All Forum Posts by: Michael Douglas Christensen

@William Hochstedler

Thanks for the response! It's comforting to hear encouragement from people like you when I know so little and have so many questions. 

I've been reading a lot of books. Brandon's book on rental properties, no and low money, tax saving strategies, the book on flipping, rich dad poor dad, cash flow quadrant, millionaire real estate investor, 4-hour work week, and a few others. 

I understand there are four wealth generators of real estate investing which you mentioned, but I suppose my perception of cash flow could be off. I've heard that appreciation is like icing on the cake and should be second to cash flow. Make sure the deal cash flows and then if appreciation happens great. I have listened to podcasts with Brandon saying he shoots for at least a $100-200/month/unit in cash flow and I have been calculating ROI based solely on cash flow to be conservative.

From what you're saying, which is also consistent with the millionaire real estate investor, is that if you're not cash flowing negative then get the deal? Even if it cash flows $1/month after all expenses? I suppose the other 3 wealth generators could be very powerful in a market like Utah - cash flow just doesn't seem to be the strong suit here. 

This makes sense. Would you be concerned at all about a deal like this if the markets go south? If you're barely cash flowing each month could this turn into negative cash flow in a downward market? Thanks again for the response!

@Brandon Rindlisbacher @Jeremiah Maughan @Rebecca Belnap @Jeff Wallace @William Hochstedler Wow you guys are awesome! Thanks so much for the feedback. I really appreciate it! Very interesting to hear all of your perspectives. I came up with these numbers because I have a brother-in-law who acquired and rehabbed a property in Orem for about $100,000 and sold it for $175,000, and he told me he could have rented it for about $1350/month based on some nearby properties that were renting for that. From what you are all telling me this sounds like a very fortunate find. It seems that the markets in Utah are not very rent friendly from the numbers you're all throwing out. 

What do you all suggest with the BRRRR strategy? It seems like this may be to difficult to realistically achieve at this point and still maintain reasonable cash flow. A $200,000 property with 30% equity at a 30 year mortgage of 3.5% would be $629/month. If this property is renting for $1,350 it seems like the mortgage and expenses would leave essentially nothing for cash flow. From what I've read and heard this doesn't seem like a very good or wise investment. Should I focus more on flipping and only rent the incredible deals or just hold off entirely until the market changes? What criteria do some of you other Utah investors have? How do you make these numbers work and what do your expenses look like (I'm just using the 50% rule so my numbers could be off quite a bit)? I really appreciate your advice and perspective.

Hi BiggerPockets!

I have been learning a lot for the past several months, have come up with a plan, and wanted to run it by all of you with much more experience than me to see if my plan seems reasonable.

This Tuesday I am meeting with a friend, who happens to be a general contractor, to discuss the start of a new real estate investing business. We are both very interested in partnering and beginning a BRRRR-based business approach.

I have been going to the local REIA, networking, and learning as much as I can, and he has a lot of experience fixing up properties with fire damage and other problems. In July we partnered in a completely different business that raised $100,000 from a private investor. With this background we feel confident we can raise private capital to finance our future deals.

I plan to begin an aggressive direct mail marketing campaign and do everything possible to find deals (still trying to learn as much about this as possible) and he will oversee the rehab. Once the rehab is done we’re planning on partnering with a property management company. We’re hoping to find private financing for around 7-8% and then refinancing as soon as possible with lower rates.

This is what our criteria looks like:

-3 bed 2 bath SFRs and small multifamily properties (2-4 units) in Orem, Provo, and Spanish Fork.

-Total acquisition and repair costs must be 70% of ARV.

-Unleveraged ROI of at least 10% after all expenses.

-Preferably acquired and fully rehabbed for under $90,000

-Preferably rents for 1.5% of cost to fully rehab ($1,350 for $90,000 property)

Does this plan / criteria seem reasonable? Any input from those living in Utah would be great. Also, any advice with marketing and finding deals would be much appreciated. Thanks in advance!

Michael

@Johnny Kang that makes sense. Thanks for the response! 

@John Anderson thanks for the reply! Do you mean I would have a hard time getting a conventional loan through a bank with this type of private lender helping with the down payment or do you mean the private lender wouldn't lend me the money for half of the down payment? Could the private lender put a lien against the property if I failed to pay him/her the loaned principle and 10% interest? Would this not be considered collateral? Can you explain this a little more? Thank you!

Hey BiggerPockets! I am curious about private lending - specifically for a down payment. Has anyone ever done this and is it legal/possible? Let me explain the hypothetical ideal scenario I'm interested in and any feedback would be great.

I'm interested in getting private lending for half of the down payment on a $100,000 property that meets the 2% rule. In other words, I would pay $15,000 and a private lender would lend me the other $15,000 for a 30% down payment. From a mortgage calculator with 3.52% interest the monthly payments on a $70,000 mortgage would be $315/month. If the property met the 2% rule it would bring in $2,000/month and with the 50% rule minus the mortgage payment I'd assume a monthly cash flow of $685. Over a year period this would be $8,220. If I split this and gave half to the lender and half to myself I would net $4,110/year or a 27.4% cash on cash return. Over 6 years I could pay back the lender's $15,000 plus an annual 10% ROI for a total of $24,000.

Has anyone ever tried something like this? The numbers seem to make sense and it seems like a win-win for everyone. I'd manage the property and the lender would sit back and relax while we both could get cash flow. I'd get into a deal with little down and a great ROI and the lender would have nice passive income. Thoughts?

@Svetlana Foley and @Jason Roman thanks for the response! Great to know about the taxes in WI - I didn't know that. I'm learning about financing options right now to get into something for less capital in Utah. It seems like there are a lot of great options for owner occupied financing. If I can find something distressed and fix it up this would probably be the best option to make something cash flow decently. Thanks for the advice. I'll definitely keep exploring options.

@Jason Bott thanks for the info. Let's keep in touch. If I decide to venture out there I'd definitely love to chat with you. I didn't know that @Peter K. - good to know. Thank you! @Brandon Rindlisbacher I'm learning more about seller financing now. I'd love to learn as much as possible and pursue all the options. Good to know. Thanks! Thank you @Daniel Hyman! Wisconsin seems like a great for place for newer investors with little capital. If the numbers make sense, it's a good area, and you can build a team there it seems like a no-brainer.

Hi BiggerPockets! I'm a newbie and am interested in learning more about out of state investing - specifically in Milwaukee. I currently live in Utah and the prices generally seem way too high to find anything that could provide a decent ROI. I'm having a hard time finding anything that meets the 2% / 50% rules here in Utah. I will continue to look in Utah, but in the meantime I'm interested in exploring other options. I've heard great things about investing in Milwaukee and have looked on Zillow and the prices seem like steals. The properties generally seem to easily meet the 2% / 50% rules and the barrier to entry also seems a lot lower. I would be interested in purchasing a 2-4 unit building with conventional 20% down. Because I don't have a lot of capital I'm hoping to get into something for less than $10,000. I'm interested in learning more about the this area and people's experiences investing here as well as out of state investing. Any advice would be great. Also looking to network with as many people as possible in the area. Thanks in advance!

Hey @Steve Olson! Thanks for the welcome. I'd love to keep in touch!