All Forum Posts by: Michael Moikeha

@Mike Koebke You should not buy properties outright. Yes it is "less risk," but if you don't want any risk, real estate is the wrong industry. Quick math here, if I have $100,000 and I buy a house outright, the rent at $800, Expenses and reserves are $400, I end up with a $400 monthly cash flow. If I leverage that $100,000 across 5 homes with a $10,000 downpayment on similar houses as above, the numbers would be as follows. $800 rent less $400 expenses, less debt services at say $300, leaving a $100 cash flow per property puts you at $500 cash flow a month.

In this market, its worth the risk to lock in the low down payments. Afterwards to mediate your risks, pay minimum on 4 of the places (Just going along with the above numbers) and pay the extra cash flow straight into one of the homes, and at $500 a month, that is $6,000 extra a year, and that will compound quickly. Once one is paid off, your cash flow will jump to $800 a month, rinse and repeat for each home.

(I am sure I took the numbers above from a post on this site somewhere else that I could not find)

The other options is to leverage your $900,000 against a larger or nicer commercial MF property. I know I am looking at a few great MF properties where even $600,000 out of pocket can bring me an $800,000 profit in 2-5 years.

@Matthew Cataldo There are actually many private lenders (local banks and credit unions) that will offer you a great interest rate with 5% down. You should do some research, ask some local RE investors, and see what banks or credit unions they refer. Then do your due diligence and sit down with each of the lending officers and see what deals they can work with you.

Right now I am looking at a 5 year fixed at 2.99% with 5% down and no fees at closing.

If you are looking to get into RE then chances are you will want to leverage one house upon the next to go bigger and better, so a 5 year fixed, even if it begins to raise afterwards, you can always sell it or refinance.

@Megan Roder This is a great site and you will find lots of information here. I would also suggest finding a local REI group and networking there. This can help you find a mentor who can offer advice as you go through the process of becoming an investor yourself.

An easy route for starting if you are also looking at a cheap way to pay for your "rent" is to get a duplex with an FHA loan, rent out the other half, and you effectively have someone else paying for your home.

@Wendell De Guzman Just saw you have a podcast here talking about creative investing. I am excited to listen to it!

@Wendell De Guzman Okay, that makes a lot of sense.

Leverage someone else's experience as a guarantee to the money partners that a seasoned investor is "looking over our shoulder" and giving credence that the deal is worth investing in.

Thanks!

Any other creative ideas to inspire confidence in private money investors?

@Andresa Guidelli we have a 2-5 year exit plan expecting an 100-125% ROI. This is based of the type of places that we are targeting at the moment and the numbers that we are looking at for the local market.

Then we plan on 1030 exchanging that into a larger complex.

We are looking for the deals, but what we would like to avoid is having to setting for selling the contract vs finding a JV partner due to the fact that we are new to the REI industry.

We are hoping that some people with experience can give us some insight on what else we can add to inspire confidence in those we approach.

@Michael Seeker beat me to saying thanks for the great information!

Seems like the last part was the only thing I already knew. That commercial lending is not cut and dry, and quite hard to wrap up in a nice little box! I will check out that book and work to better my understanding.

Can I get you to clarify what you meant with your answer to number 1? How can you get away without using the owners numbers in the loan app, and where does the 35% - 40% come from and why is that applied as an estimate?

I am sure it will click once you explain it, but I was not able to connect the dots on that one.

Thanks!

@Kenneth LaVoie I was under the impression that the lower unit properties (anything under 5) don't necessarily follow the 50% rule. Can you give me a little more insight on this.

I do know that with commercial MFU properties, OE should never be lower than 40%, and buying closer to 50% gives you some leeway for increasing your NOI by decreasing your OE.

@Justin Williams Thanks for your response and taking the last hour of your morning posting replies! Hopefully you get time this year to step away from this thread to hit your 150! ;-)

I am fresh to the market, have spent my due diligence studying, learning the craft, and building a team, and now I am looking to find the last and probably most crucial member of my team.

The Money Partner

Here is my question: if I can present a business plan and strategy with comps, projections, market research, and the exact type of deal we are looking to close, is this sufficient in providing them with the knowledge and assurance of our skill set? The value we bring is the ability to search out deals and build a team to ensure a high yeild lower risk investment opportunity for a joint venture partner.

Or, are the more interested in seeing a history? If so, is there any advise on how to reassure with limited history? I am not interested in wholesaling, flipping, or SFH deals as they are apples and oranges in the REI world.

Any input would be greatly appreciated.