All Forum Posts by: Mike Weber

@Jordan Jensen I agree, with @Michael K Gallagher to simply answer your question - Getting started is the most important step. The consideration for the property to cashflow (after you move out) is still very important if you plan to hold, but taking action with the consideration of how this first step will impact your finances today will yield the greatest impact. 

@Lor Fara Great questions.

Regarding Underwriting: That's is a fancy way of saying "running your numbers" (according to your pre-determined returns, criteria, or goal requirements).

 Essentially, doing your financial due diligence (running your numbers) with any analysis tool (BP Calculator, or an Investment Property Excel tool you can find on google) is a more responsible way to approach seeing if a property will show signs trending toward a good investment, or bad one, against your criteria. If you do not run numbers, you are shooting from the hip and your strategy is either fueled by "hope-ium", or your experience is so immense you know every input and return without running the numbers (but even the most experienced investors run their numbers).

Here's the best advice I can give you: You can "run the numbers" until you are purple in the face, and you will never know what every single ACTUAL number is going to be before getting into a deal. It may take a year of owning the property to find out what your average monthly repair spend is, but you have to start SOMEWHERE. It's the chicken-or-the-egg problem for first time investors. SO, at least the BP calculator has little suggestion bubbles to give you a hint if you truly have no idea, otherwise, at least start ball-parking the water bill, for example, based on your current water bill at your residence. We all have to start somewhere. If, while running your numbers, the returns are within range to your criteria, do not lower the expenses to "make it work", but just know that some months may be higher, some may be lower, and if you have the cash reserves to support a higher bill or unexpected repair, then the underwriting at least helps you mentally prepare ahead of time.

Any calculator, based on the inputs from any noobie or seasoned professional, will NEVER be the same as your actual numbers. The goal is to be close enough with a calculator to make an informed decision, based on your risk tolerance and capital reserves (Cash in the bank for variances in the bills or emergencies).

Regarding my comment on off-market properties - I'm referring to the buyer who wants to find a "deal" through a wholesaler, but does not think to use a real estate agent/broker, and is either using cash or owner-financing. Many traditional lenders will not lend on properties that are (or *may be*) in stressed condition. Remember, many (if not most) off-market properties spoken about in the investor sphere are not going to be in tip-top shape, and are, by nature, distressed in one way or another, often times condition and deferred repairs. In that sense, when an investor buyer is competing with other investor buyers for an off-market property, you are not typically given the opportunity to perform a full third-party inspection prior to putting in your highest and fastest cash offer.

I'm not a pro by any means with off-market properties. I do know they *typically* carry a higher risk profile, given their higher return potential (after all, you're usually and hopefully buying at a discount). The risk becomes exponentially higher if the "guardrail" team members are not there to help advise, but know that any additional party involved who is weighing in on a particular deal can hamper the need for speed in cases where wholesalers may not wait for your financed offer with an inspection. That risk changes with the level of experience by the buyer.

Howdy @Jordan Jensen, great question. Congratulations to you for taking all the steps to get to this point.

Although I'm not in the DFW market, I am in the Milwaukee market which is also in a historically low inventory position. So, I will dispense this advise generally, as it can apply anywhere. The only caveat I have, is that every investor's goals, resources, and strategy are all going to be different. Okay, to the answer you're probably looking for...

Here in MKE, many of my clients (and tons of other live-in investors) are certainly finding House-Hack success. Here's a quick guide to success:

1) Finding Deals:

Establish your Goals - First, think about, write down, or know by heart, your goals and your "Why" - why are you investing, and what do you want to achieve.

Next, create a "buy-box". Be sure to eventually narrow down your specific buy-box (your investment property "avatar" based on your Goals, Returns/Appreciation). For example, my buy-box is 4 bed, 1.5 bath side by side, larger sqft duplexes - based on my goal to achieve "okay" (slightly positive) cashflow now, and reap the benefits of higher chance for appreciation and cashflow growth over time). I forego better "cashflow" opportunities, but look for greater appreciation opportunities - they're generally on a linear "scale", opposite from each other, but blend as you slide along that scale.

By setting your buy-box, you can at least narrow down your search. You can always change your buy-box, but it's great for focusing and helping avoid shiny object syndrome.

Yes, you can find deals on the MLS/Zillow. One option - (looks like you've already taken this route) - Shack up with a local investor-minded realtor, they will be more than happy to set you up on a specific, filtered investment property drip campaign. Now, these on-market properties won't be as lucrative as driving for dollars, or securing another type of off-market find, but it's one option, and you would have the help of a fiduciary (Realtor, looking out for your best interest). Otherwise, you can take on a bit higher risk and acquire an off-market opportunity yourself, but you will not have the guard-rails of a Realtor and Lender to keep you away from expert-eye (or obvious) pitfalls.

2) Tools and Analyzing Deals:

What Tools - The analysis can be done via the BP Calculator (lucky for you, you're a PRO and have included access). Also, there are tons of home-grown (free, shared) calculators other investors have created if you Google for "Investment Property Calculator".

Analyzing The Deals - You, the investor, need to put on your blinders and practice underwriting (running the numbers) before you jump into a competitive offer scenario, or getting too far in front of your skiis with an off-market deal.  Pull any ol small-multi-family properties off of Zillow and chug away.  The first 5 times will be painful and frustrating - watch one of Brandon's or David G's videos on how to run the numbers - you'll become quick after a few dry runs.

