All Forum Posts by: Nick Harrington

What's up Jacob! Congrats on getting pre-approved. I did my first house hack in 2020, and then am doing my second one now. Let me know if you want to chat about anything - I have a lot of clients in the greater Chicago area and I'm sure they can connect you with a realtor they've worked with for their duplexes. 

Overall, here are my thoughts: 

When it comes to a realtor: 
- Someone that at least owns rental properties
- Treat a showing as an interview - sign a short term buyer / property specific agency agreement with them. If they are coaching you through in person what looks good / bad about a property, great. If they are downplaying EVERYTHING condition wise in the property, that would set a potential alarm bell. 
- Someone that is going to educate you throughout the process, not just be your friend
- I'd recommend someone that also has solid volume in the last 1 - 2 years. Essentially someone that isn't hungry to get you into any property, but has your best interest in mind to get you in the right property

Tips / General Comments
- Look at inventory first thing every morning
- Go and see several properties - don't fall in love with the first one you see, and don't wait until the perfect duplex comes up to have it be the first one you see
-understand how much work each property needs. Treat every showing like a mini home inspection. Look at mechanicals, general condition, type of plumbing, exterior, roof, etc. 
- Repairs / updates are more expensive than you think. If you are handy and can knock out work as you live there, great, but don't fall into a trap of buying something that needs a ton of work, unless you have the capital / money to fix it up post closing
 
I got my first house-hack before I became a realtor. I lucked out with a good one, but I wish that I would have gone and seen a lot more before it. 

Also - I'd recommend to not get obsessed with how the numbers / spreadsheet looks. A house-hack is 99 times out of a 100 going to be a better financial decision than renting / buying a single family home - focus on finding a property in an area you like that is in general good condition. 

Hey Priscilla - very exciting! Happy to chime in here. 

Whenever I am comping rentals, I always start with Rentometer. I have a pro membership which is I believe $5 / month and it is well worth it. 

This gives me a gut check in terms of what the rent range is for this property based on location, number of bedrooms, and number of bathrooms by showing the average rent, median rent, 25th percentile, and 75th percentile. From there, based on the condition of the property, I can then determine where on that range I should expect for rent. 

Next - I look to look at Zillow (which you mentioned) to see the active number of rentals on the market that this would be competing with. I wouldn't let 2 rentals that have been sitting for 30+ days deter you. If you are seeing  a large number in a small area that have been sitting, I would be more concerned. 

Next, I would like to uncover what has rent growth / decline looked like in that city / area overall. In general, are they going up or down YoY.

There is no true "science" to it and it is a bit of an art, but to answer your question, you are doing all the right things, and I would not let 2 rentals that have been on for a long time stop you. 

Hey Jon, have to give you my two cents on this year! I am a realtor in Milwaukee that specializes in working with investors, and I also have a portfolio of rental properties myself.

I will get to your questions, but here is some background regarding loans and in general. 

- If you are NOT buying the property as your primary residence (in this case, it sounds like it will be an out of state rental), you are looking at putting 20% - 25% down if you are going to use a conventional mortgage. First time home buyer programs (FHA, LoanPossible) or even low down payment options (5% down with a conventional loan) are all limited to owner occupants.

- You CAN NOT use a conventional mortgage to purchase a property with an LLC. Conventional mortgages are designed for individuals to purchase homes, not for businesses. If you want to acquire the property and have it deeded directly into the LLC, you are looking at either purchasing it with cash, a commercial loan, a DSCR loan, or hard money.

So now you are probably wondering how does anyone buy a property with an LLC and use a conventional mortgage? 

The answer is they buy it in their personal name, their mortgage is in their personal name, and then upon closing / taking title of the property, they "quite claim" deed transfer the property from themselves to their LLC. 

Now, the LLC is the owner of the property. The mortgage will stay in the name in which the home was originally purchased. 

Without going down too big of a rabbit hole, some lenders may require the loan to be paid due in full upon the transfer of ownership. Of all the lenders I know who have clients that do this (purchase in personal name and quit claim to LLC), none have ever had that happen - the main thing is to make sure you just keep paying your mortgage, and this would be a good conversation to have with a lender. 

As to should you create an LLC - the answer here comes down to mitigating risk. The whole purpose of the LLC is to mitigate risk and to separate yourself from the property through the LLC. In the case of having several partners in the property, it also would outline an operating agreement and arrangement between the partners of who owns how much of the property. 

An umbrella insurance policy may get you guys the same result here as well. 

As for which state to create the LLC in, I will need to defer on that one. For my properties in LLC's, I have the LLC state as the state the property is in. 

Hey Shelby - 

You are correct, turnkey properties don't get the lime light like flips / brrrs get in general within the BP community. 

Whether to buy something turn-key or something that needs work comes down to your goals and what you are looking to accomplish. 

A turn-key property allows you to walk into something that is ready to go to be rented out with minimal repairs, or it potentially already has tenants in place. There are in general less headaches on the front end and it is typically easier to get stabilized. 

The downside though is your ability to recycle your money with a turn-key property is limited. Something turn-key is typically going to be sold at market price (unless you can find a deal off market as you mentioned). Therefore, your ability to re-use your money like you could in a BRRR or a flip is limited, and you are banking on the cash flow from that property or market appreciation over time to re-capture any money.

If you have a lot of capital already, a solid income coming in elsewhere from real estate, and want to minimize your headaches / downtime to get a property, than I would say this strategy fits. 

I also believe that jumping into a flip / brrr as a first deal is a good way to never do a real estate deal again. 

In your situation, it sounds like the primary focus for you is more a quality of life play (reducing your commute time), and the STR may allow you to break even cash flow wise?

