All Forum Posts by: Max McQueen

@Max McQueen  If you are looking to grow a portfolio you will need to build relationships with numerous lenders. First of all, banks will have legal lending limits which dictates how much the bank can lend to each particular borrower. Unless you have a tremendous track record and strong balance sheet, banks will be reluctant to lend up to their legal lending limit. Secondly, some banks will be more active and offer better terms in the construction and bridge debt space whereas others will consider take out financing and debt for stabilized properties a core competency. You will want to determine which lenders are best suited for different loan requests.  Once you understand which banks offer the loan products that align with your borrowing needs you can spread your loan requests around. 

Now for the more nuance part of the process. Currently banks are looking for borrowers to keep cash on deposit. This can make it difficult if you are working with numerous banks. Therefore you should determine whether this is a requirement and/or try to negotiate this out of any term sheet outside of perhaps keeping an operating account open. Also, depending on how active you intend on being, you will find the banks who offer the better construction financing terms tend to be the smaller banks with smaller legal lending limits. This means you will likely need to spend more effort finding more banks that can fill that void whereas you will want to find banks with higher legal lending limits for the take out and stabilized financing. The underwriting tends to be more similar deal to deal once you reach this point and once you are familiar with a particular banks procedures and underwriting policies it will streamline the process, especially if you find a bank who can take on numerous stabilized loans.

You will also find the banks you work (particularly the banks who offer the aggressive construction lending terms) will frequently be acquired or participate in mergers. It's the nature of the banking business, particularly now. Typically when this occurs "the gold standard" aggressive lender lending policies change overnight & the loan officers leave. You will build rapport with the loan officers more so than the bank and this will open up new banking relationships. Paying close attention to where loan officers are moving is an excellent way to determine which banks to work with. If you see a press report about a CRE team moving from one bank to another, it typically means the onboarding bank is aggressive with their lending. Meanwhile you probably want to shy away from the bank where loan officers leave.

While not a primary emphasis of your post, it was mentioned by others in their responses and wanted to suggest not to purchase real estate in your name solely because the loan terms are better. Owning real estate where the deed holder is an LLC (if done correctly) is a powerful asset protection tool. You will also find your CRE loan terms will improve as does your track record and balance sheet.

Ultimately the question I can add to these stellar options is this...

You seem to like both options.  You have comfort in both options.  Which one itches your investment desires most?  You probably have something leaning towards one or the other, so lean in and enjoy.  Once you make your choice, push forward and don't look back wishing you had done the other.

Give which ever choice you make your full attention as both will have different demands on your time and resources over time.  

A second question is, how much experience do you have in either space?  Do you know anyone who has experience in each space that you can pick their brains and run things by after you're in.

Maybe join a local REI meetup and find people already doing what you want to do. Have some local allies that know your market and have experience there. They will see things that any of us outside your market won't see.

@Max McQueen, from a technical standpoint, if you buy a midterm rental, you will not be an owner-occupant and your financing could be considerably more expensive.  And of course, I would be certain you are in a market that is in demand for mid-term rentals, i.e. you need to be in or around a fairly major city, or have a big hospital nearby that utilizes travel nurses (does every hospital use travel nurses?).

The house hacking a 4 family is something I wish I had done earlier in life.  The nice thing about this is: owner occupied financing, typically going to cash flow better than SFRs, 3-4 tenants, so it is less likely to be all or nothing when one tenant moves out, and you have a place to live, so you are not only collecting rental income, but also saving having to pay rent yourself.

I listed the upsides, but there are downsides to both too.  4 family - 3-4 tenants to manage (could be nothing or could be a lot), more wear and tear on units.  If you tenants know you own the building, and they are already needy tenants, it can be burdensome for you being that close for them to knock on your door, and presumably you are going to want to live in a specific neighborhood(s) so you are a little more limited in your options.

If you, personally, are comfortable with either, then it comes down to actual opportunities available.  

Quote from @Max McQueen:

Hey BP Family, I'd love your insight on this.

I'm currently weighing two intriguing options: house-hacking a 4-plex or venturing into the realm of a mid-term rental with a single-family home or duplex, particularly for renting to travel nurses. While the former presents a classic investment opportunity, the latter has caught my eye for its unique and potentially lucrative approach.

As someone relatively new to this field, I'm aware that there might be aspects I haven't considered or opportunities I'm overlooking. Your insights, advice, and recommendations would be invaluable to me in this decision-making process.

Thanks!

When weighing the options of house-hacking a 4-plex versus mid-term rentals for travel nurses, consider a few key factors. House-hacking offers a classic investment opportunity with less furnishing and management intensity. On the other hand, targeting travel nurses for mid-term rentals is unique and potentially lucrative but involves more hands-on management and furnishing efforts. Location is crucial, so research areas with high demand for travel nurses. Assess your capacity for involvement and consider potential vacancies. Additionally, be open to Airbnb as a solution for filling gaps in occupancy. Ultimately, your decision should align with your risk tolerance, involvement capacity, and long-term goals. You could also just get a 4-plex and use a smaller unit to "test the waters". Good luck!

Quote from @Max McQueen:

Hey BP Family, I'd love your insight on this.

I'm currently weighing two intriguing options: house-hacking a 4-plex or venturing into the realm of a mid-term rental with a single-family home or duplex, particularly for renting to travel nurses. While the former presents a classic investment opportunity, the latter has caught my eye for its unique and potentially lucrative approach.

As someone relatively new to this field, I'm aware that there might be aspects I haven't considered or opportunities I'm overlooking. Your insights, advice, and recommendations would be invaluable to me in this decision-making process.

Thanks!

Just some hopefully thought-provoking questions on option #2. Have you considered proximity to a hospital, or better, multiple hospitals and long-term care or retirement facilities? Secondly, do you have any data on the lengths of time over which a traveling nurse is in one location vs another? Days, weeks, months, etc? If shorter lengths of time, it could make more sense to STR/Airbnb a property like that; if longer, maybe mid-term is a better approach. Just some thoughts! Good luck!

What type of units are the 4-plex you're looking at? Are they 1/1s or 2/1s? If so, they could be good MTRs especially if you're looking to target travel medical professionals. Location matters, too, as does the mix of renters you put in your units. For example, travel nurses typically work long hours and are often night shift workers, meaning they need to sleep during the day. Sharing walls with a noisy family with children or college students for example is not going to invite conflict and may cost you in poor reviews or guests wanting to leave early. So just think about your occupant mix because it can be tempting to accept anyone who comes along especially when starting out. If you're also living in one of the units it'll be easier for you to monitor this and make sure everyone is comfortable in your place.

Our first MTR experience was a 4-plex, feet-to-the-fire style.  We use one of the units for ourselves and rent the other (3) for 30+ day stays.  We've been up and running since around October last year.  It is really important for us to keep the units booked to cover the monthly overhead (higher monthly rates to cover the 4th unit not being rented).  Be sure you keep this in mind.  I often wonder if it would have been better to have started with a single family as our first, to learn the ropes, and then graduated to the 4-plex model.  It is a lot to juggle.  We have a normal REI business with this 4-plex on the side and it takes some juggling.  As a MTR newbie, I'm learning how important it is to constantly be updating your listings and keeping track of which platform your guest comes from, all the while mixing in STR stays to cover the gaps between the mid-term guests.

Why not house hack the 4 plex and use 3 of the units for MTR?

House hack the 4 plex - it takes less money down and you likely buy the asset that spits off more cash. Why can't you MTR 1 or more units of the 4 plex? That's what I would do...some of those decisions would be market dependent though.