All Forum Posts by: Konstantin Ginzburg

@Belen Gamarra

You are right about lenders preferring to see a loan applicant with a few years pay from one set job since that shows employment stability. The general rule, is mortgage lenders want to see 2 years of W2 forms from one job or similar tax documentation. This is the general rule but there are exceptions you can try for. Try to talk with additional lenders, primarily local lenders and credit unions who loan within the area you are specifically targeting. Ideally, try to find portfolio lenders who are more flexible in their loan requirements. At the moment, I would focus your attention on networking with as many lenders as you can until you find one that is willing to work with you so you have an idea as to where you stand on financing. If lenders are not willing to work with you, ask them why and then try to fix those aspects of your application. Once you have financing secured, you will be in position to select a property that suites you once it comes along. I would keep saving money and researching in the mean time as well as there is no telling how long it may take to find a suitable lender for you. 

@Christi Caden

I would look to add your listing to additional sites. Zillow is the main site I have always had the best luck on. I usually determine what I think is a fair market value but then adjust downwards if there are no inquiries within the first 1-2 weeks. Usually if there are inquiries and showings, I may keep the price where it is and wait out for a tenant who will be a good match. If there are no inquires at all for an extended period or time, this could be an indicator that your listing either isnt painting your rental in the best light or the price is too high for your area. 

Regarding property management: in my experience if I am renting in an A or B neighborhood, I haven't had the need to use property management for those units as long as I did adequate work up front to place a good tenant into the property. This means not only one that will pay rent on time each month but also one with a history of taking care of their rentals. You could get that info by calling previous people they had rented from. Generally, no property manager will take as good care of the property as the owner, especially once that management company has 100s of units in their portfolio. Once your own portfolio grows, then a property manager should be a requirement so you can save more of your own time but a single unit can be self managed well enough. 

For the question of furnished vs unfurnished. This is a case of identifying your target clientele and adjusting your unit to suite their needs. Most long term renters that are past college years, are likely to have accumulated their own furniture and belongings and would prefer to bring those with them into the rental with them so it feels more like their own home. In this case, an unfurnished apartment will likely attract more attention. In my experience, one exception to this are college students who are still young enough to not have gotten the time needed to accumulate their own furniture so would prefer a move in ready unit. If you are near a college, then this could be a clientele base you specifically try to market too. One option is posting your listing on facebook rental finder groups of that college. Another option is to try to market to traveling professionals like traveling nurses on a furnished medium term rental model but I have personally not had as much luck with this strategy this year compared with pandemic years. 

I hope this advice helps you or at least helps provide you with some ideas to try. Best of luck!

@Carlos Quiros

As far as the percentage portion of your question goes:

Insurance: This is really dependent on the market. There is no baseline; you will be much better served by asking insurance agents in the specific market you are targeting since there can be city to city differences in insurance even if you are looking at multiple cities within the same state

Maintenance/Repairs: I combine these two options and use a 10% of rent estimate for this item

Cap Ex: Most people use 5% for this item as an estimate. However, I mitigate this a little by using that 5% to pay for a home warranty instead. This won't pay for things such as roof repairs or other structural issues but it will cover the cost of most large appliance repairs

Management fees: This can also vary from market to market but the most common I have seen is 10% of rent each month plus half of the first month's rent

As far as cash flow: Finding cash flow right now is a lot harder than it was a year or two ago since the rising interest rates have essentially wiped out a lot of the profit margin in many investment properties. There are still cash flow deals that can be found but it will require a lot more searching and patience than it had previously. The expected cash flow also varies from market to market. There are some markets (a lot in the northeast) where initial cash flow is minimal or non-existent but the historic rate of appreciation in those areas are a lot higher so both rent and property value increases rapidly. On the other end of the spectrum are markets (a lot of these in the Midwest) where the appreciation is much lower but there is higher initial cash flow. A good strategy would be deciding which one of these two suites your goals more and try to find target markets that are more conducive to that type of investment. Its important to not only look at a state, but evaluate city to city. For example, in Pennsylvania; Philadelphia falls more under the rapid appreciate side of the spectrum while Pittsburgh is close to the cash flow side of the spectrum.

As far as utilities; I would push the cost of utilities to the tenants as much as possible and have them put the utilities under their names. This saves you work, is one less thing to worry about, and will stop surprise utility bills that can happen if tenants are not conscious of those costs. 

