All Forum Posts by: Lumi Ispas

@John McKee, 

Hi John, I have a lot of great examples done over the last few years:

Story #1: My own: I sold a 4 flat in the Suburbs that I had for over 7 years and it had enough equity to buy 3 - 4 flats in a different area of the City of Chicago, going from having the tenants paying off 300K to a new total mortgage of over $1,000,000, and cash flow more than doubled. Interestingly enough, I am already ready to leverage the three new building in spring on an even larger property and do another 1031 Exchange.

Story no 2: I have a client in Chicago that had a very low return on investment on his places, was self-managing them and had a change in lifestyle, wanting to start freeing his time to build a new business. So after a strategy talk, I sold his 7 unit & 4 unit and found him off market two large commercial properties with triple Net leases in place so he can stop managing rental units and just collect money while his loans went from about 1 million to over 2 million, building wealth really fast.

If you wonder why I am mentioning the mortgage amounts, is because with the inflation and tenants payed equity, the more you own and the large mortgage amounts, the more you depreciate for tax brakes, the more you get to appreciate and the more tenants pay off, growing your equity very, very fast.

Story no 3. I have a friend that I met at a Tony Robbins event who shared how much equity she had in a property and how much cash flow she had. When we did the math, she was getting 1% cap rate. After that realization, she made a swift decision: she sold her property with lots of equity in California and used the money to buy 5 properties here in Chicago, with a total of over 2.5 million in loans, lots of cash flow & property management in place.

Story no 4. I received a referral this year for a couple that sold a condo in the Suburbs and after sitting down with them and learning about their issues and what they are looking for, I found them a commercial condo with a triple net lease in place that has three times the value of what they sold and has in place a long, 10 year lease with couple 5-year options in place.

I can give you a lot more examples. The question is: "What is your goal"? Are you looking to increase your equity, your cash flow, your depreciation or are you looking to stop doing self-management? Or is it that your rate of return is very low? 

When I sit down with people wondering if they should do a 1031 Exchange, we analyze the return on capital, what the owners are happy with and what their goals are for the future real estate wise and that's how we determine if they should sell their existing properties and do a 1031 Exchange or not.

@Alexandra Belle, you are a smart lady to looking to buy and live for free. 

You have at least a number of options depending where you want to buy, how much are rents in your area, and for how much you are approved for.

1. You can use FHA loans with 3.5% down if property is in good condition

2. FHA 203K if the property needs a lot of work

3. A conventional loan with renovation, however for a 3-4 unit the down payment will be 20-25%.

You want to find a great team to help you strategies: an investor Realtor and a lender that knows a lot of programs. I will say look for Realtors and Lenders that are investors themselves and have been in the business fulltime from before the market crash of 2008. 

Good luck to you!

@AJ Wong, 

Good job on researching what's happening on the market, and you always want to read into the info a bit more. Here's an article showing that the amount of foreclosures in 2022 are the same as in 2020 and about half of 2019. The foreclosure levels today in US are actually below the average foreclosure rate in USA over the last 100 years! 

The numbers look so high percentage wise as banks put most foreclosures in hold after Covid started and now they are processing them. A lot of people that are in foreclosures are the ones that took advantage of not paying their mortgages as the banks allowed it. A lot of these owners are working out payment plans with the banks or selling their homes for a profit, meaning they won't be foreclosed on.

You always want to read three sources of information, and try looking for data articles, not articles that interpret the data as most writers don't understand Real Estate and they are just looking for sensational information.

https://www.attomdata.com/news/market-trends/foreclosures/attom-midyear-2022-u-s-foreclosure-market-report/#:~:text=Nationwide%200.12%20percent%20of%20all,the%20first%20half%20of%202022.

This time around the market is so far different than 2008:

1. The market is flashed with cash, meaning lots of buyers looking to buy, 

2. Owners have so much equity that most sellers in foreclosures if they would even want to talk to a Realtor could sell the property and walk away with money

3. Inventory is so tight due to landlords securing interest rates at less than 50% of today's rates, and not willing to sell them 

4. Wealth in general had increased for RE investors due to Inflation, savings, age, so more investors are buying a lot more properties without selling

5. Real Estate market is local. The only markets that will have a correction will be the ones where Real Estate prices went up very fast and unsustainable, which is less than 10% of USA.

 With other words, the sky is not falling people. While you will always find a deal, don't panic. 

Lastly, commercial interest rates are about 2% under the conventional rates, and in the conventional market there is a bunch of new programs to buy down the rate, ARMs, or seller pay 2-1 buys down. The banks finally have fun and can play in the market as they can start making money on loans.

With other words, what change will you make in WHAT you buy, WHERE you buy, as construction costs are not really coming down and most properties can't be rebuilt today with the new construction cost. 

@Leonel Almagro, With FHA they can buy by showing that they've been paying on time their utility bills, phone bill, etc.

Also, you can add them on your credit cards for a fast way to show credit. 

Good luck!

@Jacob Vargas, while you can buy only up to 10 properties with conventional financing, you can buy unlimited with commercial financing under LLCs. There are a lot of commercial lenders as now that have interest rates as low as 2% under the conventional interests and down payments as low as 15% depending on the type of property you are buying and what type of credit score you have!

Let me know if you need the info of a great lender and remember in Real Estate the potential is unlimited!

@Tony 

@Tony Scarangella, buying right means buying with plenty of cash flow, with 30 year fix mortgage if you can stay in the conventional arena and don't overpaying for the property.

Do your inspections and make sure your rental comparable are correct. Same with any repairs estimation. 

Good luck to you!

 @Stephen Hollenberg, Here are some options:

1. Find a partner in the deal. They bring the 250K and get half a deal

2. Raise the money from people that have money in retirement funds. 6% might be too low for those investors. I will think they'll want 10% or so.

3. Get a 2nd mortgage at 6% or whatever interest you find and refi the loan in a year at 75% loan to value ( as you are mentioning the building value of 1 million. By then you'll have no vacancy and the numbers will work)

4. Raise small amounts from different investors. 5 investors at 50K each - voila you got your 250K

5. Take a personal loan - there are plenty of options at 50K or more, combine it with what your Equity line of credit and borrow only the difference.

Good luck to you!

@Rafiq Elkiki, congrats on your big goal. It is doable. After doing a number of transactions, you might decide that 300 units with low profit per door might not be as good as 50 units with high profit per door.

For now, you can buy your first building with a 203K FHA loan and actually do a BRRRR strategy by finding a building that after it's remodeled its value goes up 25% above purchase price + rehab. Rehab it, rent it out, refinance from the FHA loan and do it again!

This way you'll reutilize the money and start adding cash flow to your income and start getting great tax deductions. Hopefully after a few years, from all the savings, cash flow, and depreciation you'll start having higher down-payments and start building your portofolio both ways: as owner-occupied and investor and accumulate properties faster!

Good luck to you!

@Colin Williams, Great question! 

I originally bought a single family on a large lot, bought with 100% loan in 2004, and promptly lost it in 2010. 

I got back on my feet, and three years later I recovered and the 2nd time around I house hacked a 4 unit building with a 203K FHA renovation loan. Best decision I could have taken. That property helped build my portfolio!