All Forum Posts by: Paul Shannon

Have you tried raising private money or finding a seller who will do seller-financing?  

Lots of retirees have nowhere to make income on their investments with interest rates at Zero.  If you could structure a deal to give them a 5% return and you still make money, with trust, they would jump.  

With seller financing you may pay a higher interest rate (8-10%), but in many cases you wouldn't have to bring as much to the table at closing, so there's that for upside.  

Just need to get creative. 

There's good debt and bad debt.  Good debt uses conservative leverage to enhance returns that you otherwise wouldn't have access to with cash alone (Investment real estate).  Bad debt is a liability that doesn't provide any income to offset it, and bills keep coming no matter the situation (auto loans, student loans, credit cards).  

Personal finance is personal, so how much debt to carry is a personal preference based on circumstance and risk tolerance.  How do you sleep at night?  I hate bad debt and avoid it if possible because is is anti-wealth building.  Sleep better knowing that I don't owe money to bad debt when the sky is falling (like now! #Covid-19).   

Congratulations on the book....my copy should be arriving shortly!  If anything, real estate only looks more attractive in the long-term, particularly mutli-family. The Fed has cut interest rates to zero and may have to go negative. The old 60/40 stock/bond asset allocation model is out the window with bond values having nowhere to go but down and paying little to no interest. How does a retiree derive income from their portfolio?  Real estate offers stability and income, without the swings of the stock market, helping balance a portfolio. Cap rates could continue to get compressed after this little hiccup as more first time investors jump in the game.

In the next 6 months or so, we will see who's been swimming naked when the tide goes out.  This will create a buying opportunity that we haven't seen since the great recession's early recovery years.  

I believe in the short-term this situation has somewhat frozen markets. Buyers are concerned about deploying capital and if they do, they think they should be getting a deal. Sellers think they should get top dollar because we've been in a sellers market for some time now and COVID's affect on markets is still up in the air.

The link included from the St. Louis Federal Reserve is a good summarization of demographics and population trends in Vanderburgh County/Evansville.  

https://www.stlouisfed.org/pub...
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 You'd be into C class properties with rents of $450ish for 1/1s (tenant paid utilities) or $600 for landlord paid utilities.  Budget for a higher than average expense ratios in your pro forma numbers. 

Tigran, 

I would agree with the others who've already commented that Evansville is a great market for rentals.  Its one of two markets I'm investing in currently.  The stagnant population was a concern of mine prior to investing and still is in the back of my mind somewhat.  However, the community was very dependent on the manufacturing sector for jobs.  As technology and automation have replaced many of those jobs, Evansville has remained relevant by shifting its economy more into healthcare and education.  There are a number of revitalization projects underway downtown and I'm hopeful that the long-term prospects are bright.  In the meantime, you can enjoy 2% rule deals.  

I'd recommend getting very familiar with the map of the city and the property values.  Its very street by street.  You can literally drive 2 blocks and the landscape will change from owner-occupied properties with clear pride in ownership, to run down C class rentals.  Be cautious when pulling comps.  I personally like foreclosures, auctions, vacants, etc., where I can add value through rehab (with the idea of BRRRRing) to mitigate some of the risk of buying high.  Just an FYI, there are a few older investors who are selling a lot of their properties to simplify their portfolios.  Some deals, but be careful of paying for what looks like turnkey, but actually has a lot of deferred Cap-Ex.    

Investment Info:

Single-family residence buy & hold investment in Mooresville.

Purchase price: $55,000
Cash invested: $85,000

Purchased through online auction for $55K. ~$30K rehab cost for all-in $85K. ARV of $130K, rented for $1,200 a month through April of 2020.

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

This deal was purchased through an online auction.

How did you finance this deal?

Paid cash through a HELOC. Will eventually refinance through a portfolio lender with other properties.

How did you add value to the deal?

Total rehab.

Lessons learned? Challenges?

This was rehab was a great lesson in managing contractors. Ultimately, buying right made this a great investment to add to my portfolio. I went over on my budget by about $5,000 due mostly to mismanagement of labor and being taken advantage of to some degree. My next deal spells out specific expectations as to project duration/scope of work, payment schedule, and deadlines. I was too lenient with my contractor on this deal and it cost me!

Hey All, 

Glad to be a part of this community.  I'm new to Bigger Pockets and Indianapolis, but not new to RE.  I've been a part of a number of buy/hold deals but got out of real estate after relocating to Indianapolis and starting a family.  I've missed it since and am looking to re-engage.  

Looking forward to getting to know people, the trill of the chase, and as always, learning.  

Paul