All Forum Posts by: Mike Trzaska

I’m at a point in my investing that in order to hit the goals I have set for myself I need to start bringing in outside capital. I’d like to start with private money as I have a lot of friends who have done well for themselves as well as family that may be willing to help.

I’ve realized the power of bringing in capital since day 1 and knew if I want to achieve my goals I would need to do it. However, I am getting hit with some limiting beliefs that are preventing me from even having these conversations.

I’m hoping those who have raised private money before would be willing to share their first experiences. What was it like to ask that first person? Who did you ask for your first deal? What was the outcome? What objections did you get? What value did the private investor get that was better than throwing it in the S and P index?

Thanks!

Hi BP,

I know most people here with multiple properties have dealt with this situation. Over the past 18 months I have acquired 4 rental properties, refinanced my home, and opened a HELOC. All good things, except my credit took a hit due to the recency of all these open lines. Prior to investing my score was always between 780-800, now I'm sitting at 660. Does anyone who has been in this situation before have any strategies they used to improve their score while continuing to invest and use mortgages as leverage? It's wild to me that owning 5 hard assets all with over 30% equity that pay me monthly can hurt my credit score. I guess it's just the rules of the game we play…

Thanks!

I invest in the Cleveland Area and am also a local. My choice was mostly because it is my backyard. I know the macro population trends, but  like most cities there are micro markets within the City of Cleveland that people are flocking to. My quick run down for you is that the west side of the city will continue to see growth and investment, the closer you are to the lake the better (Detroit Shoreway, Ohio City, Edgewater) . Outside the city of Cleveland, Lakewood is a suburb that has seen a ton of appreciation in the last 5 years. A lot of areas on the East Side of the city are pretty rough so make sure to do you due diligence when you see a property for $20k. Is that an area you really want to be in? East side suburbs are nice areas, but there you will see high taxes to make sure to take that into account in your underwriting.

I would address the declining population concern, by asking yourself the question of how long am I going to hold this property for? Not sure if you are a new investor or have a portfolio already, but if you are new and it will take you another two years to have the capital to invest in Columbus I would say look at an Ohio market with a lower cost of entry to get into the game.

Thanks all for the great feedback so far. I’m going to take the maximum I can while maintaining a projected pure cash flow of $100/mo. That gives me $100 a month cash flow and probably around $100 in equity pay down per month on something that already made me a healthy profit.

I think the point about taxes increasing is the one that convinced me to hold back a little in the tank.

I actually did think of flipping this when I bought it, and would likely do so if I thought I could get $128k. I really don’t think it would sell for that especially now that it’s tenant occupied. 

Thanks again for the awesome responses!

Hi All,

I just got my appraisal back on my latest BRRRR and it came in wayyyy higher than expected....I know, good problem to have. Now I am faced with a decision, do I sacrifice cash flow and increase my risk exposure to take out the most tax-free refi proceeds or do I balance cash flow with refi proceeds to manage the risk? Looking to this great community to see how they would approach.

Here are some more details:

All in Purchase + Rehab + Holding = $64k

Appraised Value = $128k

Amount available for cash out = $96k

Monthly Rent = $1150

Monthly Cashflow after all expenses at $96k Cash Out = $48/Mo

I personally don't think the house would sell for $128k, I would think it would sell between $105 and $110k. The neighborhood is stable, but not in the path of progress. My goal is to build passive income, but since I am early in my journey and self-funding my deals I want to keep as much capital as possible. My thought was to take out 75% of what I think it would sell for in order to manage the risk. I do have property management in place, so could self manage if thing went awry to reduce my monthly expenses. Any insight into how others have approach this scenario (albeit a great one) are appreciated!!

I started doing some driving for dollars and direct marketing this year and have gotten a few leads, and one deal. I used a lawyer to draw up the first purchase and sale contract that led to the deal I purchased. It cost me about $700 total, but he only would give me the PDF. I used him again for another lead, and he drafted the purchase contract again (basically changed the names, pulled in the new exhibits like legal description etc.). Cost me $400, and the deal ultimately fell apart. This to me is not sustainable. Also, the contract is over 14 pages and a little intimidating. Luckily the deal I bought was from a friend, but I'm nervous this detailed of a purchase and sale contract would scare off a potential seller I don't have an existing relationship with.

For those out there that are doing off market purchases:

Do you have your lawyer draft each contract or do you just fill in the blanks on a template?

Did you use a lawyer to draft your first contract template?

@Brandon Sturgill can you elaborate on what you mean by inbound marketing? Are you talking about having a website to capture leads and driving traffic to that site via organic and paid search?

How does this work if you are targeting specific markets/neighborhood for buy and hold investing?

I started direct mail marketing in 2021. To be clear, my "marketing" consists of driving for dollars, vetting my addresses against property records (looking for enough equity), then handwriting cards I bought off Amazon. I've gotten 2 leads on about 50 pieces of mail, but no deals. How have others started in direct mail marketing and what has been your journey in scaling up? What have been you results?

I just got my appraisal back on the HELOC I was trying to increase to free up additional equity to invest in RE. Unfortunately, my appraisal came in about 40k under what I was expecting and my appeal was just denied. One of the things that dumbfounds me is that the house directly right next door was not used as a comp and transferred 3 weeks ago from nearly $100k higher than our appraised value. It is nearly a replica of our home: same colonial style, same bed/bath count, same square footage, similar renovations. The only difference I could see is that the home is more renovated, but all 3 of our bathrooms have been fully renovated with similar finishes in last 2 years, our kitchen was renovated with very similar quality, mechanical ages all very similar.

Can anyone help wrap my head around why this would not be used as a comp in an appraisal and if you would pay for another appraisal?

Additionally, there are other comps that have sold on our street and next with a similar value so it also shows the house next door was not a fluke.

Hoping to educate myself on some of the tactical aspects of a seller finance transaction. I'm currently under contract on a property where the seller will be financing 80% of the purchase price. The deed will transfer to me and he will hold a lien against the property. Additionally, I will be using a private lender to fund the rehab who will hold a private promissary note. I know the seller who is financing the purchase should be listed on the insurance policy, should the private lender also be listed?

I do plan to confirm with Lawyer/Insurance Agent, but want to educate myself before going back to them. Thanks in advance.