All Forum Posts by: Matthew Radniecki

Investment Info:

Single-family residence buy & hold investment.

Purchase price: $110,500
Cash invested: $25,000

Single family home with medium rehab. Typical BRRRR. Cash flow about breaks even due to such a high post-rehab appraisal and maxed out refi on high appraisal. But we opted for higher cash out and break even on payments rather than lower cash out and positive monthly cash flow.

Investment Info:

Single-family residence buy & hold investment.

Purchase price: $76,000
Cash invested: $40,000

Bought direct from homeowner in foreclosure for amount due to bank $76k. Rehabbed $55k. Reappraised for $170k. Refinanced for $130,500. Rent short term on Airbnb.

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

Location seemed conducive to short term rental due to growing tourism.

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

Searched county records for foreclosures, researched homeowner, reached out direct through Facebook. Negotiated to pay off mortgage to save them from foreclosure.

How did you finance this deal?

Short Term bank lending for 80% of purchase price and rehab costs.

How did you add value to the deal?

Major rehab

What was the outcome?

A cash flowing property that is 100% managed by outsourced mgrs.

@Andrew Postell & @Salvatore Lentini - I greatly appreciate the insights. Both are quite helpful. This property is still available (way over priced) so that will be hurdle number one. 

And hearing "a commercial 'flip' is usually a 3-4 year turn time" is helpful. It is what I kind of assumed based on my limited experience in RE and knowledge about banking. 

Thanks! 

My wife and I looking at a 16 unit motel and converting away from traditional motel operation and towards STR Airbnb each unit.

I've read enough books and have enough education to know on paper how the commercial refi process should work.... increasing NOI at a given cap rate to drive up valuation.

But none of the books and education really dive into the nitty gritty of what is basically commercial BRRRR.

For example... upon cash out refi, I am assuming most lenders will require a formal business appraisal. It is easy for us to value using NOI and cap rate for the given market. But how will that differ from externa business valuation? Any insight?

And what about time lines... will most lenders (or appraisers) require a certain number of years of financials to qualify the increase in NOI?

And is there any consideration given to property improvements and market conditions or is it all 100% financially driven in the commercial world? 

Just looking for some of that real world knowledge that may get missed in a book. 

@Connie Tang

There are no tax benefits of owning rentals through an LLC vs personally, other than having to pay for additional tax prep if you have an LLC.

There "may" be additional legal protections the LLC would provide… but I am of the opinion that a solid insurance protection plan is just as good as an LLC if not better (insurance also pays to defend, while LLC does not).

Lastly, if financing a property in an LLC, you'll pigeonhole yourself into in-house or "portfolio" loans aka commercial loans. Which are fine, but will carry higher interest rates and generally 3-5 year balloons which will require frequent refinancing. If owned personally, it's much easier for lenders to secure conventional terms backed by Fannie/Freddie with much better interest rates and 30yr fixed terms.

@AJ H.

Thanks for the insight!

Is anyone willing to share how their credit score has been affected or changed since starting real estate investing? 

I am curious, because prior to real estate, I had a high 700, just a hair under 800. But it has been lowering steadily since starting in real estate 6 months ago to currently around a 735. Still good, but no longer over that 75

Despite being current with all the debt, the mere fact of utilizing loans increases overall credit utilization, and we tapped into a heloc on top of a mortgage to partially fund our first deal. And now renovating second deal again via heloc and acquired with commercial note. 

Also there is the fact that these two new loans on my first two deals have dropped the average age of my credit quite a bit. 

Is it safe to assume that real estate investors that are active in BRRRR'ing properties will never see an 800 credit score?

Obviously none of this really matters as most lenders will lend over 700 or even lower. More just curious how others' scores have changed over time while acquiring property. 

@Jim K.

The REI side of me (conservative) just adds 30 and 50 to call it 80 and good enough.

The educated human side doesn’t do mental math and my brain thinks “where’s my calculator?”

I stay away from what I don't understand. 

In our fiat system, supply is regulated by the Fed, and printed by the Treasury. In a crypto system, where is the supply coming from? Mining?.... that's a whole 'nother level of questions. 

Outside of the underlying questions, "investing" in crypto to me seems no different than forex trading... which is a very very active investment in which to make money you must always be actively trading. But it seems so many crypto investors are choosing to buy and hold. Perhaps I don't understand currency trading enough, but I've never met someone that's accrued any significant wealth from a currency buy & hold strategy... 

But like I said, perhaps my folly is simply ignorance into crypto mechanics. 

I am partnering up on a small SFR deal with a long-time friend. We are acquiring a home in foreclosure proceedings and intend to rehab and turn in to a short term rental. The home is located in a great spot inside a tourist destination locale. The house will come with some repairs which we have budgeted. The partnership will be 50/50, with me actually contributing the needed capital. Half of what I contribute is actually going to be booked as loan to my partner. He's got the construction experience for the rehab.

I am curious what everyone's thoughts are on legal entities in a single property partnership. I'm not really concerned about having liability protection (that's what insurance is for). Outside of the liability protections offered by an LLC, are there any other considerations I should keep in mind? I am inclined to keep it simple and just operate as a partnership... no filing fees and financing is easier with better terms.

Additionally, if we go the general partnership route, I am assume we ought to take title as tenancy in common correct? So that my heirs or his heirs retain title if either of us passes away.