@Hannah Simpson

I think you may be doing things a little out of order. If you plan on investing long distance; things will likely go much smoother for you if you establish your network in the area before actually putting in offers on houses. This includes creating a network of GCs or a boots on the ground that are able to see the property quickly and give an estimate on what the repairs will be. Once you have a rough estimate, you can access whether or not the property is still a viable investment and put in an offer accordingly. If your offer is accepted, then the seller will be locked in and you will have a period of time (usually 3-6 weeks depending on what you and the seller agree to) where you can order inspections, GC's, and any other in-depth research on the property you feel are needed. During this time, the seller can not negotiate with any other buyer so you two are locked in. This is the best period of time to get a GC to give you a full scope of work and bid that you can present to your lender. If you begin searching for GC's after the offer is accepted, you are essentially racing against the clock to get everything accepted and completed in time. You don't necessarily need an exact figure for your repairs prior to making an offer but you should have a decent estimate that you can confirm during the holding period. Having your team set and ready to deploy as soon as an offer is accepted will make this a much smoother process for you. You should remember this from the GCs perspective as well. If you have a GC that you have a previous relationship with and you have provided work for, they would be more willing to provide a quick estimate because they know a relationship with you is mutually beneficial. If you put in an offer and start calling random GCs afterwards who have never dealt with you before, there is no incentive for them to take you seriously as a potential lead and are more likely to decline if they do not have the time available in their schedules. Every town does have GCs, there are more in larger cities compared with small towns but there are plenty in small towns as well. The GCs in small towns may no advertise or may be smaller in scale and harder to find if you are in the area. This is another benefit to a boots on the ground team that is more tuned into the local market and is aware of who the quality property managers and GCs are in that area. 

@Marjo Naci

Out of country investing is something that I would be very interested in pursuing and I have looked into real estate while I had been traveling already. It is a goal of mine for the future but there are several concerns that I have about it. Right now my background is that I have properties in 2 cities within Louisiana that are 2 hours apart from one another. We are currently practicing long distance management in the second city in order to get more comfortable with the systems required to manage long distance real estate. However, if there is an emergency, we do have the safety blanket of being able to drive to the other city to deal with a matter since its only a 2 hour drive. To answer yours questions:

Would you be against investing out-of-country if the numbers made sense

Yes

What will hold you back from not investing?

From personal experience, understanding the nuances of each region is important for having a successful real estate property. Even differences in tenant-landlord eviction and interactions have some differences in the two cities we own in the state of Louisiana. The greater the distance, the more these differences are likely to come up. Once international investing comes up; there is a lot more to consider. The system in place for purchasing, financing, and managing a property in another country are likely different than what I am accustomed to within the US. While this wouldn't scare me away from buying international property, it would be a knowledge base I would need to be sure to acquire before I am comfortable proceeding in a venture like that. In order to be comfortable with getting a property in a different region, I would also need to find a property manager or boots on the ground team that I am comfortable with and I believe are able to do the job adequately. Without a good property manager, a property is more likely to turn into a money sink than successful investment. Finding a quality property manager in a region I do not live is another major concern I would have. 

@Katie Kantzes

I like your idea of targeting markets with an abundance of hospitals in order to cater to traveling medical staff. I think this is good strategy in theory but might be a little harder to do in practice in the current environment. During the pandemic, there was a large demand for traveling medical staff and there were a lot of MTRs that popped up in order to meet this market demand. I think this caused a bit of a market saturation as the market for traveling nurses has appeared to soften a bit since the pandemic from my experience. I think this would still be a feasible strategy but I think it may be better to make sure you select properties right next to the major hospitals as opposed to in the general region of a city with hospitals nearby; this could help your listing stand out more and help drive more deals to you. Another strategy would be to attempt to contact a hospital directly to see if they would be interested in having you providing housing for their traveling staff. One market that we have had more luck serving is student housing, as opposed to traveling medical staff. Acquiring a property near a school can help with this strategy. 

For SFH vs multifamily; I strongly prefer multifamily homes. You not only typically have higher cash flow with this asset class but there is a higher chance of minimizing vacancies since even if one unit is empty, you may still have other units continue to be occupied and paying rent. 4-plexes are one of my preferred asset classes since the acquisition process for getting a 4-plex is no different than a SFH but we have had substantially more cash flow from our 4-plexes than our SFHs.

