All Forum Posts by: Bryan Montross

I agree with @Karolina Powell that one of the best places to look would be small local banks. They are more relationship based and will look at your overall business plan and will lend smaller amounts knowing you will use them for more business later.

Matt, first thing to make sure is that when you are using a HELOC it is for a short-term loan. Do not use the 140K as a down payment on a new rental you plan to hold for a long time. The one exception would be the BRRRR strategy if you plan to fix it up and refinance into a long-term loan later.

Regarding BRRRR, you say you don't want to "burn all my capital on one property." Even if you use all $140K on one property, when you refinance you should get most, if not all, of the back so you can move on to the next property. If you are just starting I would not try to do more than that at a time anyways. As you build your capital then you can start looking at multiple deals at once, but use it now on one deal, refinance and pay it off and have it ready for the next. That's how I would go.

If the ADU is a separate structure it is generally pretty easy to get a sub meter put in for utilities. However, I have found in some of my converted units that are the same structure it is just too difficult because the line tie together in different places. My utility company does budget billing so it is the same price every month. I just pre-determine a split for the units and add a little overhead. I charge this as an additional rent each month. (If you advertise at a higher rent, even if it includes utilities, it doesn't show up in some people's searches). I also let them know the utility charge each month can change depending on usage. In reality I only change it at the end of a lease if needed, but that tends to keep them from setting the thermostat to 64 degrees in the summer.

I think you are on the right track and just need to keep looking at the numbers. If you are cash flowing $500/mo that seems really good to keep it. However, if the $500/mo does not include maintenance, vacancy, capex, and property management, then it probably actually makes your cash flow negative. Assuming you took all of that into account, then I would really consider keeping Home A when you move. Depending on where in MD I think it should still be appreciating pretty good from my experience in the area. One thing I would throw out to you is that tax savings of selling a primary residence. You may want to rent it for 2-3 years and sell to capture your tax savings.

One other option is to rent in TX when you first get there. That might really make sense if you don't qualify to purchase a second home. For example, let's say your current expenses for housing are $2500. Now in TX you rent for $2200. Now your housing costs are $4700, but you are getting $2900 in rent. So when you subtract that off you are now only paying $1800/mo in housing instead of the current $2500. That still sounds like a win to me.

I have always let my tenants paint if they ask. It really does give them a sense that it is theirs and they are more likely to stay. The one time I did say no, the tenant painted anyways and painted accent walls black. When I allow them to paint as long as I approve the color I have had no issues. I never make them change it back because I have approved the color, and most likely if they have stayed a while I am repainting anyways.

Do they do the best job? Not really. If they paint over outlets and switches, it just comes out of their security deposit in the end. It's a minimal cost to replace them. If I have to replace carpet because it is stained, again it comes out of the security deposit, but I was probably replacing anyways if they stayed there a while. If it keeps my vacancy numbers down, then the money I am putting aside for vacancy can go to the extra cost a professional might charge to fix the tenants mistakes.

Just for reference, my tenants are staying on average about 5 years and I still save for vacancy between 2-4 weeks per year.

Part of this still depends on what your specific strategy is and what you are looking for. If you are investing for cash flow, then you have a long ways to go to get there. With all of the expenses you mentioned I would want at least $100/month in cash flow, if not more. If you are going for more appreciation (and it is in an appreciating market) the taking a lower cash flow might be fine.

If you're confident with your rent number and the fixed expenses you have, then the only thing to negotiate is price and terms. Note: I think your maintenance reserve is a little low, but that is condition dependent and what you have for an emergency fund. If the seller won't budge on interest rate and length of loan then negotiate price. If he wants that price then negotiate the loan. If he is unwilling to negotiate, then walk away.

Don't limit yourself just based on where you are currently living or going to live. If you are going to invest out of state, then it doesn't really matter how close or far it is, but rather do the numbers work. As a new investor you definitely want to find a good property manager. It makes life so much easier. If you do end up investing close to where you live, it is worthwhile to manage your own property for a short time. It helps you to understand what goes on with managing a property so you can better manage your property manager in the future.

So, decide on a market that the numbers work for your strategy. Find the core 4. At a minimum a real estate agent and property manager as they will help to find the others. Then start looking at properties and go from there.

Good Luck.

I do agree that it is just taking the practice exams as much as possible so you really know what will show up on the test. Take notes and review constantly. There is a lot that is just common sense and stuff you should just know. Don't worry about that and concentrate on the things that most people don't know. The calculations always trip people up as well. Make sure you know how to do those.

When you pass, if you are looking around for a broker, send me a message and maybe I can help out. Good Luck!

@Dylan Tiernan

I became a Real Estate Agent later in life. I had a full-time job when I got my license and tried to make being a agent a part-time job. With that, I made about $15,000 in gross commission my first year. I do think if I made it my full-time job from the beginning I would have done better. It really depends how hard you are willing to work. I know people that were negative their first year because of the expenses and some that made over $250K. It really comes down to how hard you're going to work for it.

I do think you are in a better position than me because when I started all my friends and family already owned homes. The couple that didn't were more than happy to help me out by using me as their agent. You are just finishing up college and will have a whole group of people you know that will be wanting to buy houses that you could be their agent.

I do recommend getting on a team from the beginning. You won't make as much on each deal, but what you learn is invaluable and you can market to your friends you work with a strong team.

One word of caution is you said you were considering moving. Being an agent is all about relationships (and knowledge of the area). If you start building in one area and you move, you are starting new trying to build relationships. If you move to a new area you are having to learn the area as well. Just keep that in mind when making your decision.

Best of luck!

@Kevin DiMaggio I think everyone has given you some sound advice. I just want to add one additional thing to think about. That is the capital gains exclusion for selling your primary residence.

If you live in your house for 2 of the last 5 years you get a capital gains exclusion up to $250K if single, $500K if married. Since you have built up equity it might be something to consider. I would potentially buy the duplex and live in one side. You can take advantage of the low down payment. Rent your current house for 2 years and then look at selling it using a combination of 1031 exchange and the Section 121 exclusion to buy a new property that might cashflow better. Or sell it using the 121 exclusion and buy your next primary residence house hack keeping the duplex. There are a lot of options.

You can always keep your current house and just use 1031 exchanges to continue to defer the taxes, or if you just sell it later down the road pay the capital gains tax, but this is one way to try to keep more of your money.

Like I said, just one more thing to consider. Make sure you talk to your CPA and seek counsel if you are going to do these strategies as there are specific rules you need to follow.