All Forum Posts by: Noah Chappell

@Nathan Gesner I just went through my first experience with this as well in October. It was a section 8 tenant who died of an overdose. Quite tragic really, kids involved, etc. I think situations such as this underline how important it is to have a good property manager on your team. With a simple "we'll handle it" my unit was turned over and is now listed again in about a month. If not for my prop manager, this would have been a really challenge, but could have left such a bad taste in my mouth that it would have been hard to continue.. things are tough enough as it is right now.

10 Votes

@Jason Johnson hopefully we'll cross paths at a meetup. What angle are you interested in?

1 Vote

@Andriy Likhman to play contrarian, I wonder if you should take advantage of your local knowledge of the NYC market, which is something a lot of ppl wish they had, to establish yourself there after all. I think proximity to your investments, while not required, is definitely helpful. Check out local insights by Redfin, NYC prices have taken a dip, NYC ain't goin nowhere so I don't think they'll continue to drop, especially over the medium- long term. I have family in NYC and was checking out some prices recently, looks like you can get some decent stuff in Staten Island for even like 150-200k a unit in low crime areas, which to be honest competes with Minneapolis prices.. Just something to think about if you're going for a long term play and want to stay in the area, I know you New Yorkers rarely leave ;)

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@Peter Lai Great idea! If you can find success investing where it makes sense while living where you want to, you'll really more forward in this game. One thing I'll emphasize is the importance of local knowledge. I think you'll find a lot of Midwestern cities are very block by block. Just today I was reflecting on different neighborhoods of Minneapolis, one duplex less than one mild from another with identical specs can have double or half the value of the other. You'd never know the difference just looking at a map. Sometimes even crime maps can be tricky (highly desirable downtown areas or areas around college campuses can be high crime too). Just be sure to visit an area and walk around, or have a knowledgeable local contact before jumping in. Remember, as much as you think you know about a city, there are local investors who've been studying the market for years your competing against.

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Originally posted by @Jason Jones:

Hello,

The question is in regards to opinions on whether to sell our first SFR for a large amount of equity money from it to be used to acquire multiple more SFR or duplex/triplex faster....or keep the current SFR as-is right now and let it ride slower.

We moved out of our residence house in the Twin Cities area and into a new residence house. The old house has become the SFR and is currently rented out until the end of July 2021. It pulls $2,150/month right now as it rented out during off-season, but during on-season good rental time of August/September the going rate for the area is about $2,300/month would be anticipated.

The SFR will be 100% paid off bank loan, free and clear in 5 months time. I have a recent Realtor appraisal of it being worth $440k if sold, and in talking to another Realtor he said I could expect to pay with him all fees from him and bank and everything else about 8%. So that would be about $405k in free and clear money to us. We would easily meet the rule of having lived in the property 2 out of the last 5 years and would avoid the capital gains taxes scenario.

If we keep renting out the SFR past July 2021 we would get a much larger cash flow per month than any normal scenario, main reason being is that the bank loan will be paid off 100%. But the money needed to acquire another property or two will come much slower logically it seems as we would then have to save about $1,500 per month (would earmark money from the rest of the monthly rent for CapEx and other expenses) and it would take a while to get enough for a new down payment and also repairs costs for a new rental. Not all that super interested at the moment of looking at high interest hard money or private money.

To me it seems to make more sense to sell the current SFR and get around $405k to then buy new rentals and afford their repair costs too, avoiding needing to use hard or private loans. I would scale up faster for money coming in overall and get more properties faster it seems. Looking right now to have between 5-10 doors I think...I'm open to SFR, duplex, triplex right now I'm thinking.

Thoughts?

Hi Jason. I'd cash out refinance to the point that you're making $500 monthly on your SFR, then buy 4-5 duplexes for 20% down. Alternatively if you're sophisticated with brokerage connections you could put that chunk down for a larger 10-14 unit apartment building. Either way you'd be making $2,500 or more monthly cash flow from your portfolio, then could sit back and let things grow a bit over time.

2 Votes

Originally posted by @Michael Cabaña:

I would like to invest $40k in rentals. Do you have any recommendations on markets to look into?

