All Forum Posts by: Jonah Richard

Some context:

My PM uses Buildium. Each month, I take the income & expense report generated by my PM and manually enter it into my bookkeeping software (just Excel) alongside other expenses (mortgage, landlord-paid utilities). I then export/import my bank statement data to reconcile. 

I know I can use QB (or similar software) to automate some of the bookkeeping side (bank account imports, expense tagging). But has anyone had success integrating Buildium (or some other PM software) into your accounting software (either QB or other)?

Or, if not, what steps have you taken to simplify the bookkeeping process? Outsourcing is always an option I suppose. But curious if folks have had success with creative process/technology improvements.

TIA!

I got my start in Newark, NJ but eventually got priced out. I’ve since pivoted to Vermont. Still fairly expensive, but a lot less competition.

I would suggest starting in your backyard, wherever that may be. Could be where you live now or where you grew up. It’s immensely helpful to have the deep knowledge of a market when you’re looking for your first deal. Especially with all the other variables and unknowns you’re working around.

Not warning tenants before cutting plumbing main.

This was on my first major renovation. 3-family stacked. We were renovating top to bottom and had leased up the 2nd and 3rd floors by the time we were part way into the 1st floor.

Plumbers were on site roughing in a new bathroom. There was an existing wye in the main plumbing run that we thought we could tap into in the basement without having to cut into the main. Mid way through rough in, I realized I should warn the plumbers that tenants were living upstairs just in case they had to cut into the main.

I open the door to the basement and hear the angle grinder going (cast iron main). Not a good sound to be greeted with. I rush down the stairs just as one of the plumbers is removing a 3’ section of the main at head height. 2 seconds later we hear the faint sound of a toilet flushing. Uh oh. Plumber’s eyes get really wide right before he gets a 1.6 gallon shower of nature’s finest.

2 years later we laugh about it. But at the time it was absolutely horrifying. Never again will he assume a building is vacant before opening up a main plumbing run.

Investment Info:

Large multi-family (5+ units) other investment.

Purchase price: $100,000
Cash invested: $900,000

New construction 9-unit underway: 7 apartments + 2 micro-retail spaces.

More details here:

https://brickandmortar.substack.com/p/project-spotlight-501-main

What made you interested in investing in this type of deal?

This was the next step up from the small multi renovations that I’ve done in the past. Also a great crash course in how to do small ground up development.

How did you find this deal and how did you negotiate it?

Purchased an old post office off market. Worked directly with seller on purchase price.

How did you finance this deal?

Owner financing for original purchase (90% LTV) while I planned for long term redevelopment. I then secured $250k equity investment, $80k in tax credits, and $670k in construction/perm debt to fund the project.

How did you add value to the deal?

Turning vacant single story commercial building into a three story mixed use.

What was the outcome?

Still in progress!

@Chris Levarek thanks Chris! Interestingly enough, I was actually able to qualify on my own for the $650k construction + perm debt on the 9-unit new construction project. I have a few investors but was able to keep them off of the loan (in terms of qualification and personal guarantees). I think a lot of it comes down to developing a good relationship with a local lender and demonstrating you have a good team/plan in place. For my other two deals since I left my W2, I've needed my investors to co-sign but I was able to negotiate the terms on my own for the 9-unit (different lender). 

@Sam Yin totally fair. A lot of it depends on how much time you can free up to focus on real estate on the side. I was working 60+ hours a week at my W2 and didn't have a whole lot of extra time to spend hustling. But sounds like you have a good setup so ride that for as long as you can!

@Alicia Marks I had been working for a management consulting firm in NYC. It was certainly an adjustment but a worthwhile tradeoff for me if it meant I could start my own business. I cut out rent (I've been house hacking for the past year and a half), most non-core expenses (bars, restaurants, clothes, etc), and all retirement savings contributions (401k, stock investments). I had tracked my expenses meticulously for the 2 years leading up to that decision so I had a pretty good sense of where I would have to cut back to make the transition work. To be honest, even though it was a big change of pace, it wasn't that difficult. I was fortunate that most of the expenses I had could be trimmed without any real impact to quality of life (no medical bills, no children, etc).

Having lurked on BP for the better part of my 5-year REI stint, I figured I'd pay it forward and share my journey to get to where I am today (14 units owned with another 17 in the pipeline). Hands down, I attribute my confidence going into my first deal to everything I've learned on here. So for those of you just getting your first one done, keep your heads up and keep grinding!

2015: Graduated university & started working at a consulting firm in NYC

2016: Caught the REI itch, started researching markets and reading BP, etc religiously

2017: Landed on Newark, NJ as a target market. Decided to move there to for a year to get to know the city before committing to buying an investment property

2018: Bought my first duplex in the Ironbound (arguably best neighborhood in the city). It was a flip so one unit + basement was renovated (vacant at purchase), the other unit was outdated but rented. Day of purchase (after the walkthrough), tenants left unexpectedly and trashed the unit. But whatever, it was a good crash course on turning an apartment (spent several weekends hauling out trash, painting, installing LVP flooring, lots of YouTube university). Got both units rented quickly and started learning the ins and outs of being a landlord (mainly, dealing with tenant issues). I know this is a divisive topic on here, but I'd highly recommend doing your own PM if you can. It sucks but it'll fast track your understanding of how to operate a real estate portfolio (it's hard to hire a good PM if you don't understand the full extent of what their job entails)

Deal #'s: $411k purchase price, 20% down conventional loan, $4400 gross rents / mo, maybe $5k in rehab. Far from the 2% rule but this is a city that's 20 minutes from NYC so you're lucky if you can get above 1% (I'm not advocating for this type of deal necessarily but the numbers worked and I didn't care about hitting a home run on my first deal)

2019: Saved up enough money and felt comfortable enough to start looking for a second deal. This time, I wanted to do a value add. Found and closed on a triplex in Newark in October that needed work and brought my buddy on as a partner who had experience doing major renovations. We went 50/50 (both in terms of capital and sweat equity) and committed to taking sabbaticals from work to manage the construction ourselves. Probably a bit atypical, but I wanted to really learn how to do a renovation from start to finish. 

