All Forum Posts by: Luciano A.

@Deonte Watkins

I was going to tell you to send over to me but @Scott M. bet me to it. All joking aside. Not sure what your finances look like but congrats on saving $100k. I would go to a few local community banks and credit unions, tell them you want to start investing in rental properties and want to know what they can do. If the properties in your area are cheap and you can put say 30% down I am sure one of these banks will want your business. But as others pointed out, if you have no experience or knowledge then I would suggest going to local meetups and finding partners. As a developer and builder, I meet people all the time that want to use their cash to get into real estate but don't know where to start. 

If the bank says you can't get a loan because of debt issues you might be better off using that cash to pay off high credit cards etc than to buy a house and lose money because of sleazy contractors or repairs that eat up your cashflow. 

Protect that cash as if it is the only money you will have. Take your time to read and watch youtube about analyzing deals and how to calculate rentals. Once you are comfortable and can figure out how to look at properties then you should partner.

Another last option is to look at these apartment syndicators or become a private money lender to others who are rehabbing homes and you can become their bank at a higher interest rate. You make money while you learn. 

Best of luck

@Ed L.

I am assuming you are asking from the seller's position. Some of these guys that say we buy houses in cash on yellow signs are not all real cash buyers. Some are wholesalers that want to get your property under contract then flip to a real cash buyer for a higher price.

If you have someone that is offering cash, just ask are you a wholesaler or the end buyer? 

Look at the contract and see if they put assignee after their name or company name?

Have them show proof of funds. And ask for non-refundable earnest money if they cant close. Now it is only non-refundable if they cant close and it is not something wrong with the title or an unexpected find about the condition of the property.

Otherwise, if you like the price you are getting for the house and want to sell then go for it.

Best of Luck  

@Nick P.

I dont predict another 2008 but having equity of 20-30% will put you in a good position especially if it is cash flowing. I refi at a more conservative LTV than most but that is my way of playing in RE.

I think 75% of ARV is tough to find at least in many markets but if you take on a heavier rehab than most people will be willing to do it can get you great numbers but of course, there is the risk of going over budget. So will need to find yourself a good GC.

If you wanted to get into BRRR instead of going FHA each time you can possibly consider hard money then go to the bank if the deal has good equity and refi out without any extra money out of your pocket. I know many that do this approach thus no need to season the loan or have sellers not choose your offer because it has an FHA loan attached to it.

Hope that helped

@Evan Knapp

Go to meetups in your area and find an experienced investor that will allow you to shadow them so you can see how the real life of an investor is. HGTV is not reality. Go get your license as an agent but while you are learning and meeting people, read and watch as many videos about how to analyze deals and estimate repairs. These skills will help you to find deals worth going after both for yourself and for clients. 
It's awesome you are wanting to get in at young age. Keep focused and think of this as a long game, not a sprint. Take your time but don't sit around waiting to get the money or find a deal. Educate, educate while you are saving money or trying to locate a deal. 

Real Estate has so many avenues to make money. You are young, explore different interests until you find what you like then become an expert in that field. 

Best of Luck 

@Shaun R.

Congrats on having 10 rentals and self-managing. One piece of advice I would give my younger self if I could be KISS....Keep It Simple Silly. I remember when I was starting out I read all the Rich Dad books, other books that talked about Living Trust, Land Trust, etc. I over complicated my taxes with a dozen LLCs, 4-5 Living Trusts, a land trust, a Delaware and Nevada Corp, etc.

I wanted to protect myself and my assets. But keep it simple.

Create an LLC so that you have a different entity that manages the properties versus the same LLC that owns them. Helps to keep your accounting separate and looks more professional as well as allows you to say you are just the property manager not the owner of the property.

Then I would get great insurance for the properties with an umbrella policy. 

That should be enough. The only time you need to do all these other things is if you have high net worth or own the properties free and clear. Otherwise, you have a third partner that will insure you don't lose your property..... the bank that holds the mortgage will not just allow someone to come in and sue you and take the property. They have an interest in the property thus they will defend it to defend their stake.

Best of luck 

@Nick P.

You got some great advice from the community on here. Just remember forced appreciation is not like 5+ multifamily forced appreciation. Your appraisal and value are based on what similar properties in your area are selling for. Don't over-improve thinking the appraiser will give you that higher value. One way to increase value without doing much work is to find say a 1200 2 bedroom house and make it into a three-bedroom by adding a wall and closet. This third room can put you at a different price point and normally give you higher value. Adding a bathroom if it makes sense can also increase value but paint and some new floors will not increase if you did not buy it right.

