All Forum Posts by: Mackenzie Grate

I started off doing just this, buying single family homes that needed cosmetic work. Back then there were bigger margins, but I also put the first two on 15 year notes intentionally. I lowered my ROI, but I thought it would be good to pay down the mortgage quicker. That was me being a newbie as an investor.

If I could go back in time I would definitely do it differently. Instead I would probably just jump directly to multi-family? Why? You speak about mitigating risks. The two biggest risks for a turnkey single family is 1) Smaller margins for cash flow 2) Significantly greater risk of vacancy or non payment. Yes there are things you can do to mitigate both but with a single family home but ultimately if the tenant stops paying or moves out, you lose all your income until it is retenanted. If you have huge cash reserves, or can carry the mortgage on your own with it being empty, you are fine. But with multifamily, at least there is one or more other units to help carry you through.

At the end of the day, there is always risk. But if you are looking to buy and hold for rental income, my thoughts are the more units the better.

Good luck and congrats on starting your journey!

Hi guys,

I just finished this article and have been following this story for awhile. Considering there is no legal precedence on this sort of thing, it could have serious ramifications reaching far beyond New York. Just wanted to share this article and curious to hear your thoughts. Fair, unfair? Anyone here have any updates from the ground level? Is there more to the story than they have written here? Feel free to chime in....

https://www.theguardian.com/us...

Thanks,

Mack

Hi Anna,

I personally invest in upstate NY and I have partnered with someone on one of my deals. While it's gone fairly okay, there still have been some hiccups that I will make sure I address next time before I jump into another partnership.

Here are some things to think about:

- Decide your strategy first. This is going to be based on your goals. Are you in it for cash flow? Or more of an appreciation play? Are you comfortable holding it for awhile, even if that means you might have to pay a little out of pocket along the way while you are stabilizing it? Or do you want to do a project more like a flip where you can get in and get out and test how your partnership works before you commit to a long term relationship?

-Once you have that, develop your operating agreement. And use a lawyer. They will ask you a ton of questions you probably won't even think about when you two are coming up with the initial agreement yourself. Why? Because it's your first deal and you don't know what you don't know. What will happen if one person wants out? What will happen if one partner dies? What will happen if your tenants aren't paying rent and you have to carry the property for a bit? Who is managing the property or project of fixing it up? Who is managing the bookkeeping an taxes? Etc. Etc. Etc.

-Lastly see if you guys are a match in stressful situations. This may sound silly, but travel together. You get a real sense of how someone handles stress when something goes wrong on a trip or when someone is put into an entirely new situation outside their comfort zone. Both of those things will inevitably happen while investing. Are you a match and are you compatible when it comes handling challenges thrown your way. If not, I'd strongly reconsider partnering with this person.

If the reason you are thinking about partnering is just because you feel like you need the money now, to get started today, pause. Go back and really consider whether this person will add stress to your life or remove it when things get hard. Cause the first one is ALWAYS hard. Remember, you can do it on your own. It may take longer, but sometimes its better to partner with no one and take the slower and steadier road than introduce someone just so you can get there quicker. Just food for thought.

Either way, good luck! I know if you stay the path and are committed, you will be wildly successful. You got this! :)

If your new to this, always get an inspection. In NY you can offer to do an "inspection for informational purposes." That means you get the inspection but you won't renegotiate. You do however have the opportunity to walk if there is a deal breaker you come across. This option will still mean that you have to pay for the inspection out of pocket, but it gives you the peace of mine while also giving you an opportunity to walk away if you find something major. This is the second most enticing thing to sellers next to waiving the inspection entirely, so it's worth a shot.

Good luck!

I guest I am unclear what the exact issue is. Do you plan to sell the place now? Are you just worried they will stop paying? It's unclear.

However either way, if you plan to keep the property or if you plan to sell it down the line, you will want to transition them from paying cash so that you have a record of payment. One suggestion if they don't want to do an online payment for whatever reason is to have them start paying via money order and keep copies of the money orders so you can prove that they are consistently paying their rent. You need documentation of that if you want to go to sell, but also, really for tax purposes. Someone doesn't need a bank account to get a money order. They can get one each month and deliver it to you but there will be an added level of proof that you are collecting the rent roll that you say you are.