Appreciate the feedback!

Hi Michael. I think it really depends how aggressive vs hands off you're looking to be. 40k is a good chunk, and many very successful investors have started with less, so I don't see money being any issue, the extent of your inventiveness will be the true determinate. On the one hand you could buy a turn key duplex or tri plex in Cleveland that cash flows decently, or on the other side of the spectrum you could MOVE to Cleveland, house hack a distressed 4 plex using FHA with 3.5% down (~7k), rehab this (~20k), then refinance out in a year using a local credit union to recover all of your money, all while BRRRR'ing another single fam house, then repeating the following year, to accumulate 15-20 units in a few short years, with the plan being to expand into mid sized multi fam vs syndication after that. It really all depends on your goals and your grit.

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Originally posted by @Mariquita De Mira:

I live in the Twin Cities and have been looking at duplexes to move into and house-hack to get started with real estate investing. I made a 6-Month Contract for Deed offer on a duplex located in a B/C area with 3 bedrooms and 1 bath in each unit priced at $290k. It appears it is in solid condition and move-in ready. The bottom unit has been occupied for 6 years by the same tenant who gets some assistance to help cover her rent at $1600/month which about covers the monthly mortgage. She just recently signed a new lease and is a good tenant. When I move out, I could potentially collect $3200/month in rent from both units.

The reason my agent and I arrived at a Contract for Deed offer is because I still need to sell my house before I can buy my next property due to my DTI ratio and I need more time to prep my house for sale. However, the seller of said duplex already has an FHA offer but was willing to consider mine. Our offer was $290k, $20k down, 4.25% for 6 months. He countered with $295k. But after my agent and I started to review what I need to bring to the table, it appears I need another $5k for closing costs, inspection, etc. I have exactly $20k and no more unless I want to move some money from my brokerage account or borrow it. However, if I were to do the former, I will have no money for reserves or emergency funds and I keep thinking how the worst can happen like a furnace going out, I get laid off, etc. and now I have no net to fall on or umbrella to cover me.

As much as the numbers seem to work I don't have all the money on hand to do this deal. However, I'm wondering in this hot market with most rents not meeting 1% rule and in this case it is more than 1%, am I letting a good deal pass me by or will there be more deals down the road, I just need to be patient. This is a huge financial decision and I'm terrified of making a mistake: spending money I don't have to buy an investment or passing up a great investment opportunity, hence it's worth moving heaven and earth for an extra $5,000.

Sorry for the long post and appreciate any guidance on this major decision. Thank you very much in advance!

Hi Mariquita. This is a decent deal, but nothing earth shattering. I'd say that's market price based on your description of the duplex, area, etc. Before jumping into this, I'd get together at least a decent emergency fund for the property, maybe 10k. Imaging if your furnace went out, then your water heater 3 weeks later - you'd need 8k fast and could lose your house to the seller if you aren't able to make your payments. Another thing, if selling your other house is all that separates you from, say, a low down payment Minnesota housing or FHA loan, I'd definitely wait the month or 2 until you do that instead of using a contract for deed, which is basically like a hard money loan from the seller. Just think, you'll have to close twice (1x initially, and a 2nd time to refinance out of the CFD), that means 8-12k of closing costs. Also, you'll likely pay interest only monthly payments on the CFD that are at a high interest rate. In summary, the deal is not bad, but not stupendous, nothing worth putting yourself at financial risk for. I'd wait and find a similar or better deal in a month or 2. You might take advantage of the winter months and anticipated end of several aid programs to swipe a great deal up in Jan or Feb when you're ready. Feel free to reach out and run any deals by me!

1 Vote

Originally posted by @Travis Hawthorne:

Some background on me: I am 36 years old. Work for a tech company in sales. I average $250K year in W-2 Income. Excluding retirement funds I have set aside $300K of investment capital to start. Education is degree in finance and accounting. Although I don't remember half of it but a few credits short from eligibility to sit for CPA exam as well.

I am gearing up to start executing my BRRRR strategy. Although I am a bit torn where to start. My goals are all about monthly cashflow and scaling fast. But of course I have to manage risk and not get in over my head.

