All Forum Posts by: Ramsey Blankenship

 I have to disagree with everything you say. I am not sure anyone who works out considers it a luxury, yet a priority. I dont see the point in making tons of money if you are not fit/healthy/energetic enough to enjoy your time spending it. I am not talking about being a gym rat or a health nerd - however staying physically active is by no means a luxury.   This is not a mens health forum so I will move on. 

I am not a full time investor or landlord, so I may be off when stating this, but isnt the entire point of being a REI to have the freedom to chose your schedule instead of a boss telling you when/where to be?

I have a 9:00 to (Whenever the work is done) and luckily the military gives us Physical training hours to work out, however I dont think its super easy to plan a routine with someone else determining you work load. 

Ramsey

@Derrick E. I have two little ones as well. I work a full time Job in the Navy and also run a baseball tournament business with partners on the side. REI is third fiddle however it is my passion. I get up at 4:00 because it is the only time in the house that I can be alone and truly productive. There is no doubt that waking up earlier than the rest of the household is beneficial, I am simply trying to make it as efficient as possible.

I do actually follow the routine for the most part, however I am not getting crazy and setting timers. When I check stuff out on BP, I read and post until I feel I have learned or helped. I work out however not religiously like i used to. 

I think there is benefit to a routine for sure.

@Hurricane Hamilton I myself have been in the military for 12 years and believe me, the younger soldiers do NOT want to live on base. The younger soldiers are typically provided barracks on base and do not receive housing - this is why most/all of them stay on base unless they are married. Soldiers above the pay grade of E-5 receive housing and would be a good, working tenant class to rent to - however they get paid a decent amount and can certainly afford somewhere well above $325 p/month. If you were to target a military audience, the units need to be clean and in good working order. 

Ramsey

I have heard nearly all successful people such as Tony Robbins, Grant Cardon, Timothy Ferris etc. describe their morning routine. Most of them do something along the lines of "Mind, Body, and Spirit" so I wrote down a routine for myself. I am interested in what your routine is and why it helps with your success.

4:00 - wake up

4:15 - coffee made

4:30 - read and post in bigger pockets for 30 minutes

5:00 - Conduct market research for 30 minutes

5:30 - Check personal emails

6:00 - Hygiene

6:15 - leave for the gym (listening to BP Podcast along the way)

7:00 - workout for 1 hour

8:00 - Shower

8:30 - relax for 30 minutes before starting the day job (Navy)

9:00 - begin work.

What really ended up happening on the first day:

4:00 -  hit snooze

4:09 - hit snooze again

4:18 - awake and lie to myself for 5 hours

9:00 - start work with less sleep and in no better shape than I did the day before.

I obviously plan to make this much better and to actually follow the routine. I am interested in what other people are doing and why? 

Speaking from experience, and depending on what the interior looks like, you may run into issues renting the studios without including utilities if you are renting to a lower class tenant. I am unsure if there is a college or some primary driver that would warrant a younger, single tenant who is a professional person however just getting started. If this is the case then you may be fine. However if the tenant class is people who are forced to stay in $325 p/month units because that is all they will ever be able to afford - these people have trouble having utilities turned on in their name. If you are renting to people with bad credit and very little savings, the utility department requires a down payment to turn on services. This is a deterrent for this class of tenant when finding a place to live. 

I dont recommend keeping any apartment in this class of tenant, however that is more so determined by the area this complex is located.  

At those numbers, however, the return is great - however just like anything else in real estate,  returns and headaches are directly proportionate. 

Depositing in the the local branch makes for immediate cash availability however it is not immediate if the tenants pay late (obviously). I use local branch deposits for my tenants and it works ok, however I give my tenants until the 3rd of the month to pay because sometimes the first falls on a weekend. After the third, it is an immediate $25 late fee + $5.00 per day until the 10th. At the 10th, they receive a 3 day notice.

@Kevin Scott seems like you are having a hard time getting the answer to your questions. Let me answer a few from this thread:

1.) Just so I have this straight, is borrowing about 10K from an HML to get me over the hump, then using my own funds for the rest of the dp and the rehab a normal approach?

A.) You can not take out a loan to pay a down payment. That being said, you have options. 

- If the property is 4 units or less, it is considered "Residential" meaning you will be receiving a loan from the same side of the bank you would borrow for a Single family house for you to live in. When buying residential property, the value of the property is based on land and structure (i.e location and square foot) and the appraisers professional opinion of the properties worth based on local comps.

- If the property is 5 or more units, it is considered "commercial" real estate. This will mean you loan comes from a different side of the bank where businesses go to receive a loan. The value of a commercial property is appraised differently.  The commercial lenders look at the property as a functioning business. As in any business, what it is worth depends on the income it produces. The commercial side uses a different formula.  They will take the Net Operating Income of the property (NOI) and divide it by the local market Cap Rate (something you have no control of, Cap rate is essentially the ROI the local market is willing to buy property at) and this will give the lenders a general idea of what the property is worth. An appraiser will still assess the property and make adjustments based on location, age, amenities, and comps to polish off the final value of the asset.

Formula for assessing commercial (NOI/Cap rate = Value) or (Asking price/NOI = Cap Rate)

Now, I say all of that to help you determine your ARV. If you put money into a residential property, it will directly effect your ARV if you make improvements that match the local demographic. If you put granite countertops in an apartment complex in a war zone, you will be throwing money away. The reason is effects it, is because the appraiser will look at the Structure of the property and assess that it is in good condition therefor you value per square foot will increase.

If you put money into a commercial property, you value is determined by the income. This means that with a nicer property, your rents can be increased. Increased rents will show a higher NOI which will then be divided by the cap rate and will show a greater value.

This leads me into question #2

2.) I will do some more research on the BRRRR strategy. I really need to try to figure out how one gets their money back with the refinance if the new appraisal value does not exceed the old appraisal value.

A.) You will not get your money back if your ARV does not exceed your pre-repair value. A bank will lend you 80% of the "cost" when making a purchase, and 80% of the "value" when refinancing. Cost is determined on your negotiation for the contract, and value is determined by the property and market it is in.  If you put money into the property to make it better, it will appraise higher unless you make bad decisions such as removing bathrooms and bedrooms, or changing the roof line for no reason.  If you do a generally smart renovation such as updating kitchens and baths, paint, flooring, and fixtures - you will see an increase in value or rentability unless your market tanks simultaneously. 

That being said, in order to receive ALL of your money back at the refinance, you need to increase the value of the property by $1.25 for every $1.00 you spend unless you enter the deal with substantial equity. The reason for this is because in the end, you are only going to receive 80% of the value from the bank. If you make a $1000 repair, and it increases your value by $1000, the bank will lend you back $800. Just keep this in mind.

Lastly: 

3.) Does the bank actually pay out money during the refinance?

A.) Yes, absolutely. They will give you 80% of the value of the property. If your current equity is anything above 80% of the current value of the property, you may receive this in cash. Your mortgage will increase, and you will be paying interest on the money you pull out, so only pull the money out if you need it for an emergency, or an investment. Interest rates are currently low, so borrowing from your equity is an extremely smart decision because this money CAN be used as a down payment on another loan. 

Hope all of this helps you. If you have any other questions - feel free to reach out.

Ramsey

@Kevin Scott, here is a post I wrote to explain my BRRRR. Hope this helps.

https://www.biggerpockets.com/forums/223/topics/478691-brrrr-in-panama-city-multi-family-huge-success 

@Maxwell Lee thanks! 

I am renting as well. I dont like renting but I dont like the idea of buying in an overpriced market even more.

 What cities are you researching and why?