All Forum Posts by: Mike Hoherchak

Hi all! Sorry for the clickbaity title. I'm a marketer at heart but more importantly, I'm super curious about your approach and what you would do in this scenario and may help other new agents, like myself.

Scenario:

Imagine you got kidnapped and blindfolded. You woke up in a brand new part of the U.S. that you are NOT familiar with whatsoever. You lost everything! All your money including any credit cards or lines of credit, your properties, your business networks, connections, and unable to contact any of your friends or family for help. The ONLY way to get it all back is to sell ONE property within 45 days!

The only resources you are able to start with is 

1. Your R/E license for that particular state 

2. All of your accumulated knowledge from years of experience

3. A vehicle

4. Cell phone

5. Laptop with internet

6. A safe place to sleep. 

The ONLY money available is for supporting these specific resources plus food so basic necessities are taken care of.

Even though, there are no guarantees, what would you do to close on a property within 45 days in this new location with only these resources available to you? What are the most important actions that would move the needle the most for you? In this scenario, can you describe one or two actions you would take that would make all other tasks easier or not needed?

@Johann Jells I hear you. I think a lot of people I spoke with are coming from a business owner mindset vs a landlord mindset. They would rather be finding deals than fixing toilets. Plus it's an added liability layer. I'm open to both sides, especially since I may end up financing conventional VA it will have to go in my personal name anyway.

Hi all!

So I'm looking to purchase a 3 or 4 plex as a house hack. Unless I can get the sellers to take back financing my plan is to use my VA loan to purchase. I've heard from many people to never let the tenants know you're the owner for various reasons.

So, for those of you who have house-hacked, how have you done your inspections and other due-diligence without letting the current tenants know you are planning on buying and living in the same property?

Thanks in advance for your input!

@Greg Dickerson Thanks for your insight! I just started digging into all the nuances of what it might take for building a new project and I do understand it can cost a pretty penny. What I'm trying to figure out is if it's known that it's more expensive to build vs buy and existing property, why are people still building? There must be something I'm not seeing that makes it worth it.

@Michael Wayne My strategy for this would be as an owner-occupied financed with a 0% down VA loan, no other investors (ideally). High leveraged, I know, but if I'm planning on keeping it for the long term for cashflow, i don't see it as a huge concern as long as the numbers work on a conservative level. I would have the reserves to cover the holding costs. Sales and marketing are big strengths of mine, so I'd be able to market the property while it's still being built and fill it as soon as it would be complete. I don't see this as a problem for my area due to the demand. I will say I was looking into prefabricated MF's rather than traditional builds. Prefabs are homes build off-site in a warehouse and shipped to the location to be put together. Because the home is built in a different location they can also do all the foundation work at the same time cutting down the time almost in half compared to traditional builds.

What are your thoughts?

I live in eastern PA and I'm learning that inventory of residential multi-family properties are very slim within my price point. The inventory that is available seems to be really old and run down and expected to have much deferred maintenance. 

With this in mind, I've been thinking what it would take to just find an acre or two and build my own MF. I recently learned I could do this with a local prefab company that can make a 3 unit. The average rent in my area is roughly $1396 with a +2% change year over year. So with a brand new build I think I could get $1200/m on the low end up to $1500 depending on location.

The market I live in is doing well and more and more people are moving into the area due to cost of living and easy access to major metros within a 2 hour driving radius. The down-side is that the local municipalities and townships are a bit unfavorable to MF since they are trying to keep an "american dream" feel within the area (ownership of SFH are preferred). Needless to say, there might be a challenge with zoning if I'd like to build or turn a large SFH into a MF.

Whether I buy or build my plan is to owner-occupy, paid for with a 0% down VA loan. I plan on moving out after 2 years and holding this property for cash flow for as long as it makes sense. This will be my first investment property and I'm leaning more towards building.

Knowing all this, what are your thoughts on building a prefab MF vs buying one of the existing inventory? Pros? Cons? 

Any insight would be much appreciated!

@Jonathan Taylor Smith This is how I've heard many people started and was considering doing the same. From what I've researched, it seems to make the most financial sense, specifically when just starting out. I'm sure many policies deny claims so I suppose shopping around for investor friendly insurance companies is important. Also, thanks for the reminder, I completely forgot about looking into homestead laws.

@Chris K. You can't use VA financing using an LLC. The stipulation is that it has to be for a primary residence, not an investment property, with the exception of a residential MF that you live in one of the units. I did plan on having an umbrella insurance policy regardless of purchasing in my own name or LLC. I'm just curious the opportunity costs of using the VA loan with no down payment and just an umbrella policy vs. 3.5%-25% down using an LLC and commercial financing. I figure as long as I purchase the right property and have the least amount of cash in the deal, my COC should be significantly better. I'd prefer to not have to use any of my savings up front and keep it as reserves for the property so I'm interested in others opinions on finding the right balance within this specific context.

@Jason D. I didn't know LLC's with commercial loans don't allow for owner occupants. I'll need to research that further! My plan was to purchase my first property in my name using a VA loan and after 2 years or so, building equity, doing a cash-out refi into an LLC using any gains for another property. If I can't live in it using an LLC I may need to rethink my strategy!

For a military veteran who's a new investor looking to purchase their first multifamily property to house-hack, does it make more sense to just get an umbrella insurance policy with VA financing (since you have to purchase in your name) or create an LLC using any other type of financing?

The question is intended to focus more on risk mitigation rather than financing as a newbie. However, is there a "sweet spot" that makes more financial sense when determining risk mitigation? (specifically, when just starting out?)

@Chace Fraser Thanks for your detailed response. I suppose I was expecting to be cash flow positive but I don't know what I don't know. Your response makes sense.

@Andrew B. That's my plan...any positive cash flow will be going to the reserves account. 

@Anthony Wick i like this approach. Since it's not realistic to be cash flow positive right out of the gate, I think it makes sense to use those two metrics. I'm currently renting for $950/m so if I'm paying less than that to live after all expenses then I would take that win. Plus I'm building equity so I'm still benefiting. 

Since this Superbowl is super boring this year, I decided to analyze some properties for practice. 

I'm looking to purchase a residential MF and live in one of the units using a VA loan this year. I'm focusing on 3 and 4 plex's for less vacancy risk and more likelihood of the rental income covering all expenses.

When analyzing, does it make sense to include your units potential rental income even though I'd be living in one of the units? Or would it make more sense to analyze on expected actual rent roll without my unit's potential income? It seems the most logical approach would be to exclude my unit but it seems very difficult to find properties that work. What are your thoughts?

@Account Closed Thanks for the reply. This is what I was thinking from the jump..buy for cashflow, less vacancy risk with 4 units (vs. SFH). However, with being over-leveraged, do you mean putting a large down payment? My plan is to purchase the property using a VA loan and my intention was just to pay for closing costs.