All Forum Posts by: Justin Kay

I'm not sure I understand what your question is. It looks like you could get a $50k loan if your credit score is over 680. But it isn't. So if your question is "should I get this loan?" it isn't much of a question, because you don't qualify. Right?

If your question is how to improve your credit score so you can get the loan, it depends on where you're at now. What's your credit score? If you need a 10-50 point boost, there are a number of things you can do to increase your credit score, although usually not in the matter of days or weeks. If you need a 300 point boost I don't think you'll have much luck in the short term. Having unsecured debt limits increased is a good start (ask for the credit card companies to increase your credit limit), and keeping your balance below 30% of the credit limit is also a key start. Beyond that, you can look at credit card piggybacking. I know some people who it's worked for. Or try challenging a few of the bad things on your report if you have some reason why it should be removed. Some may come off, which helps. 

But generally I agree with @Mitch Messer. If you don't qualify, I wouldn't try and make the situation worse by getting a personal loan, unless you have a REAL investment opportunity at your finger tips.

As an attorney, I don't think your legal needs should grow or shrink over time (on a "per unit" basis), but it will evolve.

There is very little an attorney can do that you can't do yourself if you have the right knowledge and experience (apart from those actions that require a law license, like representing a corporation in an eviction matter in some jurisdictions). 95% of evictions are very basic. LLCs are SUPER easy to create and maintain. Most legal documents (purchase agreements, leases) come on prepared forms, or are really basic to create from scratch if you know what to look for. But it's only easy if you know what you're talking about and have experience doing it. About 40% of what you'll read online is wrong, and just bad advice. Good luck finding which part is the bad advice.

When you're starting out, hire an attorney that has more experience than you in the real estate area, but you don't need to pay for the big gun. You aren't the big dog in town, you aren't leasing or buying from the big dog in town, and you don't need the big dog lawyer. If they have 5 more years experieince than you do, and they seem like an intelligent person with a good referral, engage their services. Give them your first closing, your first LLC, your first Property Management Agreement, your first Lease Agreement, etc., and ask them questions. Learn what to look out for. The second one, look over the agreement yourself and then send it to the attorney. Ask similar questions. The third one, look it over yourself and ask the attorney to confirm your suspicions and concerns. Use them less and less on the routine stuff as time goes on and your knowledge grows. Eventually you'll either feel comfortable analyzing it yourself, or you'll send it to the attorney and think "man I wasted my money." But as time evolves, their knowledge and hourly rate will grow too. Use them for more complex stuff, that you're more likely to come into contact with as you get larger.

From there, compare their hourly rate to what it would cost you to do it yourself. If it would take you 10 hours to do an eviction (taking time off work, traveling to the courthouse, learning the updates in landlord/tenant law), maybe $500 for an attorney sounds good. Maybe not. It depends on what you're giving up to do it.

I've also never been a fan of large law firms. You pay for those big offices. I'm also not a fan of small shops that try do to everything. They can't do it all well. They do some things well, and the rest they get through to keep the doors open. If you go to a restaurant and see Italian, Chinese, and Mexican food on the menu, they're probably not doing any of them good service. Same with attorneys. Find someone that does that area of the law to solve that issue. Real Estate attorneys can do LLCs, they can also prepare SEC filings and do your tax returns, but I wouldn't want them to. Just like I don't want advice from my dermatologist on my heart condition, or advice from my cardiologist on a mole on my back.

I'm in the planning stage on my second real estate investment, and I'm thinking about doing a BRRR SFH buy & hold. What would you suggest as a first good strategy to implement for someone's first BRRR?

1. Location - close to home, within an hour or two, or long distance?

2. Home type - any particular specifics on Br/Ba to target?

3. Home price (pre-repairs) - would you target a low purchase price home (in the $50-80k range), a mid purchase price home (in the $150-300k range), or a higher purchase price home ($350k+)?

4. How much in repairs would you suggest taking on - simple reno of $10-15k, more involved reno and some larger repairs of $20-40k, or a whole overhaul of $60k+?

5. Any particular cash flow you'd suggest targeting, or anything that's positive?

I know most of these answers will be more "it depends on the deal," like if I can get a $50k home and put $20k into it and have an ARV of $110k with rent at $1.5k in a quickly growing neighborhood, obviously that's better than a $140k home with $10k repairs and an ARV of $155k with rent at $1.5k in a stagnant market. But just looking at some basics on what most would suggest are decent parameters for someone's first BRRR deal.

