All Forum Posts by: Scott Hollister

@Jonathan Klemm exactly, grow with you comfort level. 

And if you found 5 great deals at once, presented them to a hard money lender, BRRRR them with your team, then take out a portfolio loan on all 5. (This is just the route I would take, there might be a better way. I only know what I know in my limited knowledge, we are all still growing here on BP)

Now there are many steps in between the above route. I would make connections with banks, lenders, contractors, etc. before you buy 5 houses at once. Maybe this time around you do two houses? 

I know you trust your contractor but he can only work on one house at time. What if he gets hurt? Decides to leave the business? Has to complete another deadline before yours? Always plan and have back ups, especially contractors. 

Remember identify your goals first, if flips will help reach your goals then continue on that path. If your goal is financial freedom, what does that look like? Specific, how many dollars? 

Hello @Jonathan Klemm,

Welcome and congrats on you first flip. 

Lets start with your goals? 

• Why are you investing? 
• What is your end goal? 
• How will you reach that goal?

It makes it easier to give advice once you have fine tuned your goals.

For instance, If I had 200k cash I would do 5 flips at once. (For me I would do 5 BRRR's at a time because I like the passive income of rental properties)

• 100k for 20k down payment on each property with a hard money or private financing on the rest. You can find 10% down with rehab costs covered once you set up a relationship with a lender. (Or even better terms, I've seen $0 down while using another property as collateral)
  • Or buy 1 house at a time all cash. (Slower growth because you aren't leveraging your money)
• I would keep 100k emergency fund. (I like to plan for the worst and sleep at night...) 
• Build your contractor/project manager team up to handle 5 houses at a time. You may want to only do 2 houses to start, remember slow and steady building! 
• Single family homes are "easier" to flip because the buying pool is bigger than the 2-4 unit market. Someone looking for a multifamily has a different mindset as opposed to a first time home buyer. 
• Connect at your local meet up for a answer to the Chicago suburbs. Remember, don't ask @Joshua Dorkin about Chicago real estate;) 

Best of luck Jonathan!

Welcome @Katy Redell, 

Thats great that you're getting involved at a young age! My girlfriend has also caught the bug and has helped me on previous projects.

I noticed that you said you will be building a portfolio in CT. You both should come to our meet ups when you start to invest out here! They are located in Manchester. 

-Scott

@Mike K., 

Looks like a clean property! It is definitely rent ready in my area. 

Capex standard is tough to say, I know brandon always figures 5% but that is for his area. I know some investors only keep their freshly rehabbed houses for 5 or less years so they avoid those big costly repairs like roofs and furnaces. (Never spending their capex reserves)

I would ask the listing agent about the windows and roof, they disclose that information. But beware, always do your due diligence and don't take their word for it. 

I know it is tough to find properties in a good area, but don't give up. Keep farming your area so when a deal pops up you can be the first and best offer! 

That is a good excel sheet. I use the BP one when I get financing and bring partners in, looks professional. 

My best advice is to add value, find something that needs a little bit of cosmetic work and some updating. Nothing you have to pull permits for. That way you gain additional equity and hopefully you can pull your capital back out. Then rinse and repeat. Buying something like this isn't necessarily a bad investment if its bringing you a steady return. But it also leaves you in poor cash condition because your capital is locked up. So choose wisely, think ahead, and reevaluate from time to time. 

Hello @Mike 

@Mike K.undefined,

Im glad you're putting in effort to analyze deals. That will help you in the long run! 

It is tough to comment on the property because I do not know the market, I would find local investors at your meet up to help you. Your web address didn't work, can you direct link it? 

My questions are: 

1. Why is the rehab budget so small? Is it rent ready and you just need some paint?
2. When you budget, make sure you account for vacancy and capex expenses. It could wipe out positive cash flow for years if you're not careful. 
3. Even though a 9.43% of return on your money is good, are you sure you want spend 50k to get it? Can you better leverage your money and time? 
   1. For instance, if I had a liquid 50k I would do 2 BRRRR strategies and refinance out in 6 months (I would also get that 50k back, rinse and repeat)

It sounds like you are a first time investor, have you thought about house hacking with a low down payment loan? Saving the leftover 40k for your next property in a year or so? (It might not be for you but look at all your options) 

Hello @Gary C Jones,

Brandon does a great job teaching! 

I have currently have one BRRRR under my belt and I think what you would call one with bank financing. I bought a house that needed some work(all cosmetic) with bank financing, you have to be careful here. A bank WILL NOT finance a deal if it is not in livable condition.

UNLESS you get a rehab loan in which the house must be livable after the contractor is finished. Look into 203k rehab loans, I hear its great but there are drawbacks. For instance you have to use a licensed contractor, not you. 

The BRRRR strategy will work with 203k but remember you will be losing some profit because you're paying someone else for the sweat equity you were going to put in.

