All Forum Posts by: Reese Thompson

Nothing, it's what my deals have been. It's not as hard as it seems and people come out of the woodwork with money. I've learned of a different unique niche though that I think will be more profitable and is more suited to my interests.

I might add that a little extra caution should be added for throwing out $25k at a multi-family. If you max out your LTV with the entirety of your savings for the down payment, you won't have any extra for any possible repairs/maintenance that may pop up unexpectedly.

Not sure if you've heard any of the podcasts yet, but that might be a good place to learn more.  If you're wanting to lead projects instead of develop them, you might be interested in this one in particular.

https://www.biggerpockets.com/renewsblog/2016/03/31/bp-podcast-168building-hundreds-homes-sell-rent-cameron-skinner/

@Ben Naughton

I was speaking with a lender a couple days ago about some loan opportunities.  He mentioned that a HomeStyle Renovation loan is similar to a 203k without the live-in requirement.  Here's the link to his website that explains it a bit more.  Not sure if this is suited to your situation, so hopefully it helps!

http://www.amerifirst.com/homestyle-renovation

Seems like Hugh has the word on this particular property.

You should keep in mind while looking at other properties that while many people may scream that's a low cap rate, you don't know how they arrived at their NOI. It could be the case that they're hiding a lot of write-offs in their NOI that drives it lower than it actually is. Many do this because they're used to reducing their taxable income, but they don't pull back out the paper expenses when determining cash flow. Talk to the owner and get some real numbers and do an analysis based on that. If a property looks appealing to you, never make a yes or no decision based on advertised cap rate whether it's high or low.

I think you'd be surprised at the quality of a place you can find for $100k.  Of course there are exceptions.

To expand on Matt's point about rentability, if you have a more expensive home that is harder to rent, your vacancy rate will be higher.  Also, spreading out your investment over 5 homes won't hurt as bad when you have a vacant unit compared to only have one very expensive home with a vacant unit.  It's the difference between losing 20% of your income and 100%.  Even only 50% would be better than 100%.  (I'm sure you know this, I'm just saying for sake of discussion.)  It'll probably take longer to get to the point of having 5 units though.

Whatever market you decide to get into, it'll be important to have some boots on the ground.  I think BP will be a good opportunity to help you find someone.

@Peter Padalino

Congratulations!  All it takes is getting started.

It seems that money starts to magically flow once you get started.  You find money in places you wouldn't have thought possible.  Banks like you more and want to lend, and when you are talking about how excited you are about real estate, people want to invest privately as well.  Just always be on the lookout for new ways to obtain financing, and eventually money will become less of an issue (though still very important!).

Is the seller interested in financing it themselves to you?  Just a thought.

I have HUD tenant that has been great. Aside from the guaranteed payment, this tenant has treated the property very well and watches over the complex like a hawk. I know that's a diamond in the rough, but it is possible. This tenant was inherited, so I don't know what the prior landlord did to screen this tenant.

@Tony Sessa

I'm actually using it for repairs/upgrades on the property.  I didn't explicitly use it for the down payment because I went a little more creative for basically no money down (I still am making these repairs, so I'm putting money in).  But I created a win-win-win-win situation that let me do it that way and this is the wrong post to get into that.

However, in your situation, once you get the HELOC on your personal residence, you can use that money just like a checking account. Some places actually even have checks. But no matter where you use the down payment money from, any bank is going to want to know where you got the money, so just be sure to be honest and disclose that info to them. The HELOC does tend to be higher interest, and it's a variable rate loan. So even if you get a low rate now, it will most definitely go up at some point, so you need to calculate your cash flows based on worst case scenario. That worst case scenario is the max interest rate that you can pay and should be spelled out in your HELOC agreement. I would suggest being careful with getting as low of a down payment as you can find if you're using this method. Your overall payment is lower based on interest, but still check the difference in your cash flows because you may have to factor in PMI. For example, I'm looking at a deal right now where if I pay a bank loan at 4% and finance the down payment at 6%, the difference between putting 20% down and 15% down is only like $1/month in cash flow, but the PMI on the 15% down loan would cut into cash flows significantly. It could cut a $100 cash flow in half or less pretty easily.