All Forum Posts by: Brian Moore

Hi All! I'm interested in the Chattanooga rental property market as well, and I'll be in town on business this week. @Riley Kurtts and @Jeffrey Holst, are either of you (or anyone else out there) available to meet up Tuesday or Wednesday night for a brew? It would be great to chat about the local market and talk shop about RE in general. I can also share my experiences in other markets if you have any interest in long distance investing. Thanks!

@Tom Hawkes I'm in the exact same boat and just closed on my HELOC last week. I've done 7 deals over the past 13 years with traditional 20/25% down conventional financing but am very excited about trying out BRRRR. Given my long history of rental property investment experience, I don't have any fear of using the HELOC although I've run across a few colleagues who are totally against the idea; different strokes for different folks.

I intend to buy properties in the $80-120K range and keep rehabs to $30-50K which will leave a large cushion of reserves in my HELOC. Even if the BRRRR goes totally awry, worst cast scenario would be leaving $20-30K in the deal, which the interest wouldn't cause much harm. On the otherhand if everything goes to plan and I have a perfect BRRRR, then wash-rinse-repeat. I also rationalize using the funds because I was fortunate (and wise, but mostly fortunate!) buying my primary in 2012, and I have several friends who bought 3-4 years later at prices that are the combo of my purchase price and HELOC. If I used the whole HELOC and did a Refi into a new loan I would be right where they are at. One last item I thought I would mention, I've heard of folks on the podcast using credit cards with 0% down for rehab costs (usually Discover) on their BRRRR deals. I might try this out as well so that I can save money on the HELOC interest. Good Luck, hope the BRRRR goes well!

Hi All, Though I have yet to attend (hopefully the next one!), the most prominent SD Meetup on BP appears to be 'Beers and Deals' which is hosted once per month at alternating locations: Stone Brewery in Escondido and Stone Brew Pub in Liberty station. Per the link, the next one is Sept 16 in Liberty Station. Hope to see you there!

https://www.biggerpockets.com/forums/521/topics/749536-beers-and-deals-san-diego-networking-event

 

Hi David, you've got the basics down but there's a lot of additional expenses that can eat away at cashflow. You mentioned your mortgage payment of $1350 includes property tax but does it also include home insurance? Is your financing below 20% which would require PMI? Is the property in an HOA? Will the property need routine gardening? You'll want to account for maintenance and vacancy of maybe 5% each. You mentioned that you might live in one of the units so it sounds like you plan to manage the property on your own; if not, professional Property Management runs 8-10% of gross revenue. Note that 2bed/1baths will have moderate turnover so you might be paying a make ready costs (paint and carpet) of $500-2K per unit every 2-3 years. Hope this helps!

Hi Robert, it appears your question has 2 parts so I'll try to tackle the 1031 piece. Replacing your expensive CA property with 2-3 cheaper ones in AZ is fairly straightforward. The basics of 1031 are that you can identify 'up to 3 replacement properties in the immediate 45 days following COE on your relinquished property'. You then have to close on at least one of your identified properties in 180 days and invest 100% of the sale proceeds of relinquished property towards the purchase. I think you can use funds to pay some of your closing costs but I've heard conflicting info on this.

I did a very similar exchange last year and I would caution to keep an eye on your reserves. It is likely that you will spend a lot of money out of pocket (make ready of the property you sold, possibly buying more expensive property than your 1031 funds can cover, make ready of purchased property) which cannot come from the proceeds of your sale. You're probably looking at a nice bump in cashflow once the dust has settled, but that is 6-12 months out (unless you buy turnkey and occupied at market rent) so make sure you have the cash on hand to sustain. Best of luck!

Hi Trevor- thanks! I owned the condo from 5/2010 through 2/2014, so yes the price was very low compared to now! I probably could have held on longer for more appreciation but it was slightly negative cashflow as a rental and I needed the cash for my house purchase in Encinitas so I took the $80K capital gain tax free and sold. I'm not sure what the rental market is like in PB these days but I imagine it will be hard to make the numbers work as a rental property if you move out. It's nice to have a roommate pay some of your mortgage, but you may need to plan on living there several years until the numbers make sense as a pure rental.

Though the PB life is invaluable and I would never trade my time there, it would at least be worth exploring some multi-unit properties in the east and northern parts of the county. You can take advantage of owner occupied financing for a multi unit, and then move back to the beach if prices cool off in the next 2-3 years. Good luck! Happy to share tips.

Yeah, the insurance AND property tax increases were quite the 1-2 punch this year out in the metroplex! I was able to bundle a home and auto policy through AllState and the discount removed all the proposed increases. Do I need auto insurance in a state that's 3 borders to the east of mine? NO! But the basic auto policy actually made the grand total cheaper. I'd be happy to refer my insurance agent if you're interested.

Is anyone aware of any bulk home insurance policies available for a portfolio of 5, 10, or 20 properties? Do any agencies out there cut deals in bulk, or do all policies have to be written through the big carriers as one individual policy per property?

@Travis Rasmussen- I'm new to BP and ready for some beers and deals! It appears that the next meetup should be at Stone Escondido in late July? Is this correct? (maybe the info is on another thread?) Thanks!

Investment Info:

Small multi-family (2-4 units) buy & hold investment in Fort Worth.

Purchase price: $170,000
Cash invested: $60,000

I used the proceeds from the sale of a 448 sq ft studio I purchased in 2006 to buy two full duplexes- quite a trade up! My REA helped find this pocket listing before it went to the MLS and the transaction was very smooth. I LOVED the numbers on this duplex from the beginning, but the property is 33 years old and there have been a lot of updating expenses in the first year. CAP rate is close to 10 but without significant reserves I could have been in trouble.

What made you interested in investing in this type of deal?

Another multi-family; 2 units under one mortgage!

How did you find this deal and how did you negotiate it?

REA pocket listing. After inspection, I leveraged some of the results to bring the price down $3K and then closed. The appraisal came in $15K above purchase price; another win!

How did you finance this deal?

75/25 conventional loan for investment property. I used the proceeds of a 1031 for the down payment.

How did you add value to the deal?

I significantly updated one unit shortly after purchase and was able to get market rent. The other side still needs upgrading but has a great long term tenant so I've held off.

What was the outcome?

A lot of expenses in the first year but hopefully the worst is over and I'm setup for a good 10 year run with this rental.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

Trevor Dyck

Investment Info:

Small multi-family (2-4 units) buy & hold investment in Fort Worth.

Purchase price: $230,000
Cash invested: $75,000

I used the proceeds from the sale of a 448 sq ft studio I purchased in 2006 to buy two full duplexes- quite a trade up! My REA helped find this pocket listing before it went to the MLS and the transaction was very smooth. Though I wasn't very excited at first because the numbers and CAP weren't great, it has turned out to be a good buy and taught me a lot. It is a well built duplex and only 12 years old; capex will hopefully be low with no surprise big ticket expenses.

What made you interested in investing in this type of deal?

I wanted to buy my first multi; 2 rent checks for only one mortgage!

How did you find this deal and how did you negotiate it?

REA pocket listing. It was 'take it or leave it' and the numbers looked good so I pulled the trigger. The appraisal came in at $15K over purchase price which was reassuring.

How did you finance this deal?

75/25 Conventional loan for investment property. I used the proceeds of a 1031 for the down payment.

How did you add value to the deal?

Both units needed some upgrading to get top dollar rents so I put in granite counters and vinyl plank flooring as I plan to be in the deal long term and these upgrades will pay me back year after year.

What was the outcome?

Well performing duplex with great tenants and premium rents.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

Trevor Dyck