All Forum Posts by: Logan Koch

As I've been doing more and more deals over the years, and gaining more and more experience I been having people reach out about how they can invest with me on future deals whether it be Buy & Hold or Flipping. I've just  been brushed it off for a while as I continued to build a portfolio on own, and wanted to continue to gain more experience before going down that road and the large responsibility that comes with bringing in other peoples money into the investments. 

At this point I'm realizing can scale a lot faster with those partnerships, and beginning to try and understand the actual structure of the business behind these kinds of partnerships. I realize I'll need to consult with my attorney and CPA for actually structuring these, but I'm interested to learn from anyone here who's scaled their real estate business from their individual portfolio or flipping business, to bringing in outside capital to grow. 

As a hypothetical example lets say, I'm able bring in 10 investors who want to invest $25k each. The majority will most likely want an equity position in the deal, and since wouldn't have an active role I'd be getting into a syndication rather than just a JV. A few may just want to be a PML and get the agreed upon interest rate. If we're focusing on Small Multi-Fam and/or Flipping. Would pool this "fund" of capital along with my own to be able to do multiple deals at a time. Just trying to get a better idea on how it really looks from people who've done it.

From my basic understanding that I'm brainstorming this, would need to set up a new LLC for the Syndication That would own properties bought using the combined capital from the equity partners and myself. My personal holding company would own the equity position for my percentage in this syndication. The investors who prefer to lend privately rather than hold equity positions would receive promissory note tied to an individual property that their contribution is tied to? I know there's a lot more detail that goes into this, as I'm trying to set this up

Would appreciate insight from anyone out there who's done it, and willing to share from experience. 

Congrats on a solid house hack. Goes to show you don't have to get your mortgage covered 100% by the rent from the other unit for it to be a good deal. Especially when you break it down and look at the other levers being pulled to increase the ROI

I would seek out an Insurance Broker in your area. They'll be able to take the property information and get policy quotes from a few different companies so you can compare what is included in the coverage, the liability coverage, deductible, and monthly premium. 

If you're working with a Real Estate Agent, they should have referrals for insurance brokers for you. Also, you can reach out to the escrow/title company that you are working with for this transaction. They would be another good resource to provide you with referrals. 

In Reality you're going to have a hard time finding a good contractor willing to walk multiple properties with you that you don't have under contract, and don't have a previous working relationship with them. It'll be even more rare to find multiple contractors willing to do this. 

When you're trying to get a general understanding of estimating a rehab, offer to pay the contractor for their time to walk the property with you. They may do it for free on the first one. Ask as many questions' as you can, and learn as much about rehab costs in your area. You'll build a solid working relationship with a contractor this way, and show that you respect there time. You'll get a better understanding of estimating a rehab budget to narrow down your search criteria. Then once you start to get comfortable with it, you have the contractor walk the property after you get it under contract. 

@Catherine McElwain

I got started investing in Real Estate with a Large SFR Student Rental. Held it for 5 years before selling it, so can give a little input from what I learned.

-As you mentioned Student rentals have a higher turnover rate, and can be stressful finding a new group of students to rent for the following year. Every campus has pockets of houses within the neighborhood that are more sought after than others for students to rent, and getting in those pockets can drastically reduce vacancy rate, and stress. Better area, attracted more applicants, which gives you a better more responsible group of students to rent. With your Daughter going to school there, i'm sure she would know the blocks within the safety zone that are better than others. Close walk to campus and night life. 

-More bedrooms seems like the way to go on paper since it produces higher cashflow by renting by the room, but it increases vacancy substantially. Where I was at, 4-5 seems to be the sweet spot. Anything over that and it was harder to find that large of a group of students looking to rent together. My property held 6, but usually was averaging 5. 

-If you can find a property with unfinished attic, its a potential a way to add 1-2 extra bedrooms if needed, based on how the permitting works there. 

-When looking for properties would try to keep at least a 2-1 ratio for bedrooms and bathrooms, helps to attract more groups of students. 

-If you can include the cost of a monthly cleaner into the rent, it is well worth it. Will alleviate a lot of headache managing from getting calls about the drama within the house. 

-I Learned to build the cost of utilities into the rent as well. Would get calls from students complaining about other students not paying their share on time. 

-When looking at new properties, inflate your reserve costs for vacancy, repairs, and cap ex. 

-Leases were written to be Jointly and Severally, to hold each individual, and the group has a whole liable. 

Hope some of this helps!

@Justin Smith Congratulations on the success with your first deal. Looks to be a great return based on cashflow per unit compared to purchase price. I'm sure that deal will help you get another in no time. 

Dee,

Getting Started I used apartments.com to collect rent, It was originally cozy.co and apartment's bought them. Didn't have any issues with the platform, and it was free to use as a landlord. If I remember correctly, ACH payments took about 3-5 days to process.  It also was useful for credit and background checks. As a free platform I'd recommend looking into it, if you haven't already. 

I've since moved onto using Buildum as an all in 1 property managements software. Which as worked well for rent collection. However, its a few thousand per year so that doesn't make sense for a portfolio of 4 doors. 

Hey Troy,

The best thing to do is look at comparable sales in the area you're investing in. See what others in the area are doing to rehab a property, as far as finishes go to sell for top dollar in the market. 

Obviously Kitchen's and Bath's are big things if outdated. Flooring, Paint, and fixtures, are high ROI items for lower cost to rehab. Really depends on the condition of the property you have to determine the scope of work needed to sell for the most money. As for the exterior fresh paint and landscaping goes a long way on curb appeal.

Look for the common theme in the neighborhood within the fixed up properties that are selling and try to mimic that, no need to reinvent the wheel.

Hey Andrew, 

Based on the info you provided I really agree with @Benjamin Aaker on taking an equity split relative to your 5k investment, and then paying yourself the property management fee. Since you'll be managing it your main goal should be to learn to manage the deal as efficiently as you can. The better you manage it, the higher the NOI will be, and will make the property worth more.

Then you can refinance to pay your partner back at least half of their initial investment to make you both 50/50 equity partners at that point. 

I think it depends on the lender. You may find one that allows you have a mortgage with them, and give you a HELOC to use as the down payment. More than likely would be a commercial lender.

Going the conventional route you'd most likely have to setup the HELOC in advance, and transfer the money to your checking account and let it sit in there for a few months to show up on enough bank statements that the lender will require. Since they source the funds a few months leading up to the transaction. Then you'd still need the DTI to work with that HELOC balance already withdrawn.

That's just my thought, i'm sure someone who works in the lending industry can give you more guidance. Either way i'd make sure your confident in your numbers, since the HELOC will come with a higher interest rate as a second monthly mortgage payments.