You will make your money on the buy side, not the sale side. If you bought it right, below the value you can do some rehab and get yourself with the 20% to refi out. 

Also if I remember, it's been a long time since I did any FHA-type loan, but if you see that you have 20% equity you can ask the bank to order a new appraisal and that can remove the PMI.

In today's market with prices being at historical highs be careful. Putting 3.5% is a great way to get into the market but if you are an investor and this market has slight correction it can put your property into a liability instead of an asset. It can hurt you from buying more properties if you owe more than its worth thus even if it cashflows the banks will treat this as a liability versus adding to your networth. 

Best of luck 

@Account Closed

I agree to buying a property that you can do value add in multifamily is a great strategy. I have made a lot of money with such a strategy. I am using this current market to build multi-family from the ground up. However, what I was pointing out is how people are throwing out the number of doors they own versus the amount of cash flow they are making from their investment. The popularity of syndication has made it sexy to walk around telling people you have 500 doors but in reality, you might not be making more than someone who owns 10 doors. Buying 10 units with one partner and making decent cashflow in my opinion is better than owning 1/10th of a value add with promises of a great return on your money in year 5 of a 300 unit with 80 partners. Controlling an asset gives you the ability to create value. I am not a passive investor so I know I am biased. 

Sure the 3-5 year projection of a high IRR at the time of the sale sounds great but I don't know what 3-5 years will look like so I am not going to bank on appreciation as my exit strategy. I would rather have a good cashflowing property in a good area.
I personally know a handful of investor friends who lost their shirts with overleverage on their multifamily back in 2008-2010. I loved the 2008-2012 time frame as I was buying assets well under build cost. I have met tons of investors some with large portfolios that had their loans come due by local community banks. And I agree if you bought correctly you can weather a storm. I just didn't want newbies to think in terms of the number of doors rather think of the cashflow as they are building their portfolios. 

@Brad Hunton

I am also in Texas. Don't you have a rich relative that can just write you a Million Dollar check??? Yeah, me neither. lol

Having your properties on 15 years means you will have properties paid off in 15 years thus at that point will see huge cashflow coming in. If you don't want to play that long term of a play then I would second those that mentioned going into a 30 year or getting a HELOC or line of credit on the current properties.

It sounds like you are being a good investor that is not falling for the get-rich-quick schemes. Look at your game as a long-term play. If you want to grow quickly you might want to sell some of the properties and use them to flip other deals. Grow your cash base and then put that into long-term holds. 

It's awesome you have gotten 5 thus far so don't give up. Take your time and play the long game especially since you have a full time job and can make this into a 5-10 year play and not a 6 month play :)

Best of Luck 

@Bryce Renicker

I am not a fan of buying knowing you will lose money. However, if you can pay less than what you are currently paying for rent and you like the house/area then basically you are buying your first house with tenants next door helping you cover your mortgage. I would not say this is an investment but if you live in it for a few years and the economy plays in your favor you can have a winner on your hands. BUT don't let FOMO (Fear Of Missing Out) lead you to a poor decision. As others pointed out here. Don't forget there were 1000s of investors that looked smart before the 2008 crash bragging how they made $100k in appreciation and losing only $500 per month. There is no real gamebook for this current economy so better to take your time than to jump into a ship that has a small leak growing without the occupants knowing. 

If you buy with only 3.5% down and the market turns you will be holding onto an asset that has negative valuation thus no longer an asset and will prevent you from buying in the near future as banks see you with negative net worth versus an asset. 

Best of luck 

@Robin Morales

First thing first. Not sure what city/state you are in but can only give you what I know about Texas. You would need to check with your local city permitting department and if your property is in a subdivision with HOA or deed restrictions you will want to verify you can build a second dwelling on the same lot.

If you have no deed restrictions then you might be able if City doesn't have zoning. 

For finance, you will not be able to get a construction loan unless you replat the lot thus creating two separate property tax accounts. Only then will a bank give your partner a loan as they will use the new lot as collateral. 

If you have no issues with deed restrictions, city zoning issues then I would try getting a HELOC loan and do the build then refi the whole property.

Best of luck