All Forum Posts by: Ben Gordon

@Michael Seeker

Thank you! Great info. Fortunately we don’t have to have a strong appraisal, but it puts us in a more ideal situation for growth.

*Disclaimer* Not all appraisers apply. This forum is about the experience I am having in my market

Where am I looking: MLS

Method of investing in this discussion: BRRRR

I want to get your feedback on how to get more creative or should I just seek greener pastures.

Yesterday I spoke with 2 different appraisers about "what is the best bang for my buck" when putting money into lightly distressed property. By the way, I highly recommend doing this! Talking to them was very insightful to what they look for, what they like, what they don't, their opinion of the market, their opinion of SFR vs MF investments, and their feeling of the value (SFR, MF).

Here is why I have decided to ask these questions. There are several duplexes in my area. Most of them are in ~$40-$50k listed price. Most have long term tenants and the current rent is very good.

Here is my pickle...After talking to the appraisers, their opinion is not high of the MF properties. With that being said, their opinion is that if they appraise one of these properties for $60k you're on the high side. They do not feel the market is strong for MF, yet in the same breath they said that when they do rent comps, they do very well. 

Most of these properties need ~$10k per side.

So, here is my question. How can you BRRRR better under these parameters:

Purchase: $40k (add closing cost)

Rehab: $20k (10 per side)

Appraisal: $60k is the high side

Ref 80% LTV: $48k

Total OOP:   $12k + Closing (still cash flows well)

The point to my Subject line is this; If appraisals were higher, investors could "afford" to improve the conditions of these homes thus creating curb appeal, put contractors to work, etc... Since these appraisals are so low, these properties sit on the market, distressed, and only attractive to a slum lord just seeking cash flow.

How do you handle low appraisals with cash flowing properties, and make a more efficient BRRRR (less OOP)?

@Jovon Itwaru yessir! You nailed it!

@Doug B.

Always think about the 2% rule.

If you’re into a property 75,000-80,000 the 2% rule would put you at $1,500-$1,600/mo gross rental income. I’ve found the majority of the time, it’s hard to hit 2%, but I definitely know things will be tough when I’m hovering 1% like your current numbers show.

Doesn’t mean it won’t work, but it most likely won’t be as lucrative as you’ll want.

@Keesha Duminie

Well, hang on a sec. you asked what SFR was. It means Single Family Rental

Now...I actually did start with a SFR. It's on my profile under Investments. I started with it because of the lower risk, lower cost of investment compared to anything else. For example, I got my first SFR for ~$25k. If you look at a multi-family (we will say duplex), you'll be looking at double that number (relatively).

So, I looked at the worst case scenario...if I go belly up on my first investment, can I make the payment and still survive? The answer was yes! I chose a decent town, decent neighborhood, and ran my numbers over and over to be sure I would be positive cash flow.

Hope this helps! Do you homework, make sure you can handle potential vacancy, and go for it.

@Keesha Duminie

Single Family Rental

Investment Info:

Single-family residence buy & hold investment in Muncie.

Purchase price: $26,500

Purchase Price- $26,500 (cash)
Rehab- $4,500
Refinanced- $32,550 ($1,550 positive!)
Rent- $750/mo
Mgmt- 10%
Mortgage, Tax, Ins- $456/mo
Cash Flow -$219/mo

This was our first deal.
Walked away with finds to pay for our business start up expenses i.e. (filing with state, operating agreement created by attorney, and initial funding of business account.

For a first purchase, this worked out wonderfully!

What made you interested in investing in this type of deal?

The simplicity of the property in a desirable location

How did you find this deal and how did you negotiate it?

MLS. Negotiated price with having a cash offer

How did you finance this deal?

Local bank

How did you add value to the deal?

Vinyl plank flooring and paint

What was the outcome?

Refinanced $1,550 ahead and paid for our initial business expenses

@Taylor L. Thank you for the response!

Establishing a goal has been difficult. Enough cash flow to cover my personal monthly expenses, create financial freedom, early retirement...I really just want to keep building this monster!

Can you elaborate on Asset Protection?

What I am doing is working. How do I know I am making the most efficient strategy? I am self taught in all of this so far. I am a believer in surrounding yourself with more successful individuals. By doing that I can learn more ideas, get more creative, etc. Rather than just limiting my strategy to whatever I have come up with.

Having $100k and asking "what would you do" is too broad...So, maybe it would help to know what I have done so far and where I am financially.

Currently have two businesses.

Assets-

Business 1. 11 units composed of (1 SF) and (5 Duplex)

All properties are financed. 3 separate mortgages

Business 2. 4 units composed of (1SF) and (1 Triplex)

SF is financed and Triplex is owned

Liabilities-

Home Mortgage $165k ($1,300/mo)

Truck $15k ($700/mo)

RV $23k ($200/mo)

---

Our experience has been limited to Muncie and Richmond Indiana. I have a full time job that fuels this addiction. I am very hands off and leave the majority of the work to my property managers. I have enjoyed finding property managers that are more vertically integrated (RE agent, contractor, PM). Not sure if that's everyones preference, but it definitely makes it easy on my end, sourcing from one location for everything I need. All of these properties are residential rentals (in case that wasn't clear). All of these units cash flow "fairly" well and the businesses support themselves, but not much more than that. It's a slow gain and a more long term goal with what I currently have.

So, given the information above...What would you do with $100k?

I am willing to try something different. 

What opportunity did you take that changed your business for the good? 

Would you put the money towards liabilities?

I am very torn and need advice! Thank you in advance!

Alright everyone, first post on BP and getting ready to make my first purchase. I've got a strategy and I'm looking for all of you to back me up or tear it apart! ???? I want to hear your thoughts, based your experience. Here's what I got:

I have a lender ready to finance for $30k+

I have a single family 3/2 property with an accepted cash offer of $25,000

The property will need $5,000 in repairs

I have my realtor/property manager/repairman ready (his business is a "1 stop shop")

My estimated rent is $700/mo

Monthly expenses are:

10% Mgmt- $70

Tax- $67

Ins- $49

10% maintenance- $70

= $256/mo

Now here is where my plan comes in...

I'm going to purchase the property with cash, fix it, and finance it...so I ultimately have $0 out of pocket. The only thing I plan to pay for is closing costs ($2,000). Here is what the numbers will look like:

Finance $31,000 (purchase price+ repair + misc)

Loan - $262 (15yr)

Expenses - $256

30 day vacancy- $58

= $124/mo cash flow

Now after going to the bank, I get my initial investment of $31,000 back in my pocket, off to the next deal, and I've only spent $2,000 for closing...

Thoughts?