All Forum Posts by: Tom De Moya

@JD Martin

I'm 32, pretty good job. Wife has it solid too. I'm weary of rocking the boat and leaving my 3 investment properties to property managers. Also no plans for kids. So not geographically limited exactly but the quality of life is pretty high here if you are ok with the cold. 

Perhaps thats one thing I want to stay away from. We work 9-5 and I want to direct my fixer up energy to investment properties and less so personal homes. There is a new development I'm looking at. Lot I'm considering is pegged at the intro price but I already see the next properties higher on the hill going for $40k more by next summer. How does BP feel about new developments?

My wife and I took a chance in 2013 in buying a duplex as our first home in a not so good neighborhood in Vermont that has appreciated well. We fixed up our side quite a bit and dealt with evictions on the other side. It’s been stable now but we feel that we have out grown the duplex. The layout isn’t great and the neighborhood still has its quirks (drug dealing, theft, airliners flying right overhead). Since then, we borrowed against our equity to buy other another property eventually paying back our loans. This past summer we did a big rehab on a duplex that took a lot out of us emotionally. We have some money in our Heloc to either buy another investment property or just buy ourselves a house that does not need massive work, good neighborhood and is energy efficient. Price is around $400k for something decent right now locally. Taxes would be about $9k. 

My issue is if we stop and move into a single family, our ability to continue to build our real estate portfolio essentially disappears. It would be a few years until we have enough of a down payment for another investment. My dream is to eventually stop working full time and retire us on the portfolio. My question for BP is, at what point do you reward yourself and put RE aspirations aside?

Concerns:

• Adding 5 years to our life goals.
• Rising Interest Rates.
• Less upside in a single family these days.
• Pulling back considerably on a comfortable lifestyle to make big mortgage payments.

Thanks in advance, BP. 

@Jaysen Medhurst

You mentioned not being crazy about the terms. The rates and or closing costs? 

Hello Folks, 

I am finishing up my first BRRR and have a couple of options. I took out a Heloc on my home to finance the purchase (traditional mortgage) and rehab costs of my first BRRR. The place is looking great and rented for the $$ I wanted. Would you do a refi at 15 years 5% rate at 80% LTV, 30 year at 5.75% 70%LTV, or a Heloc against this investment?

I'm shying away from the Heloc as it feels like I'd have too many balls up in the air. A refi feels final where I know my fixed costs moving forward but closing is $3k. WWBPD? 

Thank you for all your replies. 
@Tyler Kastelberg what is the strategy with the interest only loan that I saw @Chris Martin also post about. Is it to use the cash flow from those first 5 years to fund capex improvements and hope it appreciates enough to sell within 5 years or refi? 

@John Leavelle

I'm excluding PM because I plan to do the all work myself. I am local and I prefer hands on management. Cap rates on this deal are a good 50% higher than normal for the area hence my excitement. My initial plan was not make any major capex moves unless needed. There is some room for increasing rents which I have detailed in my shared gdoc. My end goal is to have enough cash flow to step away from the main 9-5 within 5 years so i was thinking adding 20 units to the portfolio can add the velocity I want. 

@Ryan Murdock thanks for the input. I have upped my vacancy requirements to 1 month of rent for all properties. 

Assuming these suggested changes, my analysis starts to change. If this was structured as a 30 year, 25% loan, I'd jump on it with 100% confidence. My next step is to understand the terms the seller is wiling to agree on. Even considering a 10 year, 100% financed packaged, I don't see it working towards my cash flow heavy goals. Am I wrong? Any other ideas? 

Please feel free to view and comment on my analysis below. 

https://docs.google.com/spreadsheets/d/1qUfF8CfOwSE-8zIDo316xazK3joIVdzt4wk-Q1V6Ph0/edit?usp=sharing

Perhaps it isnt wild and I'm still too new. This would be my 4th deal after 3 duplexes. Came across local landlord who has 4 properties for a total of 18 units. 3 6-unit buildings and a duplex. Wants to sell them all as a package. Properties are in a solidly C-Class neighborhood and in C class condition. Not falling apart terrible but not a meticulous landlord or up to my standards. 

Bundling them into 1 deal, this is my math. 

$193k in yearly income. 

$54k for taxes, insurance, utilities. 

$15k for maintenance, (8%) of total income. 

$10k for 5% vacancy. 

$114k NOI.

Asking Price = $700k. 

16.2% Cap rate after expenses with self management. 

3.63 GRM.

Landlord is willing to hold paper. I am running through 2 BRRRs so most of my money is tied up which is why selling financing is key here. My questions: 

How would you approach this? The cap rates are very high compared to so many deals I see here. 

Because the deal is spread across 4 properties, do you see too much risk? 

How would you approach the seller's terms? I am thinking to attempt to get the longest term under reasonable rates to maximize cash flow. 

Thanks for the vote of confidence @Rob Cook. 

@Nathan Gesner What do you think of my first question? Assuming ratios all match comps, do you think it would be straight forward to earning an ARV high enough to pull out my downpayment on something close to turnkey?

I think as long as the finances of each property hold up well, I see little downside in having generous appraisals by banks. The question is if these will come in or not. 

Bumping this thread up. Thanks in advance team. 

Current landlord of two properties (total 3 units) and living in one unit. Getting ready for BRRRR. When running numbers, I am having trouble appraising multi-units and understanding an appraisers strategy when looking at a multi-units here in northern Vermont. I have mapped out GRM, cost per unit, cost per sqft, and cost per bed for many properties in two markets I am looking to invest. How can I make sure the appraiser reaches my goal ARV?

I am seeing some turnkey properties with great cashflow listed at prices where the GRM and fellow ratios are below market. Could I pick these up, let them "season" and reappraise later on for a higher appraisal ( while matching comps) with minimal work?

Is it me or is the appraisal process a black hole of confusion? My friend had a duplex appraised for a divorce last year and it came in at $300k. 7 months later he did it again for a HELOC and it crossed $330k. 10% in a few months with no improvements? Seems like the appraiser played nice with the bank trying to hit the HELOC number he wanted. Is this normal?

And last question, how does an appraiser find comps in small rural towns where multi-units sales are far and few between? Where I'm looking the next  solid "group" of recent comps is about 19 miles away. Would the appraiser compare to these because it is in the same market?