All Forum Posts by: Matthew Maggy

Dude @Daniel Harnsberger and @Edward B. you guys just gave me some killer answers. Thank you!

I know this is a big topic of debate with people with different opinions on Section 8. I have done the research and decided that this is the way I want to go with the properties I'll be closing on soon. The only problem is I can't find anything on the actual process. I've checked out GoSection8.com, read countless articles, and can't figure out how you get started accepting vouchers and making sure that the property meets section 8 requirements. Can anyone give me an idea of where to start? Do I just list the property and THEN get it inspected? Will the local housing authority (Richmond City, VA) come out an inspect before I can list? Will they tell me what the rate of rent they will pay for my property would be? It's my understanding that it can sometimes vary compared to the market rate.

@Levi T. I see why you say these areas are a PITA. Not the greatest renters, generally older houses, etc. For people starting out, I think it's easier to start close to where you live to get your feet wet. The duplex has worked out really well for us so far, but that's from a house hacking perspective. I do feel that after a couple of years we'll probably unload it since the numbers aren't as hot as a straight rental (an unfortunate consequence of lack of experience when buying). 

I think for someone looking to house hack and it's their first deal, unless they have a ton of money for a down payment; Museum District  and west of it are not good deals. We looked at a bunch when we were going to house hack and values are too high for the cash flow numbers to make sense at 3.5% down. They will probably appreciate a lot more though.

Of course, that's MHO and I haven't delved too deep into that neighborhood, so I encourage the OP to do the research for himself.

"We are looking to begin investing in multi-family properties beginning with a primary residence of a 3plex/4plex."

What neighborhoods are you looking in? 

We're currently house hacking a duplex in North Highland Park. It's not the most deisreable place to live, but the 3.5% down FHA loan is nice and all of our PITI is paid for by the tenant; so more money to put away for future down payments. This might be a good place to look. Unfortunately this isn't tenable in the Fan or Church Hill, or any of the nice neighborhoods. Look North of Broad or South of the river.

 "My personal goal is to be financially free within 10 years."

What does that mean? Why do you want to be financially free? You should put actual numbers and tangible goals, otherwise it's just vague as to what "financial freedom" is. If you're already doing this, then sweet, but if not, it helps to have something tangible and attainable.

For example, for me, financial freedom is $4,000/month of free cash flow, but my immediate goal is to have enough rental properties to pay the mortgage on a nice house in the burbs for our kids to go to better schools.

If you have a clearly defined scope to begin with, then theoretically a Change Order would be obvious. If something does come up, it would be either you asked for something different to be done or an "unforeseen condition" ie: You are having some siding replaced, they remove it, and found a ton of rot in the sheathing. With a clear scope up front about what is and isn't included, you can refer back to that contract.

If you feel that the Change Order work should have been in the scope of the original contract, say so. If the initial scope is vague or verbal, then you either have to pay it or don't agree and risk the guy walking off of the job. At which point you pay for the work done and bring in another guy to finish it. 

One of the other things people run into, and our firm deals with this all of the time, people go for the cheaper bid and end up paying more than our original bid via Change Orders. This is something that can be resolved by calling references of the Subcontractors. Ask for the reference of a job that required Change Orders. 

I suppose the biggest thing I can say is define everything up front, do due diligence on the Contractor, sometimes it's worth paying a little more to work with a professional and not some guy with a pick up truck and a Class B License who works on a hand shake. If you do, have a good contract. With all this, Change Orders should not be a problem since they would be obvious.

Ask for a written proposal with a detailed, clearly defined scope. If the Contractor doesn't want to deal with paperwork and wants to do business on a hand shake, that won't fly. Make sure a contract has provisions for conflict resolution, retainage, payment schedule, etc. You must have a full, complete written scope, otherwise a dishonest Contraactor will come in low and cry "Change Order" for something that was vague in your verbal discussions.

If they don't want to put things in writing, don't use them.

That sounds terrible. I hate sales and wouldn't want to do it. Here in my market, $12k down plus a couple grand in closing costs will put you in a rental property. My opinion is that if you were to do some part time job for that 8 to 10 hours, or take on more clients in your regular business and save a couple grand more to buy a rental that cash flows well, you'll be able to build the wealth you want, albeit probably much slower.

Also, one of the head honchos here at Bigger Pockets has a book called "How to Invest in Real Estate with Low and No Money Down" which gives a ton of ideas on what you could do. I think I paid like $30 w/ the Audio Book and physical copy. 

I haven't read through other responses, so if I'm repeating something that's already been said, I'm sorry.

Welcome to BP! This website has indispensable to me for the past year and a half. Use it well!

My two cents:

1) House hacking doesn't always have to be done in a multi-unit. You can rent out rooms in a single family home if you don't mind having a roommate. In the right parts of Philadelphia, you could also house hack by renting a room through AIRBNB or something like that. It wouldn't provide a full steady cash flow, but it would offset your mortgage and you don't actually have to deal with a tenant. This would be especially viable if you have a 3 bed/2 bath and rent out the master. I have no experience with these as I house hack a duplex here, but these are things I've heard of others doing.

2) I was told that if you do a rehab loan, then you can't cash out refinance at the ARV until it has "Seasoned" for a year. For example: You buy for $100k, put $20k rehab loan and ARV is $150; Fannie/Freddie will only go with $120k. But after a year, they will loan based on the ARV of $150 then you can BRRR (if that's what you're going for). All the while, you are socking money away for down payment on the next one, or to combine with the cash you take out of this first one for the next one. Also, I have not done this (yet) but have been looking into it for my next buy and hold acquisition, and this is what I've gleaned fro my research.

I am trying to expand my circle to a group of friends who are also active real estate investors (preferably farther along than I am) and are geared toward success and passive income. I would like to arrange a meet up, not for networking specifically, with presentations or anything like that, but a get together to just talk about what people are doing, what's working, goals, have some drinks, etc. 

At the risk of sounding pretentious, I would prefer this meet up to be active buy and hold investors or active BRRRs seeking passive income; who own at least one rental property. I love the REIA and RING meetings, but their are too many people.