All Forum Posts by: John Cardinale

Hello,

Just want to know if anyone have tricks of the trade they can share to get the most deals needed to renovate bathroom/kitchen?

For example, someone told me I can get cabinets replaced by going to Lowes and they will install them cheaper?

thanks,

BP Team,

I am looking for perspective and advice.  I have been following BP on YouTube for a few years and have been investing in real estate for the last 3 years.  Over that time we have acquired 4 properties, 6 doors.  Those properties are currently cash flowing $3,815 per month but if they were paid off they would generate $6785.58 per month.  My ultimate goal is to generate $11K per month cashflow and retire.  I have decided that I don't want to build a real estate empire but rather generate that cashflow from as few properties as possible.  What has worked for me is duplexes and single family homes.  I like this strategy and plan to continue.  As you can see by the attached photo I am tracking current cash flow as well as what my cash flow would be if my properties were fully paid off.  My goal is to shift from buying to paying off my properties as soon as the paid off property bar hits $11k per month. 

I live in Sheboygan Falls, WI.  The average rental home price I am looking at is between $175K and $250K for a 3 bedroom house that requires minimal work in a nice neighborhood.  Those houses could rent anywhere from $1,600 per month to $2,000 per month.  One of my buy box requirements is the house needs to cashflow at least $500 per month or I am not buying it.  With rising prices and interest rates I have been able to overcome that requirement by putting more money down.  The last house I purchased was $227,500 and we put down $85K.  My wife and I both have jobs that pay over 6 figures and our monthly living expenses are only around $8K.  We invest the rest in our business and reinvest all the profits from the business back into the business.  We are able to save about $100K per year so putting down $85K is possible for us with our current situation.  Now for the question to the group:

 - I would like to be able to retire as soon as possible even though I know we are 5-10 years away from that.  If I keep doing the same strategy, putting more money down upfront, I will generate more cashflow now but am delaying how quickly I can purchase houses.  I always viewed it as "who cares how much money I put down", I plan to pay them all of before I retire as part of my ultimate strategy anyways.  All I am doing is paying more on the front end and that saves me how much I need to pay on the backend.  It's also less total interest paid because I am borrowing less total money.  This also protects my downside risk because I could very easily lower my rents if I had to in a market downturn and compete vs. being forced to sell because of losing money.  This also gives me solid staying power when maintenance costs arise.  Should I keep doing this strategy?  Below is my other option.

- Now that we are generating $3,815 per month cashflow from my current portfolio do I just continue to buy more properties putting the minimum 20% down?  Doing this would put my new properties making next to nothing, running some rough numbers I may make $100 or $150 per month on new properties with mortgages that are around $1,500 per month.  I would use the cashflow from my current properties to protect us if we had vacancy or repairs that needed to be paid for.  Doing this would allow me to cut my down payments in half.  Or said differently purchase twice the amount of houses I have been buying.  I truly think I only need 4 more houses to hit my goal and then shift from buying to paying them off.

I am not sure if I am thinking about this the right way and I am sure there are things I am not thinking about but below are my thoughts:

Pros

 - I can purchase the houses I need to hit my goal faster

 - With getting homes fasters the depreciation, tax benefits, amortization, appreciation, rent increases all start sooner

 - Home prices on average should be lower now then if I buy in 4-5 years

 - I can take better advantage of leverage

Cons

 - I have more risk until I pay the properties off

 - Less upfront cashflow

 - Longer timeframe to acquire the properties to reach my goal

If anyone has any opinions or advice I'd love to hear it.

Hi All,

I am looking to buy a retail commercial property and looking for options for loan. I am planning on putting down 30% and take loan on the rest. I have invested in residential RE so far and understand financing options there but I am new to commercial RE. I looked at the "Find a Lender" here but looks like most lenders listed are active in residential RE. 

Do anyone have any pointers / tips / cautions on the commercial loan world? Is yes, please do share. Thanks in advance.  

The note is going to have the legal description which includes those unsplit parcels. Split them prior to obtaining the financing and just don't include those lots as security in the note.

Hello,

I am a teacher for my job and have 2 duplexes now. I am focusing on trying to find off market deals and working with creative finance since expansion is slow moving based on my salary, and I'm too impatient to wait for the duplexes to earn another down payment.

Is there a financing option that I am missing to get a loan for a down payment? One hard money lender told me they don't do loans of that nature, and I am meeting with a different one tomorrow.

Curious if anyone has any solutions.

Thanks! 

@John Cardinale thanks for the response here. Now, you can use whomever you want to use of course. And people can do whatever they want...but most of us use lenders that will lend up to a certain point with $0 out of pocket. None of this 100% Purchase w/80% rehab formula stuff. Again, you can work with whomever you want but there are plenty that will lend 100% of both purchase and 100% of rehab...as long as it doesn't exceed 70% or 75% of the ARV. If there's one formula you never forget - it's "What is 75% of the ARV?" Because that's what the best lenders will lend me on the acquisition and sometimes that's what I will get on the refinance step too...well, sometimes. I can sometimes go higher...but if I know 75% then I at least have a pretty close approximation of what I can get on both lending steps of the BRRRR Method.

Now, what lender to use?  I have not met a lender that lends nationwide with these types of numbers.  The best lenders are smaller, local lenders.  I can't tell what part of the country you are in but I bet there is one where you are...or one in the market you are targeting.  It is true that in some super small, rural place of America there may not be many options.  But we usually aren't targeting those.  Nothing is definitive 100% of the time...so maybe some people do target that...but the majority of us target cities with options.  More options means more lending, property managers, insurance, contractors, etc. options.  Populated areas.

In my original post I provided a link on how to find good lenders.  Same concept applies here - lean on other investors in your market.  It's not foolproof, but asking other investors in your area who they are using almost always gets us started on the right foot.  

How do you find other investors in your market?   Try some local real estate meetup groups. Meetup.com is a good resource for those but some of the groups will also post here on Bigger Pockets Marketplace too. Even facebook might have some good local groups for you. Some of those facebook groups have thousands of members. Eventbrite too. But post locally for this. That’s the best bet.

@John Cardinale 

I meant that you can use a hard money lender that offers DSCR products, as traditional lenders do. Lenders will require the borrower to have the 15-20% down payment plus any reserve requirements for underwriting purposes.

Regarding your question: Are you asking if you need to have the 20% difference in cash to bring to the first mortgage closing and then have the seller lend it back to you right after closing? Or are you considering having the seller front the money for closing and then record the second mortgage immediately after?

I've seen both approaches. The seller may place the 20% in escrow, secured via a promissory note, and then record the second mortgage later. While the lender doesn't want a second position at closing, there's usually nothing preventing it afterward. It ultimately depends on the specific underwriting requirements of each lender.