All Forum Posts by: Kyle Altenau

@Eric Crockett feel free to reach out anytime. 

If you're looking to grow quickly and aggressively the key is going to be how you leverage the $50,000. There are a few options. You can put it into a value add property, stabilize it then refinance hopefully getting back all of your down payment back. People refer to this as the BRRR method.

A second option you'd have is leveraging some of your money with other people's money. I am a part owner in several rental properties and haven't put a penny of my own money into them. What I do is find a good deal, typically a big value add. Then use other people's money for the down payment. You give up equity of course, but now your nest egg is still at $50,000. It's a matter of how many investors and how many good deals you can find, rather than how far you can stretch the $50,000. As you build a track record, more and more people will want to invest. At my current point there are way more people trying to invest than I have deals for. It isn't what I do full time so I just don't have the ability to keep up. 

I'd recommend starting out with the BRRR method for now though. Find a place that needs some simple renovating offered at a discount. I'd use hard money to get in there quick, get the work done, then get the tenant in.

I'd also ask the host of the meet up group or other members at that meet up if they've worked with the lender before. If not, they can provide you with some lenders they've worked with.

One major flag I didn't see mentioned is when lenders want huge up front fees. Legitimate hard money lenders don't do that. Their may be small fees to cover things like background/credit and then maybe expense deposits further down the road to cover legal. But I've seen scammers charge people thousands of dollars up front, before even getting an app. This is as big a flag as there is. 

The cash flow is definitely nice in areas like this, but I'd warn against trying to build a completely high cash flow portfolio like this because of the other risks. The turn over can be higher and if you end up with a couple not paying or suddenly vacant, it can put you in a tight crunch. The other thing to consider is lender's appetite for financing in the given areas and of course the actual market if you needed to sell.

I only bring this up because I had a client in South Jersey that came to me for short term financing to renovate single family homes in South Jersey that had very nice cash flow. She had trouble getting more traditional financing take outs because of the type of markets she was in. She ended up paying somewhat high rates to get the loans. She continued to grow her portfolio aggressively with these same types of homes. She hit one road bump with a lot of bad tenants at the same time and ended up filing for bankruptcy. Her mistake was growing a $10 million portfolio with all very risky properties. 

The problem you may be facing is speaking to residential mortgage bankers. Even though your property and future properties may be residential (1-4 family). You'd actually want to speak to commercial mortgage bankers because of the nature of the loan not the type of property (you're using them as income producing properties not your residence). These type of loans will allow you to move it into an LLC (sometimes require it). Typically they will require that it be a single purpose entity, meaning that the LLC is created for the sole purpose of owning that property. It won't own any other properties or be part of any other business operations than that relating to the property. They will want to look at your personal financials for these loans even though it's going into an LLC. They'll still want tax returns, personal credit, and a personal financial statement.

The timing is actually great for a refi as well so you have that on your side. I would recommend working with a commercial real estate broker as you become more familiar with commercial banking relationships. A good broker will know what type of lenders are aggressive in your type of deal and know which ones offer the types of terms that are most important to you. If you'd like more info feel free to message me. I am actually an investor in NJ myself and also work on the commercial lending side of things as well and can help point you in the right direction. I'm currently working on refinancing out of a hard money rehab loan on a 4 family property in Asbury Park into something more traditional. 

I would approach local banks. If you have any banking relationships, I'd lean on that, but you might be looking at having to eat a prepay for anything that's 18 months. Maybe you can work out a deal where the pre pay is dropped if you refinance in house once the property is stabilized. They'd most likely have to do this on their balance sheet though, so you'd probably need a previous relationship. 

It might be something that you need to pay slightly more for and go the commercial bridge route with. For multi family with a qualified sponsor, you wouldn't be looking at rates much higher. Feel free to message me if you'd like some more info on bridge options. 

If you are new to investing, I can't stress this enough. You should work with a commercial real estate broker in your area. Do you research to find the best as they certainly are not all great. But a good CRE broker in your area will be able to listen to the deals you have, the goals you have and then immediately think of at least 5 banks that'd be best to approach with your loan. Typically they'd put together a package to present it to the lenders professionally and help get you the absolute best deal. As you gain experience you may decide it's no longer necessary, but in the beginning it will definitely end up saving you a lot.

In regards to the finding tenants that will one day buy the property, I'd scrap this plan. When the renovation of the property is completed you want to fill it with a qualified tenant as quickly as possible. You may end up waiting a very long time until you find the right tenant to one day by it. You want to keep this method as simple as possible. The key factor here is the velocity behind your capital. You want the money you put down back in your pocket (through refinance) and used as down payment for another property as quickly as possible. Keep it simple. Build a quality team. And execute.