@Hans Olo

I think you answered your own question. If the cash flow balanced you calculated suggests that you will have higher cash flow if you keep it as a rental, then this is the direction I would lean into. If you had an alternate plan for the capital you would get from a sale that would net you a better return, then that would be something to consider but purely based of financials, the better short term move would be to keep it as a rental. If your concern is a drop in rental prices or real estate; I have 2 comments that are worth considering. 2008 was still recent enough that many people remember this event and the real estate value drops that resulted. This is not a common occurrence. While real estate prices can drop; historically they have gone up far more often than they have gone down. I have no crystal ball so I can not predict the price of real estate in the future but I think there is a higher probability in prices continuing to rise in the future rather than fall based mostly on the low inventory that I don't think will be resolved in the near future. The other thing to keep in mind is that rental prices and home prices are two separate markets so a drop in home prices will not necessarily lead to a drop in rental prices. Just like house prices, rental prices have gone up far more often than they have gone down historically and previous home price drops have not led to rent rate reductions in most cases. 

One last thing to remember: the choice to sell or rent is a personal matter and comes down to what would work for your personal situation and this is not always a financial decision. If you are tired of being a landlord or if paying off your HELOC would let you sleep better at night, then selling could be a better route for you personally. If your goal is long term wealth accumulation and you don't mind continuing to manage tenants; then continuing to rent is likely a better option.

@Caitlin Bushong

I think you have a good strategy in place for house hacking. The time restraints you are under will complicate matters. It's a good thing that you have calculated out the max monthly mortgage you are comfortable affording. Loan officers often quote a max price but this is often higher than many people should realistically acquire. Since you know how much monthly payment you can acquire, continue to talk with your lenders about acquiring a proof of funds statement once you are ready to put in an offer on a property. It will be harder for sellers to take an offer seriously without a proof of funds from your lender. Also continue to shop around for additional funding options to see if you can find additional funding options. Given that you stated you will have $11,000 available by February, I am assuming that is when you plan on beginning to make offers. One thing to keep in mind, the out of pocket money you will need to come up with is not just the 3.5% down payment requirement for a loan; but also things such as origination fees for your lender, and prepay items such as property insurance and taxes. Your loan officer should be able to guide you through the out of pocket costs you will need to have in order to close on a specific deal so speak with your lenders so you have an exact idea of how much you will need to save up. The lender will also likely request that you have a certain amount of money saved up in reserves so this should be discussed as well. There may also be some additional expenses that will come up such as an inspection that will likely be out of pocket for you and may cost several 100 dollars. You can negotiate some of the up front payment requirements with the seller and see if they are willing to assume these payments in exchange for other concession such as a higher offer price. I agree with your strategy of getting a house in a good neighborhood. This is my personal investment strategy and this is especially important if you plan on living in the house itself. I hope this provided you with some ideas and answers. 

This is a crucial portion of my mindset; possibly one of the most determinations of whether someone is able to achieve success or not. No task or goal worth accomplishing can be done without a set goal that includes long term planning and consistency to reach that goal. I especially related to the portion you mentioned regarding the gym. In my personal journey, the gym was a huge part of what made me ultimately successful. For a large portion of my adult life, I did not regularly workout or eat healthy and had gotten out of shape as a result. I began working out and eating healthy on a daily basis until this shift in routine became my lifestyle and I am currently in the best shape of my life. I did not go to the gym each day with the mentality of waking up the next morning and being in exceptional shape. I went to the gym with the mentality of getting through that specific workout and knowing that if I did consistently over a period of months, I would reach my goals. I used that same mindset to shift towards other paths of life such as consistent reading, emphasis on education, and constant readjustment of personal goals. Thanks to this mindset, I went from being out of shape in a job where I was not progressing and spending my nights playing video games to where I am now; which is owning several rental units, shelves filled with books I read, in good shape, and less than a year away from completing my MBA. All of these required delayed gratification and I was willing to make my life harder in the short term in order to achieve my goals months or years down the line. 

@Jennifer Anderson

I am always interested in connecting with other investors and seeing how we can help one another succeed.