All Forum Posts by: Kyle Wells

An FHA loan or 5% conventional loan will require you live in the property for at least the first year after purchase. If you're not living in the home, expect to put 20-25% down if using traditional financing. FHA loans also carry PMI for the entirety of the loan, so once you have 20% equity in the property you'll want to refinance to a conventional loan to drop the PMI, which will cost 1-2% in additional fees to do. FHA loans are just a way to get into a multifamily properties for little money down, but it'll cost you quite a bit more in fees/insurance.

I would recommend becoming an assistant for someone already in the real estate business if you can. That way you can learn directly from someone in the business. Find ways to start earning cash now and save, save, save for that first property. If you can avoid it, try not to do an FHA loan. They will crush you with upfront mortgage insurance (I believe 1.75% up front plus monthly PMI). You could do a 5% down conventional on a single family or 15% on a 2-4 unit property if owner occupying/house hacking. House hacking is the best way to get started so you're minds in the right place!

The key is to do your research. Know market rents in your area for comparable properties in comparable conditions. Look on rentometer, zillow, craiglist, hotpads, talk to other landlords in your area on BP, etc. I purchased a fourplex in Kansas City in Sept 2018 for $360,000. At the time, the building was renting for $3,200/month. I put in about $40k in upgrading two of the units and a foundation repair and now it rents for $4,590/month. Two of the tenants still live there and we increased their rents by $200/month total over the last two years. One unit was vacant. The other tenant was renting for $750/month and we gave him the option to stair step over 2 years to $1,200/month. He decided to move out. We then turned over the unit and made some upgrades and now rent it for $1,300/month. If you know your market, you'll know if you can truly push rents up. Most people don't like to move especially if they can't get another place for significantly less.

My realtor is also my PM. He charges:

-50% first month's rent for placing a tenant.

-8% monthly management fee.

-$250 for lease renewal. 

Everything is negotiable.  Most standard is going to be 50% first month's rent, 10% management fee, and about 25% of one month's rent for lease renewal from my experience. The more properties you add, the more likely you can negotiate fees down. I think the fees you've been quoted are on the high end. I'd say negotiate or keep interviewing PMs.

Absolutely and good luck!

Are you working with any real estate brokers in Kansas City? I would ask for recommendations from them. You can also look for recommended contractors through BP (under Network tab) and set up some interviews and ask for references from their three most recently completed projects. I utilize my real estate broker/PM's connections to find investor-friendly contractors.

@Dan K. I think this completely depends on the individual's goals. If an investor is looking to generate passive income to quit their 9-5, then they likely will value cash flow over the equity appreciation upside. If the person loves their career and is looking for a retirement supplement and to create long-term wealth (and can eat the negative cash flow/has the cash reserves), then I think the equity play makes a lot of sense. I personally think it's best to diversify across multiple markets. I personally invest in the Kansas City area for the combination of cash flow and some equity appreciation, but also plan to invest in the Seattle area (where I live) for the long-term equity growth.

@Tim Moore If you are flipping, you will have to pay ordinary income tax if the property isn't held for 1 year and 1 day or more. If you hold the property for 1 year and 1 day or more, then the capital gains tax rate comes into play. 

As a real estate broker myself, I would never give out your personal information to prospective buyers/agents. This could have been easily avoided by the agent simply redacting the information using Adobe PDF (it's $15/month subscription) and you can even get a free 7-day trial. I would be switching to a new brokerage firm if I was in your shoes. Very unprofessional. 

From your point of view, I would print, redact with a sharpie, scan in, and email in the future to ensure you are fully protected. There is no reason your agent needs tax ids either.

Unfortunately, the commercial lender I had been working with that does refinances under LLCs froze long-term lending the week we were supposed to close (due to COVID-19), so I had to pivot to another lender and ended up quit claim deeding the property into my wife and I's personal names. We have an umbrella policy up to $1,000,000, so I wasn't concerned about doing that. I don't think Cardinal Financial would be able to finance properties held under LLCs.