Just make sure you underwrite the deals against your Goals (ROI %, Cashflow $, potential longterm appreciation, etc), and run the numbers as if you're NOT in the property. The purpose of house-hacking, as you're aware, is to benefit financially from another tenant/roommate subsidizing your cost of living. This can be a small amount (again, based on your goals), or significant. Currently in DFW (assuming, because MKE may be similar in this regard), I would find it a surprise if you cover your cost of living completely (i.e. living for $0, or getting paid while in the unit) at this time of relatively higher (read: historically AVG) interest rates compared to 2-10 years ago. Look at it this way - if you reduce your cost of living from $2,500/month to $1,750 then, hey, you're saving money, but you HAVE to make sure the INVESTMENT property will be a true cash-flowing asset after you leave (inevitably, someday, you will). So always underwrite your numbers like you were never in the property.

The silver lining: You certainly can find a deal within the 0-3 month timeline.

Hope this was a little helpful! You have the right wealth-building mindset. Your first deal will not be a home-run, and it will not make you wealthy (except for the knowledge you gain). So congratulations again on building your capital, now take ACTION!

@Sandra Hughes The cost of processing rent into your account through RentRedi is Time; there's generally several days (3-5 days) for the funds to hit your account.

The cost for collecting rent through RentRedi is $1/month per transaction type. 

For example: June Rent Payment for Unit A = $1. June Monthly Pet Rent for Unit A = $1. Both are charged back to the tenant, and the system is very transparent how it labels that fee to the tenant.

You as the landlord have the option to absorb that cost (but why would you, if you can pass it along without impact). I've never had pushback on charging back. From the tenant perspective, the difference in the cost of a stamp + envelope, or travel time to deposit at a bank, or other xyz payment method makes the $1 trivial. I believe my tenants find it as a convenience, actually.

I use many of the features that RentRedi provides, including: Unit listing services (can be free or paid), tenant screening, tenant background check (tenant paid), tenant payments and basic bookkeeping (but not maintenance and accounting). I find this platform to be well suited for at least a small portfolio, helping keep all info in one place and well organized. My disclaimer is that I have not used other platforms, and I do have cost-free use of RentRedi based on my BP membership tier.

Like some other users have mentioned, their customer service experiences (actual humans), like mine, are genuinely timely and responsive, and have resolved any question or issue that have popped up. Hope this helps!

@Devin Cronin

Hey Devin, you've come to the right place for sure. The BP community is chock-full of resources - books, podcasts, and the forum community among many other great sources of info. I'm a local, Milwaukee based investor with career experience in residential and commercial real estate. I'd love to grab you a coffee and talk shop. I'll shoot you a DM

Hi Anne, great congrats on your first!

As you allude, if you do not have an LLC set up, opening a separate checking account (for reference, Checking Account "A") will be sufficient. I'd suggest using this account (A) for operating expenses and rent receipts, so it's kept simple, all in once place.

If possible, you should dedicate 1 credit card to use that draws from this account (A), even though it is not a "Business Credit Card", just treat it as a business-only card. This way, at the end of the year (or ideally, monthly or quarterly), your bookkeeping (keeping account of expenses and income) is clean.

Depending on state requirements, you may very well also be required to hold a separate checking account (Checking Account "B") for Security Deposits. I would recommend this regardless to be safe, but will be good to get state specific advice as well. I currently keep 1 checking account (A) for 6 units' rent payments, and 1 checking account (B) for all Security Deposits. I never touch the Security Deposit account unless a new tenant submits their SD, or I return the SD once the lease has expired/tenant has left unit.

Do you plan to use a rental software? I see you are PRO and believe BP has a partnership to include RentRedi for free (at the time of this post), which is what I use. I would compare rental management softwares (Turbo Tenant, RentRedi, Avail, Buildium, Stessa, etc) if you haven't already compared or decided, though I do recommend RentRedi if that fits your needs.

@Joe Splitrock

@Joseph Miller-Hall

Joes, I hear you both on the challenges of investing with a young, growing family and the re-analysis paralysis in this environment.

I was apt living and ready to pull the trigger on my first mfh in March of 2020… (we all know what happened in March). That timing was supposed to allow me a few months of runway as a LL prior to my first child (so I could feel established enough as a LL or “prepared” as a parent, or something like that).

FF to now: Two under 2, moved into a sfh, new career and multiple job shifts, still “ready to pull the trigger”.

Joseph, hang in there, you’re on the right path. Take a step back and realize you’ve made progress with your family, rental career, all despite the pandemic in the background.

@Brian Martin
Brian, welcome to the group! BRRRRing, syndications (and duplexes) are in my scopes, too!

@Jeff Johns and Brian, I'm a newb as well, based out of Milwaukee, so this one will be my first REIA meeting. Hopefully talk to you both there tomorrow!

@Teresa Machi Congrats on the Fix & Flip in BV - Bay View is a stellar neighborhood and I've been watching the gentrification over the past 10 years. As an aside, a handful of years back, I lived on Lincoln and loved the culture and walkability. I just relocated back to MKE and I'm looking to get into small Multi-Fams in the adjacent suburbs

When did your strategy change from buy-and-holds to deciding to flip?

Are you planning other flips until B&H becomes more numbers-friendly (I'm assuming lower cashflow is the reasoning at the moment)?

What types of rentals (MultiFam? and how many) do you have in your portfolio?

Curious to hear from a Bay View centric investment approach. Thanks in advance for some insight here!

@Marcus Auerbach I’m the baby bird on the edge of the nest; I appreciate those kind words of encouragement!! I’ve just begun making some connections and I know I’ll continue reaching out to BP for solid references for a team!

@Rebecca Knox Thank you for the invite! Will join right away!! Looking to paying it forward within BP and the Brew City group!