Should I Begin with Single Family, duplex through quadplex, or Jump Straight into small commercial multi family(say 5-8 units)?

One reason I'm interested in small commercial multi is the valuation's make much more sense to me. I guess it comes from my Finance and Accounting background, but NOI, Cap Rates, it's all straight forward. Increase NOI and you increase the value of the property. The whole process of valuation for residential comps is unappealing, wishy washy, cumbersome, I could go on. Also I would much rather deal with other investors in the acquisition process than overly emotional financially distressed home owners when buying SFR. The idea of lowballing grandma because she has cancer and can't pay her bills on her SFR makes me sick. This seems like a drag. Sorry. This is all just perception by the way. Maybe i'm wrong.

However I have never done a deal, and if I started with residential could start with all cash offers with no partners or loans require for acquisition. Risk is relatively low (with respect to my available funds) and I can learn the rehab process. After a year or two even of that then I'll have even more cash (hopefully another $100k-$200k or more though savings) and can step up to the next level when I have more capital and more knowledge.

If I start with small commercial multi my research tells me I could likely get in the game (maybe not?) looking at 5-8 unit properties in south and midwest acquiring around $500-$600K (assuming they are able to be financed) if not I would need to find OPM or another source for enough capital for acquisition and rehab and stabilization.

I'm trying to figure out how much from what I learn doing single family and duplex etc will translate to small commercial multi and if there's a real benefit to doing that for a year or two before jumping into small commercial multi family. In theory it's lower risk, but in terms of process, maybe I'm naive, but it doesn't seem that much different. In fact due to the formulaic method of valuing commercial property it seems more straight forward to me personally. Also - what's another $100-$200K in capital going to do for me in a year if I want to get into small commercial? Sure It's an extra $100K, but still going to need to figure out how to do acquisition and rehab with additional capitol through partners, banks etc. I won't have a 1 million dollar bank roll next year or two. My fear is I waste a whole year fooling around with single family and in the end I learned more about rehabs, but haven't learned many of the skill's I really need to jump into small commercial multi family. My feeling is to learn how to do small multi family commercial just pursue that.

Now all that said - I'm a newb, so what do I know. Am I a fool for trying to jump into small commercial with no experience and only $300K to work with? Maybe I'd find out pretty quick I just don't have the cash or experience to step into this arena yet or worse yet, go bankrupt and lose my cash savings.

Any thoughts from experienced R/E investors?

Hi Travis. I think your mind's in the right place. Honestly I think you can go through similar amounts of heartache and emotional struggling dealing with a small single family as compared to the larger buildings, and possibly even more so given I think some investors get emotionally attached to the smaller deals, focusing too much on details and cosmetics. I've always had the impression that what you practice, you'll get good at, and the strategy of 'starting small and building up' is flawed. Yes you may want to start with a smaller sized multi family, but I'd go in from day 1 treating this as a business and building the systems that can support larger deals and repeat acquisitions. You might want to look into investors like Michael Blank or Sterling White who, as I understand it, aimed for multi family syndications from the beginning, and in so doing developed their essential skill set early on, instead of getting distracted with the day to day of smaller properties.

1 Vote

I own a duplex S of broadway, which has been my best performing property. I think the north is really block by block. I'd take a look at the trulia crime map, then walk around the house including the surrounding blocks. You'll quickly get an idea if you'd like to invest, lots of hypodermic needles and abandoned homes would be a no, whereas decently kept up homes with families is a yes.

2 Votes

Minneapolis, Minnesota

Did you ever say how much money you have?

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All Forum Posts by: Noah Chappell

Noah Chappell has started 3 posts and replied 248 times.

Post: (Update) Another Tenant died...and then two more!

Post: Any investors in Minnesota want to connect?

Post: Looking for an advice !? Out of state rental property.

Post: 400k. Long distance BRRRR

Post: Sell Current Rental SFR for More Rentals Faster?

Post: $40k. Would like to invest in rentals

Post: Contract for Deed Offer on a Duplex

Post: BRRRR - Start with single family or multi family?

Post: North Minneapolis concerns - Duplex purchase

Post: What Would You Do if You were Me?