All Forum Posts by: Ray Rivera

Just paying it forward sir.

Good luck and would love to learn how you progress in this process. Feel free to reach out if you need anything in the interim.

Great question!

First things to consider are: 1. What you in theory should set aside & 2. What's your gut say? Some individuals can have what in theory should make them comfortable, yet, they aren't. Others, have major guts yet are taking high risk (IMO). 

Personally, 6-12 months of reserves will suffice. I always have additional reserves on hand for my properties (currently only 5 doors). My rentals are usually acquired in conditions where they needed large ticket items and so I calculate a lower CapEx since I already addressed major items (plumbing, electrical, roof, windows, hvac, sewer line, hot water tank, etc.). The rest is maintenance and I don't expect anything substantial- and in the odd reason it comes up, I have warranties plus reserves.

As they say, best to have it and not need it then to need it and not have it. 

Hi Brandon,

I'm not a real estate wholesaler, however, I do have a contact in my market who is phenomenal and wholesales nationally. He also offers a program where one can learn to wholesale from A to Z. I personally know folks who partake in it and have done well. Here's his youtube channel and his name is Chris Jefferson- you'll be in good hands sir. 

Link: https://www.youtube.com/c/Chri...

Hey Preston,

First and foremost, congrats to you on making the decision to jump into real estate investing and, for doing it in a way where you will provide a roof above your head, and, build some cash flow & long term wealth. I will say, I wish I knew what I know now 10 years ago. . . .

With that said, here's what I would look out for if I was going to house hack utilizing a FHA 203k loan.

1. I would start with the end in mind. What's my goal? Acquire a roof above my head with minimal expenses? Am I looking to collect a certain amount? Am I looking to secure said property in said location for long term appreciation? These questions need some solid answers so you know what to look for and where to look for it, and, with what metrics.

2. I would then get myself familiar with do FHA 203k loan product. In my market (note: I am a licensed real estate agent in Richmond, Virginia) an FHA 203k product works in two ways. The first (streamline) doesn't require additional inspections because the rehab budget quoted by the GC (General Contractor) meets or is under the allowable threshold ($35k). The second one will require additional inspections from a 203k HUD Consultant since it surpasses the $35k rehab budget and/or has structural items.

3. Now, I would get acclimated with the local real estate market where you'll like to find said home. Learn what a duplex will run you. Additionally, look at tri-plexes & quads.

4. As you're doing #3, I would also familiarize myself with rental figures. What does a 1 bedroom rent for? What about 2 bedrooms? Is there a way to increase the rent? Any possible value ad's that people are paying top dollar for?

5. Once you know what #4 is, you will know what the ideal property looks like. Now it's time to jump into an aggressive search.

6. Once you identify said property, call your go to General Contractor. If you don't have one, ask your agent for one. If you don't have an agent, ask here on Bigger Pockets and/or tap into any good resources you have. Finding a good GC is hard but something that is absolutely detrimental to your success in investments.Your GC will and should provide you figures on what it'll cost to rehab this property. Be aware, material cost can be fixed, labor not so much. Therefore, call 10 GC's and you'll get 10 different prices on the same job. You never want to hire the cheapest as the cheapest inevitably becomes the most expensive (learn from my mistake on this one please). Last point here, accept that at first you'll be slow to act/learn. So you won't be able to calculate the figures so quickly, but you want to get out there and practice to build the speed. You also want to be open with your GC that you won't "jump" on just anything, but when you do, he will be guaranteed to get a call from you for his troubles. 

7. Now sir, it's all just a numbers game. Find the properties, get rehab estimates, talk it over with your lender to get you accurate figures on the loan (ask for a fee sheet) and what that will look like for you once you move in (PITI). With those numbers and your research on rentals, you will quickly know whether it's a good deal or not.

8. If buying for appreciation you will need to learn how to pull comps accurately. Starting out, your real estate agent should be able to help you with that. It's called the ARV (After Repair Value).

Good luck on the house hack sir and hope you a very successful venture &, new home!

Note: The GC will be required to be licensed and insured. Additionally, they also have to be approved by your mortgage lender. So if he/she has never done a 203k loan renovation, they want to get on that ASAP. A good lender should be able to assist your GC in getting that squared away.

Hi Aidan,

Full disclaimer- I am not a tax advisor nor an attorney. With that out of the way, I personally acquire my properties in an LLC. Others may purchase them under a Trust (another conversation).

The LLC provides you a layer of protection and therefore some mitigated liability. You can acquire several properties under one LLC, or open individual LLC's for each property. It all depends on your risk tolerance and personal preference. 

As you stated, acquiring a property in an LLC does require some extra leg work. You may need to utilize a HML (Hard Money Lender) or PML (Private Mine Lender) to fix said property. You can also find lenders who will loan to your LLC but as a Commercial Lender. This does mean you will have a Commercial Loan and therefore it will be with higher interest and a whole different set of requirement. Do be aware that every lender may vary slightly (or drastically) on what they require. Some lenders will do a 80% LTV while others only 70%. Some will offer a 6% interest while others will hover close to 7% or 8%. These terms can and will vary based on experience, credit score, liquidity/reserves and of course, the deal/numbers.

In short, I have and will continue to acquire all my properties under an LLC. Although I like to think I do things right for the tenant/end buyer (fix & flips)- I don't care to take on more risk than necessary.

Note: Starting an LLC is not difficult. For my first time I hired an attorney, paid the several hundreds of dollars and learned how to correctly have a legitimate business that's recognized by our state SCC (State Corporate Commission). From there, I've opened several ones on my end following the same practices.

Good luck!