All Forum Posts by: Phillip Faries

Thanks @Gregory Scarcell I appreciate the feed back, i also read up on it last night and came to the same conclusion. 

Thanks again. 

Phillip Faries

Hey @Jason Luongo I totally get managing all of them yourself.

I would still urge you to put 10% for management, You might be in a situation where you can't PM yourself. You went from great numbers to "crap I might need to sell" Also, think 20 years from now, you don't want to continue to self manage when you're old and tired, you want to relax, and let other people do the work for you. The property eventually needs to work for you, not you for it.  

Regarding Vacancies, don't forget, they can lose their job, or get hurt/cant work, or they're a "professional renter" or they trashed the place and you need a month to fix it back up. Trust me, its always better on paper to keep expenses high and rents low/inline with market. This way you'll know worse case (if the numbers work, Great!) and best case with no issues you'll be banking like a boss!

Not 100% sure but creating an LLC and have the LLC buy the property might work, ill let the other chime in.

Another route is starting small and building up. Buy a 3 flat that needs work and house hack it, sell it or get a HELOC and get two 3-4 flats and do the same thing, then sell them and you'll have enough for the big down payment for a 8+ flat.

I listen to Grant and Rod Khleif and love the idea of getting a hug 25, 40, 100 unit building but I don't have the means or the connections, so im starting small and working my way up just like I said, buy them crappy and fix them up. 

Me personally - Year 1, 1 condo, year 2, 2 condos, year 3, a 3 plex, year 4 (2018) sell all the condos and buy a 6 plex, year 5, sell the 3 plex and buy a 6 plex and so fourth.... by year 7-8 i'll have my 20-40 unit building. (DO NOT BUY CONDOS, GET RIGHT INTO 2-4 FLATS) condos aren't bad but i would have been able to move much faster getting right into plex's

Kind Regards, 

Phillip Faries 

Hi @Jason Luongo I agree with @Joseph Salegna the expenses do look a bit light. Also dont forget to include:

• Vacancies as a just in case, 5% of gross, 
• Property Management if you don't want to deal with the property yourself for the next X years, 10% of gross
• Annual Maintenance, good to budget the small surprise stuff, say 3% of gross
• Reserves, big stuff that will need replacing down the road,  5% of gross (this is not your money, its the house money that you don't touch. Only after you save a number you feel will cover most big stuff is when you stop.)

It seems you have done your own research on the location and numbers which is great, always work off of your numbers, not the ones provided to you. 

Regarding the extra $125k, work on lowering the price with the seller, Friends, Family, seller financing, a few small 20k loans from other banks, getting a HELOC on your current house, doing a cash out refi on your current house are a few that come to mine.

Good Luck!

Phillip Faries

@Frank Manning

I feel your pain…. Just got shut down by my HOA last week.

I stood up in the HOA monthly meeting and spouted a speech about how the HOA is raising the dues and my taxes are going up and I'm having a hard time paying my mortgage (the mortgage one was a lie). The point is they didn't care…. I even went further and said without the Airbnb money I will have to go into foreclosure, which will affect the entire build. They told me to move out and rent it out, I again lied and said the rent will not cover the mortgage. They then suggest I sell my unit or get a roommate and then quickly moved on to another subject leaving me still standing up and awkwardly sitting down not able to say anything else on the matter....

Luckily I was just using Airbnb to get additional income while I looked for my next deal, the condo does cash flow very well as a regular rental which was the plan all along. But again, they didn’t care at all, even when I said I would go into foreclosure….. 

If i were to give myself advise from 3 years ago:

1) Don't wasted your first home purchased of 5% down on a Condo

2) Jump right into Multifamily, 3 flats and bigger

3) Using FHA loans ASAP vs 20% down conventional all the time

4) Don't be afraid to use others money

5) Go to more meet ups and build your contacts with like minded investors. 

6) Push to start a PM company (another revenue stream) 

7) Don't talk about investing to your corporate co-works! (it affected my increase and bonus)

8) Set goals and  establish a timeline

9) Separate you personal and Investment income! Its a business and you will over spend. 

10) Be overly aggressive and buy as much as you can. (2013-14 could have gotten 2 three flats for the price of 1 today.....)  

Just my 2 cents!

Phillip 

Definitely agree with @Jay Hinrichs  , getting a renter this close to winter or during winter sucks.... 