A turn-key purchase is typically an easier and less risky strategy , but the benefits are less than buying a flip / brrr. 

Hey Owen - very exciting! 

Two of my best buddies did this right out of college as well (in Milwaukee, not in Boston), while I waited a couple years before doing it, and I can tell you, I wish I did it sooner. 

Main thing for you is: 
- Have both you and your buddy talk to the same lender and get pre-approved to understand down payment options and what your combined budget would be
- Decide how you want title held (joint tenancy or tenants in common) - do a google search on this to see which option is best for you guys
- START SHOPPING! I would recommend start going to see properties about 6 months before you are ready to pull the trigger, maybe starting with open houses

and finally.... TAKE THE PLUNGE! A househack is a financial no-brainer 99% of the time. I have done two of them and the only regret is I didn't do it sooner / I wasn't more aggressive at buying the good ones I saw when I first got started out. If I could go back to my younger self, I would have told him to "get your head out of the spreadsheet, everything is going to be okay, and buy a nice place in a nice area". 

Hope this helps and here for any questions you have

Hey Tanner - 

This right here is the $1,000,000 question! Hard to say without knowing the full backstory of your client and what their goals are. I work with a ton of investors, and part of that means helping to identify with them what their goals are, what their risk tolerance is, and what they want this to look like long term. The main thing is understanding how does real estate fit into their entire financial picutre - do they want it to be a part of it? Or do they want it to become THE picture for their finances. 

Here's a hot list of things I'd want to understand, and based on this, there are tons of different avenues he can go. 
- what is his short and long term goal with real estate investing? Cash flow? Building net worth? Building capital? 
- How active does he want to be in the business? Does he have time to devote 10+ hours a week? Does he want something more on autopilot that is more like 1 hour a week? 
- Does he plan to keep his existing income stream, or would the goal of real estate be to significantly supplement that income? 
- What is his risk tolerance? 

There's tons of different ways this can go.... if he is someone that doesn't NEED the passive income, I would recommend multi-fam property w/ 25% down in a strong B or better neighborhood where he can at least break even and focus on a market with strong appreciation and rent growth. overtime, his cash flow will increase, and his net worth on paper will grow significantly. 

If he is looking for cash flow, than the focus will be more on identifying neighborhoods / markets that have cash flow without too much risk to focus on that. 

If he has tons of time on his hands and wants to get his hands dirty, flipping could be an option as well, with a combination of his money + private money. 

Hope this helps. 

 Well thank you! One other thought too- if you feel like you are having too many deals, maybe then your buy box may be too wide, and and you can narrow in on what area / location / return you truly want. 

I advise clients to do the same when they are starting out so they don't get this feeling of FOMO for deals they aren't doing

Hey Ben - welcome to the joy of investing! 

Unfortunately- there is no silver bullet to your answer, and it really comes down to how much do you want it and how important is it for you? If it's important, you fill find / make time for it. If it's not, then you won't. 

My recommendation would be to tell yourself you are going to do 1 real estate investment related task a day / every two days / every three days (whatever that cadence looks like for you). It could be reading for 10 minutes, it could be analyzing deals, etc. 

once you actually have a property- it comes down to what sort of strategy are you doing. If you are flipping a home, and you are the one doing the owrk, then yea, that is going to be cahllenging. If you are getting a long term rental, you may have some upfront work, and then whenever a tenant move in / out have some work, but typically for long term rentals you aren't touching / doing things to it every day. 

Hey Brandon - 

First off, that's a great problem to have of "too many deals". 

I would have you consider these two questions: 
1.) What are your goals
2.) Is what you are doing enough or not enough to reach those goals? 

I also don't know how day-to-day you are involved with your deals, but it sounds like what you are running into is a scaling problem (private lenders aside) - you can't do more deals because you don't have the bandwidth to do more. 

This is when hiring or partnering comes into play. Are there little tasks you can outsource to someone else? Does it make sense to have someone come in full time on salary to take off a lot from your plate for you to do more deals? Does it make sense to start a seperate LLC and partner on some deals with other investors?

Just my food for thought here

Would love to add my 2-cents here. 

The correct answer is it completely depends on your situation, your goals, and what you are looking to accomplish. 

If your goal is to retire in the next 5 years strictly off of rental property income, then banking on appreciation is clearly not the case. 

If you have a steady paying job as-is, and your goal of real estate investing is to build your net worth long term, than I'd say it is going to be much more important to find a market that has appreciation. 

More often than not, real estate gains come from the actual property appreciating in value over time. Think about the stories we hear from people buying homes in the 80's that held onto it for 30 years and are now retired from their homes value increasing. More often than not, these homes purchased were not even for investment properties, but just a place for them to live.

Should you bank entirely on appreciation? No, you shouldn't, and the cash flow has to make sense for your personal situation and goals, but saying "you are not banking on appreciation" is in my opinion saying that "you are not banking on the stock market going up over the next 10 years", when the majority of peoples sole retirement is in a 401(k) with the whole idea of the market going up. Why would it be different for real estate?

In my opinion, there is a direct correlation to real estate investing between your cash flow and your risk: the higher the risk, the higher the cash flow. The less the risk, the less the cash flow. 

Risk is most often times associated with the area / neighborhood you buy and covers things like tenants ability to pay rent, ability to find quality tenants, ability to find good property management and contractors, likelihood of tenants keeping your property in good shape, etc. 

There is an inverse correlation between risk and appreciation: the less the risk, the more the appreciation. The more the risk, the less the appreciation. 

So to boil it down- good location = low risk, low cash flow, high appreciation. Bad location = high risk, high cash flow, high appreciation. 

I purchased my first rental property in 2020 for $225k. It cash flows fine, but the gains I have seen from appreciation are more than I could ever see in cash flow from the property.