My BRRRR number example:

Purchase price: 101k

ARV: 187k

Rehab: 10k

If I were to pay someone for rehab I would "lose" another 10k or so. But some would say that I could've used my time in a higher and better use like finding more deals and surrounding myself with a team. 

Good luck Gary! 

Hello @David Luhman,  

Lets identify the problem, 

1. Keep or sell inherited property
2. Possible solutions
   1. Sell the property (capital gains will be limited).
   2. Leverage LTV for mult rental properties
   3. 1031 to another area
   4. Do nothing...
   5. Buy REOs for that cash, rehab, rent, cash refi, repeat. (BRRRR)
3. Select and plan your course of action
4. Revaluate your plan

You sound like you have a good head on your shoulders David. I would recommend you choose the option that you feel comfortable with. For instance, if I were a young person that is willing to put in work and take on a little more risk I would leverage up. Especially in my market where houses cash flow on the MLS all day. My philosophy is to scoop up as many rentals as I can in a down market, especially when it costs me $0 out of pocket. I pay for them in sweat equity.

Or maybe you don't need to leverage up. Maybe you have looked at your personal goals and you are comfortable with the consistent cash flow, one property to maintain, and don't want the added time involved with 6 extra properties. Does $1600 meet your needs? 

You make a good point with the 15 year mortgage while saving money in interest. My mother was in the mortgage industry when I was growing up and she always said make sure you get the mortgage that you can pay each month, regardless of income. She said if you want to pay extra towards the principle then do that. That way you don't back yourself in a corner if you lose your job. 

Ask yourself these questions about this current rental: 

1. Is it in a good neighborhood? 
2. Good rental history?
3. Is it relatively easy to maintain? 
4. Good school system and job growth?

If the answer is Yes then I would keep it and use that money for a higher and better. 

(H&BU= higher return)

Leverage up if you can get deals that cash flow. 

6 properties can be maintained while working a full time job. Does $9600 a month satisfy your dreams and desires? If so then congratulations, you're 1-2 years away from meeting your goals! 

@Jay Azurin, 

Are you on good terms with the tenants?

I have two approaches and this a current battle from me. I might not be the best to take advice but maybe this will give you some insight. 

Good Guy approach: 

• Them seem nice, they pay on time every month, they left the place in great shape. 
• Two months isn't much, maybe they know someone that will help you fill the rental? 
• Make a deal that they help you pay rent until someone gets in there? They also help with turning over the apartment? Maybe a fresh coat of paint? 
• My goal would be to make it a win win situation. 

Business Guy approach: 

• Follow the lease.
• Enforce the "Default"
• Speak with them and tell them why they are responsible, if they knew they were buying a house then they should've adjusted to a month to month term. Which would result in higher rent for you. 

I know this doesn't answer your question but the decision is ultimately yours. Best of luck! 

Hello @Dana 

@Dana R.undefined

Lets keep this simple. Just think of it as a business and check off these boxes with CONFIDENCE. 

• Good Credit?
• No criminal background? 
• Good References?
• 3x Monthly rent? 

Im my honest opinion it sounds like you are coming up with reasons to rent to him. If you have to convince yourself to rent to him I would be cautious. Do you have other applicants? 

Welcome @Joseph Baiera,

I am glad to see you are looking to house hack! Most people think it is the best way to enter real estate investing. 

1. Talk with a professional. My understanding is that you cannot put your primary into an LLC because it will trigger the due on sale clause. Our group has been looking into a living trust for protection, again seek a professional who is familiar with your local laws.
2. Once you have your duplex you can write off taxes, interest, and repairs for the unit that you ARE NOT living in. Otherwise you will calculate the Square footage and subtract the SF you are using/living in. Talk with an CPA about the best way to take deductions. 
   1. This is very important advice. I was in your same situation a few years back, I was extremely aggressive when it came to write offs. (Who wouldn't, right? Why give the government more money?) That was my train of thought right out of college. However the drawback came full force when I went to apply for another loan and everything business I had showed up as a loss. You don't want it to show up as a loss, because that 50k you make at your day job will quickly go down and that will hurt you when you go to purchase more in the future. 
   2. Also, you will need reserves for EACH property you own. 2 months for primary, and 6 months for investments. I believe these are traditional guidelines.
   3. Writing off a vehicle with just one property doesn't seem worth it. I tried it for 6 months but then I had two of everything. Once you factor in all the maintenance and repairs for that car it doesn't help the bottom line. I would consider it once you have a large portfolio and if it makes sense at that time. 

My advice is to not worry too much about the above. A lot of people get caught up on little stuff and forget the big picture. You should focus your time on finding and purchasing a great deal. Ideally you should shoot to live for "free". That is make sure the rent you get on paper is more then your mortgage is. The rest will work itself out. Best of luck! This will be a great experience, also make sure you pick up some of the books here. They are extremely helpful!