@Vanesa Gonzalez - a $1M/$2M General Liability policy, with some form of a medical payment coverage provision, is somewhat a standard insurance policy for most businesses, and generally fairly inexpensive. An umbrella policy for $1-5M is also somewhat common. The GL policy will cover most, if not all of the risk exposure you have from tenants, but make sure you read carefully the policy itself. It will specifically exclude several claims. Some may not apply to you, some may.

It would be difficult, but not impossible to get one insurance policy that covers you and your LLC (depending on how FL works). I'd strongly recommend you sit down with an insurance agent and get some advice on what coverage you really need. If you find a good agent, they'll be able to steer you in the right direction today, tomorrow, and heavens forbid should any actual claims come up, through the process.

@Spencer Gray's advice is accurate and on point. Find a good attorney and CPA. I'd emphasize finding a GOOD attorney and CPA. You probably should have a CPA anyway, but have him help with the tax side of things, not the liability side of things (I've seen a ton of CPAs try and interpret the legal side of things, and do it incorrectly). Have your attorney analyze the legal and liability side of things, and not the tax side of things (as a practicing attorney that has done tax work I'll tell you VERY few attorneys understand finance, and very few of them understand tax. If you find one, you'll pay for it when you probably don't need to). Make sure you do a little research in advance (here on BP works great) so you can ask some intelligent questions. Ask about asset protection, your exemptions, the importance of liability insurance over incorporating, estate planning, as well as legal and operating costs moving forward. There is no "one size fits all" answer. I had a client that owned over 90 SFH rentals, all in his own name, and it worked flawlessly. I had another client that owned a mobile home park in a corporate name, and it ended up costing them another $30k in legal fees when things turned south. That's not counting the dozens of clients that had LLCs without any hiccups.

@Tom Keller - West Raleigh, almost near Cary. Comps put it closer to $218,000, but it had a few issues that needed to be fixed in order to get it to that point, including a questionable roof (original 1989 roof, that was showing some water damage spots), some rot near the windows and back door, as well as a few interior issues. All fixable, but cost was the question. Neighborhood ranged from $210k-$240k, and this was one of the smallest homes in the neighborhood. It would probably cost me more than $7,000 to fix (depending on the roof), and the tenant was taking it "as-is" without a real estate agent. If I put another $20-30k into the home in upgrades and repairs (again, depending on the roof), I probably could have sold it for $230k. But I wouldn't have been able to sell to the current tenants at that price, and that would have required a RE agent (costing me $14k) as well as a few months of vacancy.

I wanted to push for more, if only a few thousand more, but the other individual I invested with wanted out and I wasn't in a position to be able to take him out. Plus we're friends, and I wasn't willing to force him to stay in an investment he didn't want. We didn't have clearly defined roles, and he paid for most of the repairs over the past few years (some while he was living there), so if it took another $20-30k to upfit it, I'd have to come out of pocket and likely only get 50% of it back. It was an efficient way to end the partnership, no hard feelings on either side, which made it a good deal for me anyway.

The neighborhood never really progressed in price the way most of Raleigh or Cary did, or like we expected it would in '07. Oh well. Ready for my next investment property!

I haven't used it, or heard of it, but I wouldn't consider using them after I browsed their website.

Attorneys are like any other profession - some are really good at their jobs, and others just phone it in. Sadly the price you pay, and their hourly rate, isn't always an indication of the quality you get. I know several attorneys that started doubling their fees simply to get bigger clients . . . and it works. 

I moved out of private practice 18 months ago, but when I doing it I would put LLC's, with Operating Agreements specific to the industry the business was in, for $500 plus the filing fees. Some corporate formations I'd spend a half an hour on and the paralegal did the rest (because they didn't want anything special), and others I'd spend half a week on, and multiple Operating Agreement drafts. The $500 was a loss leader. If they liked the work they came back for other issues, and they usually did.

Find yourself a good attorney and you'll be glad you did.

Investment Info:

Single-family residence buy & hold investment.

Purchase price: $155,000
Cash invested: $20,000
Sale price: $211,000

Purchase of a single family home in Raleigh, NC while in college, with the intention of renting it out after college. Me and another individual invested in the home, and held onto it for roughly 11 years. We sold it to the (then) current tenant, primarily due to tensions between the partners.

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

Location, timing, and price.

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

Through a friend, and negotiated it ourselves.

How did you finance this deal?

Private loan.

How did you add value to the deal?

Management of the rental, capital for upfit and repairs.

What was the outcome?

The home sold 11 years later.

Lessons learned? Challenges?

Roles of the partners that invested weren't clearly defined. I also would have spent more capital to upfit the property more, seeking a higher rental income.