All Forum Posts by: Kristian Conway

@Marcus Johnson You're exactly right but how long would it take the average W2 employee to save enough to buy their first property in cash? I look at it from the perspective of leverage and opportunity cost. If I saved for 5 years to buy one 250,000 home in cash, I sacrificed the opportunity to pursue more deals. sacrificing 5 years of appreciation and experience in real estate. I also like the diversification of leveraging properties and not having my life savings in one property alone. 

I'm not saying Ramsey doesn't have great ideas and hasn't done extremely well for himself. I'm saying that I have a different perspective than his when it comes to investing in real estate. I'd love to have $40 mil to buy a facility in cash but I choose to use leverage to get me to that 40 mil.  

@Anthony Gayden Said it best! Leverage is an extremely powerful tool! There's no other way to achieve an infinite ROI without using leverage. (Specifically speaking of using the BRRRR strategy to pull out your entire investment.) Leverage allows you to compound your money at a rate much higher than any savings account. In some cases, I've been able to use leverage to give myself a stronger equity position which directly rebukes the notion that leverage is too risky.

HOWEVER, to quote Spiderman, "With great power comes great responsibility" and that holds true for leverage. The proper amount of leverage can lead to a ton of success. Too much leverage can bring it all toppling down. 

Civil Engineer here! I agree, I think engineers gravitate to REI not only because of the love for numbers but also the problem solving aspects . I would definitely say that my engineering background has helped a lot especially through major renovations.

However, an engineering background does come with some downside. For one, I'm a perfectionist. Two, being an engineer can sometimes allow you to have just enough false confidence to create headaches for yourself. "Trust me, I'm an engineer" as I tackle a project that I would be better off hiring out lol. 

I would really do some studying on the demographics and the economy of the area. Being rural property I tend to stay away from building to sell or building to rent. In our area, rural land does not attract my ideal buyer/renter. However, if it's a comfortable driving distance from Toronto (or some other populated city) I would definitely look into Tiny home/Cabin rentals as they are low cost to build and can produce a great ROI. An additional factor to look into is the economic drivers of the area. Is there a power plant, mine, oil and gas industry in the area? These type of economic drivers attract high paid blue collar workers who travel for work. They are looking for campgrounds or short term rentals and are willing to pay well for the right facilities. They also stay for months at a time which helps mitigate the high turnover rate campgrounds typically have.

The sellers main concern is simply to wash her hands of the properties. She wants to have some money from the properties but is beyond the point of exhaustion with managing and renting the properties. She's at the age of retirement and is ready to let go. 

Our main concern is holding on to our capital to fund the rehab and then making it to the refinance. 

@Chris Coleman @Odie Ayaga We've actually been able to spark some interest in using seller financing for the deal. We are looking at seller financing the purchase and using our OPM to fund the rehabs. Any suggestions on tactics to use here? This will be our first seller financed deal so any details in structuring the deal would be greatly appreciated! 

So we were able to secure a great deal on 4 single family homes! All 4 homes are in a great location for our niche market and we were able to negotiate a fair price to make our BRRR numbers work. They all require a fairly extensive remodel.

The total deal will be roughly $400,000 purchase price and rehab included. We had planned to use a hard money loan to finance the deal and then refinance following completion. However, our LLC and it's members do not have the funds to cover the upfront cash. We have raised some private capital but are being told by the hard money lender that we cannot use that money because it did not come from within he LLC.

So we have the deal, we have some OPM but we cannot seem to tie the two together and make the deal come to fruition. Any suggestions?

Have you looked into using hard money? You could pull the equity out of your rental property and use that to secure a hard money loan to do a BRRRR on your property. There's several different routes you could take from there! One of the biggest mistakes I've made thus far in REI was not using hard money and trying to fund it all myself through savings and credit cards. All my capital was tied up and I actually made it much harder than need be.

@John Corey Thanks for the advice! Unfortunately, being the frugal monster I have turned into,  I don't have any personal possessions that I could sell off. 

The majority of the remaining cost is material. I do 90% of the work myself, having grown up in the construction industry. However, I wont be doing the work on my next deal in order to optimize my investing. Another rookie mistake. The work that remains is finishing a bathroom (tile, vanity, paint, fixtures, etc.), finishing a common area, touch-up work and minor landscaping. 

I've considered refinancing earlier than planned, however, it will leave a lot of equity on the table. I have a private investor who is willing to lend on 9% interest for a 3 month term. I believe my current route will be to take that offer and finish the rehab. 

@John Corey Thanks for the response! Here are some numbers: 

Estimated rehab cost remaining: $5,000

Total rehab cost to date: $25,000

Conservative ARV: $247,000

Current Value with unfinished rehab: Approx. $210,000

Exit Strategy: Cash-out refinance 

Backup Strategy: Sit on and hold property in current mortgage. Currently cash flowing $275 a month with only the top being rented. 

Purchase price: $145,000

Current Loan Balance: $139,000

I know $5,000 is a small amount to be holding up a deal but I've exhausted the options I can think of and am looking for another option to held me get over the hump. As you can see, its $5k holding up, $37k in equity.

I agree about the credit card debt and expressed the same concern to my lender. She assured me that as long as the debt is to be paid with the cash-out and that is reflected on the closing documents I will be okay. My next deal will go HML 1st for sure. Naive and rookie mistake on my part. Any advice is greatly appreciated!