All Forum Posts by: Patrick Menefee

@Casey Roman just went back and realized this is almost the same as what @Joseph Cacciapaglia explained! Oops

You asked about if you can get started with just $100k...the short answer is absolutely. The long answer depends on your goals, what you want to invest in, where you want to invest, who you're investing with, etc. If you're partnering/lending on single family or small multifamily properties, it's absolutely enough. You may be able to work together with someone to provide most or all of the down payment, fund a rehab, or provide some other type of partnership and/or short term money

As far as resources go, I can't recommend books that directly speak to your side, but I can provide personal case studies from my own partnerships with private lenders/money partners and I can also highly recommend the book "Raising Private Capital" by Matt Faircloth. This is written for the investor looking for capital, but allows you to get a look at what the investor/potential partner is looking for and thinking about.

@Casey Roman it seems you have a couple of great options, especially being in North Carolina. My properties are currently within an hour of where I live in Charlotte, but I also have another couple properties under contract in Fayetteville. There is plenty of opportunity throughout the state if you're willing to extend past Wilmington in one of a few ways

1. As others have mentioned, you could serve as a private lender. You and the investor agree on the terms of the loan and any collateral, and then you have an attorney draw up the promissory note

2. Another option is to partner with someone already doing the work and investing as an equity partner. You come to the table with cash, they come to table with the deal and all of the work required to tackle and maintain the deal, and you work out a split where you have an ownership stake. Again, this can be drawn up via a contract that is vetted by an attorney

Hope that helps!

My first property was a fourplex in Gastonia, North Carolina (just west of Charlotte). It was fully occupied but underperforming, and after sitting on the market for a few months I got the seller to come down from $210k to $160k.

How did it go? Truthfully it was a pain in the @$$ and I'm so thankful for it. The contract and closing process ran into problem after problem and was delayed 6 weeks; I had a cheap property manager who was nearly as bad as having to manage myself; I had to evict 3 tenants, one of which my said property manager lost; and my rehab has been headache after headache, to include having a city inspector involved

The rehab is still in progress (hopefully to be complete in the next few weeks), and since purchasing this property I've closed on and stabilized another 8 units. But through this process I've learned so much about every aspect of investing, from due diligence to managing property managers to handling a rehab, and the best part is despite all the problems I'll still cash flow wonderfully!

I go into a lot more depth of the headaches related to the acquisition in my Deal Diary post, but it's been a great learning experience!

@Thomas Houpt agree with your assessment on thinking it may not be the way to go right now due to the hurdles you face. As you get further along and have other assets to protect, or have properties where you are involved with a partner, then it's probably worth getting into. In the beginning, probably not necessary

@Jason Bott is that nationwide or more specific to Milwaukee area? I'm playing with the deductible on a new property now but now want to re-evaluate some of my previous policies...

@Kasey Libby congrats!  As a lawyer I'm sure you're extremely busy, so your time commitment and desired level of involvement should drive your decision. I'd recommend considering 3 factors:

1. Type of property - with $250k you could get into a lot of SFH, but small to mid-sized multifamily may be a better way to leverage your time
2. Level of involvement - are you looking to get hands on and swing some hammers? Or keep your hands off and just generate income by investing alongside someone?
3. Structure - similar to #2, are you looking to take one down yourself? Invest passively alongside an experienced investor so you can learn and take the next on your own? Be truly passive and invest as a limited partner in a syndication?

Hope that helps provide some perspective, let me know if there's any way i can help!

@Robert English can you tag me in the other one and I’ll take a look? Even if you go in with a partner, and have outside funding for the entire deal, i would make sure you have some reserves of your own. If this Covid crisis has shown one thing it’s that you need to be prepared for the worst...so while I’m all about strategies to get into a property with little of your own money, i only do so knowing that i have reserves in place should S hit the fan and revenue stops coming in

Yes. $20k is very easy to come up with...go with private money, borrow some money from your parents, get a line of credit with a bank, etc., and then pay it back when you refinance. How are you planning to fund the rehab? And how much do you have saved in reserves that won't be touched for the expenses provided?

@Jeff Alwine I can see that logic. Personally, I have a property manager on everything I own and have no intention of self managing. I say that so you can recognize that I am giving a biased perspective :) **also, this wound up a little longer than expected so sorry in advance...hopefully it was helpful!**

There are a million factors to consider in whether or not to self manage, and I can't begin to get into all of them. Your personal life, work life, time availability, etc. are all important factors that I'm not going to get into. What I will talk about though is the perspective of real estate

What is your long term goal you're moving towards by owning a rental? Are you (1) looking to start a property management company, and therefore want to understand the ins and outs of management? Are you (2) looking for a little supplemental income and don't mind the time you spend managing? Are you (3) looking to use real estate as a way to provide enough income to allow you to leave your job? This is not an exhaustive list btw...

It's important to understand your goals first, and then weigh the options. Additionally, it's important to analyze your ROI on everything. Property management has the potential to run the gamut from easy (with amazing tenants) to a complete nightmare (with horrible tenants), and that spectrum of difficulty often ties directly to time. What is the opportunity cost of your time, and what is the highest and best use of that given your above goals?

If your goal is to eventually run a successful property management company, is it better to struggle through it yourself at the beginning when your'e learning both rentals and property management? Or is it better to pay 8-10% of rent and then learn from what they do and don't do? If your goal is supplemental income, can you afford to handle a couple month delay in leasing as you figure out how to place your first tenant or evict the one you put in too quickly? 

If your goal is to develop a portfolio that replaces your income, what is the opportunity cost of your time? Is it worth paying 10% of rent to free up the time you would spend on tenants, or is it worth it to save that 10%/mo and put it into your next rental?

There is no right answer to all of these, they're just to get you thinking. Too often I feel like people talk about self-management off the bat to save a buck when instead they could just find a better deal. Consider all the factors and what your goal is, and then figure out what best aligns to your goals. Take the cost into consideration as well, and value your time. Is your rent $500/mo? Or is it $2,000/mo? Saving $50/mo is very different than saving $200/mo, especially because the lower cost tenant will often require more attention and time

Hope that helps! Happy to chat more if I can provide additional insight (and sorry that was so dang long!)

@Robert English Yes, you should get in touch with a lender to get a pre-approval, understand their requirements, make sure you can get a mortgage, and figure out what their minimums are. You won't get a conventional mortgage on a $20k house, you'd need to get short term funding. Even $50k will be cutting it close, so you'll need to check with them

The way that banks work is that you get a pre-approval to know what you qualify for, then you get under contract for a property. Once you're under contract, you lock in the funding