2020: In February, both of us actually moved to the triplex. For 8 months, we went nuts, living on mattresses on the floor while we renovated. Demo, framing, tiling, flooring, painting, cabinets, you name it. We ended up all of the work apart from electrical, plumbing, and window replacement. We even hired a couple day laborers for a few months to help out. Finally, in October, we had all three leased up and refinanced ($50k of initial $200k capital retained as equity).

Deal #'s: $398k purchase price, 20% down conventional loan, $120k renovation costs ($33/SF), gross rents $6000 / mo

2021: With my 12 month sabbatical coming to an end, I said f*** it, decided to pursue RE full time, and submitted my formal resignation. There's a bit more deliberation that went into it (no W2 = no loans so you need to have investors willing to sign on the dotted line. And I had built several key investor relationships by way of showing what I had accomplished with my first two deals) but at the end of the day, the worst that could happen was that I'd run out of money and have to find a job in 12 months (I gave myself a year of runway). I went from making $15k/mo with my W2 to $2.5k/mo (passive rental income). Some people say you need to replace your W2 income with your passive income before quitting but that was going to take way too long.

I also decided to pivot to an area that I know well, my hometown and surrounding area in Vermont. So early this year, I started cold calling owners in search of off market deals. I landed a 5-unit turnkey in March ($300k, $5k/mo rent). I brought on an equity partner who put up all the capital and signed on the bank loan (I also provided a personal guarantee but it wasn't worth as much since no W2) in exchange for an 8% pref return + 30% of the upside. 

⬆️Rendering of the 9-unit new construction project.

I then bought a small vacant commercial building in a great location on Main Street in April using seller financing. For the past 6 months, this has been my capstone project. The plan is to demo the existing structure and build a new 9-unit apartment + retail building. It'll be a $1M project and I have been able to secure $270k in private investment, $650k construction + perm debt, and $80k in state tax credits. We're gearing up to start construction in March 2022 (you can see project financials, construction breakdown, and pitch deck here if you're interested).

⬆️3-family to be converted into 7-unit apartment building.

A few days ago, I also closed on a vacant 3-family nearby for $150,000. It's a beautiful old building that's just been neglected for decades. The plan there is to convert it to a 7-unit apartment building (pending site plan review with planning commission in a few weeks). Feel free to check out more info on that one here. I funded the purchase on my own (with help from the bank) and will be pulling in private capital to help with the $400k in anticipated renovation costs. 

In parallel, I'm negotiating another off market 4-unit deal. We're so close to aligning on purchase price, the owner just drives a hard bargain (not the ideal motivated seller but a good acquisition nonetheless). Been working on this lead for over four months now. 

Deal #'s: $220k-$240k purchase price, 20% down conventional loan, $100k renovation costs, gross rents $5500 / mo after renovation. Equity partner to contribute 90% of investment capital (I put up 10%) in exchange for 80% ownership (moving away from pref returns since difficult for sponsor to get any cash flow before sale). I'd also get a 3% acquisition fee on purchase price, 2% asset mgmt fee on NOI, and 10% GC fee on any construction costs.

I'll note that all the deals I'm doing and looking at are long term holds. Underwriting for 7 years and make that clear to investors. Some people like the flipping business model, I just prefer buy & hold. 

Good luck to all the other investors out there and feel free to shoot me a note if you want to connect.

Count me in!

@Amber Walsh thanks! I’ll give them a shot.

As the title suggests, this question is about whether any investors out there have been able to - when refinancing a residential property bought with cash and held by a multi member LLC - assign limited personal guarantees to the LLC members.

I’ll provide some details.

I’m currently working with two investors with private capital and we are making offers on triplexes. We plan to purchase the property all cash, renovate it (again, using cash), then refinance to pull funds out. Pretty standard.

We will also purchase the property with an LLC. For the purposes of simplicity, let's say each of us three members retains 33% ownership in the LLC.

Personal guarantees are obviously non negotiable since this is a one-off LLC formed specifically for the target property.

When we go to refinance after renovating, we would ideally like to have each of our personal guarantees be commensurate with our ownership stake in the LLC.

In other words, each of the three members would personally guarantee 33% of the loan amount for a total of 100% loan guarantee.

One nuance here is that we will require the loan to be held in the LLC's name, meaning we'd only be eligible for a commercial loan.

From what I can tell in talking to a number of local banks and a mortgage broker, there are only 2 options for personal guarantees. 1) one LLC member will take 100% of the guarantee or 2) all members take 100% guarantees individually. I have yet to find a bank that is OK with limited personal guarantees where each member's personal guarantee be commensurate with their ownership stake in the LLC (where the sum total of personal guarantees across LLC members adds to 100% of the loan amount).

Does anyone have experience with this 3rd option?

Thanks in advance!