Hope that helps. With a little more detail I may be able to give more nuanced advice.

Good luck though. No matter what, paying tenants is a good thing! :)

Have you looked into a DSCR loan? It is based on the asset, not your income. You will have to bring a down payment... but maybe it's something worth looking into?

No matter what, don't give up. This is what separates those who are successful. Keep going, you will figure it out. :)

Good luck!

Hi! It sounds like you have definitely done your homework, which is great. And conservative estimates are always better in the long run. The only concern that I would have is doing my first flip at that price point right now. Sometimes more expensive homes are harder to sell on the back end, especially when a market is softening. This seems like it is closer to a luxury home than a step up home. I could be wrong though depending on the area. Just food for thought, but when rates rise, the first to slow are the more expensive homes because people simply don't need to buy them. If you had to hold it, what would your back up plan be? 

So excited for you! Great work with finding a deal and analyzing it. If you have a viable plan B in place, and you think the deal will work, go for it. :)

Good luck! I'm rooting for you!

I agree with @brucewoodruff, often times this has more to do with the person wanting the renovation done than the GC. It does start with you first having a realistic budget AND a realistic contingency plan. But it also starts with you adjusting your expectations of the process. Changes will have to be made on a project. That happens every single time I start one. EVERY SINGLE TIME. And I'm a pretty decisive and organized person. 

Do your due diligence. If someone is promising you the world and says they can stick to an exact budget no matter what, they are not being fully honest with you. A good contractor will tell you what you need to hear, not always what you want to hear. Work out a payment plan from the start. Banks do this with renovation loans to protect their investments. They usually pay 30% to start. Do a few draws after work promised is completed and checked. And then there is a final draw at the end. It has to be substantial enough to keep the contractor working. 20% or so.

Make sure they are licensed too and that they have a good reputation in town. Stop by other projects they've done unexpectedly and talk directly to the homeowners. Check if they are highly rated by the BBB.

You can't trouble shoot everything, but hopefully this will give you some help getting started and setting up your mindset for renovations success. I actually want a contractor to tell me if something needs to be fixed that I wasn't planning on doing. Because I'd rather do it now, while he/she is on the job then to have to go back later, and reopen a wall or redo it then. Scheduling a quality contractor to get on a project is hard enough to start. The thought of having to do that later down the road is not only stressful, but it ends up costing you more money in the long run.

Good luck. You got this. After going through the process a couple of times, you will find your stride. 

Congrats on taking the next steps in your investment journey! I'm rooting for you! :)

Hi! Congrats on getting your license. Choosing a brokerage is a big deal and I'm glad you are putting so much thought into it.

Like everything in real estate there are pros and cons to different types of brokerages. If you go with a larger one, you are going to have more structure, more training, more resources, but usually more fees and lower splits. If you go with a smaller, more independently owned one you will probably have less structure and more freedom. Usually if they have less training, but can allow you to be more creative to grow your business. Splits and fees tend to be more negotiable there as well.

Another major component is to meet who your broker would be, check out the culture of the team, and see if you vibe with them. Are you the competitive type who thrives in an office that goal sets and is super competitive? Do you prefer a more collaborative environment that maybe won't pressure you as hard to close a specific number of deals? Do you plan for this to be your main career or a side hustle? Does that fit with what the broker expects of you?

And no matter what, remember nothing is forever. You can start somewhere and decide to leave to another brokerage later one. Just remember it is a small world. Some broker's are okay with that, others are not. You want to try to avoid burning bridges if it's not a fit because you never know who you will have to do a deal with in the future.

Good luck! Super excited for you and this next step. You got this!

Hi Nadia! Welcome. :) I live in NYC but invest in the Hudson Valley. :) So excited to see where your journey leads you! Congrats on taking the first step. :)