All Forum Posts by: Kevin Andrews

Hey Parker!

I ended up buying a duplex in the Rosedale neighborhood.  We currently focus on LT Airbnb guests and it's been a great strategy for us!  The area has gentrified significantly (along with most of Denver), but from a cashflow perspective, we effectively have our mortgage paid for when we are occupied.  House hacking was a great way to get our feet wet while building our portfolio.  Happy to answer any questions you may have on the process/ strategy!

Any recommendations for commercial financing options for a medium size apartment complex in Indianapolis? Looking for local lenders, unique gov't financing, etc. Deal would have a market value of ~$500k post stabilization. Looking for financing that would be non-recourse (or only guaranteed by the GP with strong PFS) and LTV at 70-75%. Any guidance would be appreciated! Thanks!

Clearly you've proposed a polarizing question.  One of the things that I love about real estate is there is no right way to accomplish your financial goals.  That being said, true wealth is built when you have all the 'return factors' working for you.  You're paying down existing leverage, good.  Sounds like you've experienced a fair amount of appreciation, great!  But you're missing one of the biggest components, cash flow.  Cash flow is one of the biggest draws to owning real property in your portfolio.  You can easily accomplish the first two I mentioned in a property that also gives you spendable income.  You can optimize your returns by trading out of the aforementioned assets and into a new one (or multiple).  Even after paying Uncle Sam, you should have a fair amount of ammo to acquire a high-quality asset(s) that will get you on the "right path"   

Both are quality routes. I've used the HELOC route to take advantage of the equity in a property. One thing to keep in mind is the additional leverage the HELOC can bring. Happy Hunting!

@Rodolfo Canon- my comment around the market being over priced was from an investment perspective.  If you put any meaningful leverage on a 1-4 unit in the current environment, the cash flow (if any) does not adequately compensate the investor for the risk.  This goes without saying, but there are always exceptions.

Robert-

You're asking the right questions.  Trying to figure out the next step is never easy, but you're in a position of strength right now.  I'm a fan of transitioning from the residential world (1-4 units) into the commercial realm (5+ units) as values are determined differently.  I agree that the Denver market is overpriced on the residential side.  Cap rates on the commercial side have suppressed over the last couple years, but this doesn't just mean lower return, it also means lower risk.  The stability of the apartment rental market in Denver is strong and despite the inventory coming on board, B and C class apartment buildings will remain high demand.  Completing a 1031 exchange and rolling the proceeds from the sale into a larger apartment building seems like a strategy that would accomplish the goals you laid out.  

Anthony-

As briefly mentioned above, answers to your questions are going to be heavily dependent on your financial goals and a term I like to call "CTR" (Capital, Time, Return).  I just finished writing a blog post on it.  Happy to chat further on the topic as I invest both in Colorado and the Midwest.  

Thanks Dan!  From my understanding, you need to get ~$75k-$125k in commissions  to make the extra cost worth it.  Appreciate the feedback.  I've heard of that structure from a few folks at this point.  

Primarily doing it for tax purposes.  Certainly don't need an entity, but financially makes a lot of sense.  As I'm under the '2-year mark' for having my license, yes, Ill be staying under my MB umbrella.

Hello!

Looking to create an entity for my brokerage business while I still hang my license with a managing broker. I've heard a variety of potential routes to go and would love to get responses from those who have done it before. Thinking of an LLC, but not sure if I should designate it as a sole prop. Any pros/cons with that? Appreciate any feedback! Thanks!