Not sure I want a 18 month lease (unless I have a good history with them) but I've done 13-14 month leases to push the end date closer to the May and June months. 

I have a nice little studio that I converted into a small one bedroom. Great location and building amendments but the building it self charges for everything that makes the building great.... use the pool, charge, Gym, charge, parking, charge, BBQ, charge and so on. its like an extra $200+ a month to fully use the building. As my rent is already above market level (still just a studio but rent is as 1 bed) but once people do the math its way way over market. 

I offer the first 3 months at $1,200 (market rent) and then the next 9 months at $1,300. That alone brings in lots of renters who love the building, i tell them about the building and all the up charging but due to the volume of people, 20% are fine and wont use them anyway. I use the discount to get people into the door and once in, i start working on them. 

Phillip Faries

This happened in my condo - Few months back i got a call from my tenant saying the HVAC was leaking and water was pouring into the lower unit and the unit below it.

I was out of the country and was doing my own PM.... had no handymen on call and my tenants didn’t know what to do.

Luckily my tenants boyfriend saw the problem and quickly fixed the leak and put a bowl under it just in case.

I’m freaking out.... "pouring into the 2 units below me" I don’t get back to Chicago till the next day....

I show up thinking this is going to blow past my high deductible and I’m going to get lawsuits....

I knocked on the 1st floor and ask to see the damage, they have no clue what I’m talking about... I knocked and the second floor, walked in a see a little tiny line of water damage like 6 inches long by 1/2 an inch wide. The guy looks at me and says "I hand to use a bucket, water was pouring out..." it was bone dry, I fix it in an hour and I’m on my way.

The next day I started building contacts just in case I’m out of the City/Country and something happens...

Hi Devinn,

"In your experience, is it common or possible for the guy that has no experience, no savings, bad credit, living paycheck to paycheck to complete a fix and flip?"

It’s not impossible but it is very hard. I like to have a safety fund for just in case.

You asked what cost can jump in the middle of a project.

Holding cost - contractor says it will take 2 months and ends up quitting or taking 2-5 months (with no savings or emergency funds you’re in a pinch)

Fix up cost - it’s all good until walls start coming down. One second electrical and plumbing are fine, the next it’s not and it cost an additional $10-$20k or it won’t pass inspection, i don’t see any mold, oh wait the old owner used drywall in the bathroom which needs to be replaced and mold in behind the walls and bedroom connecting to it is full of mold.... there are a lot of unforeseen problems that can happen. Make sure it’s all budgeted or you have some kind of contingency fund in place.

That’s just off the top of my head.

Most lenders want you to have some skin in the game so getting 100% financing unless you are using 2 or more loans from different institutions and putting that money together, you need to put some money down.

I’m not saying its imposable but try and put yourself if the lenders position. If you were a lender and had $200k of your money, would you loan it to someone with no experience, no savings, bad credit, living paycheck to paycheck?

Let’s work on that first before diving in head first, save 10k for a DP or closing, and build back your credit a little. Try and make yourself look great to a lender as that will also affect what interest rate you’ll have.

Just my 2 cents, hope it helps. msg me if you want to chat more.

Phillip Faries

Also if it helps, im already approved for the load and all paper work is done. (with the exception of the contraction now). I just need a contractor.... 

Thanks for any sugestions.

Phillip

Good Morning Bigger Pockets!

I'm in a pinch. I spent the last 3 months getting a 3 flat under contract using an FHA 203k loan, as well as doing a lot of problem solving and going back and forth with the HUD consultant, the Contractor and the Architect.

On Thursday I finally did it and got all 3 on the same page! (a lot harder than it sounds) The architects plans and contractors scope of work was finally aligned and both the HUD and contractor agreed to the bid price.

However, on Friday, the contractor called me and said he refused to do the job as the FHA paper work said no upfront starting cost would be paid, (this is a standard rule for the size of repair needed, $196k). No issues were mentioned until Friday and the contractor advised he has done quite a few FHA 203k loans.......

Long story short, does anyone in Chicago know of a FHA 203k contractor they can recommend in short notice?

With all the back and forth between the HUD consultant, the Contractor and the Architect I am a month behind schedule and the owner is considering killing the deal.

I’ve already got $5k into this deal and if I don’t find a new contractor ASAP ill lose the $5k and the 3 flat due to a contractor not reading a contract and canceling at the last second….

Look forward to hearing your recommendations!!

Phillip