All Forum Posts by: Robert Rixer

Agreed with most of the above comments. I'll add it likely will make very little difference to the overall appraisal price given it's a 10-unit.

If you've lived there a year or more, it would satisfy the occupancy clause on most standard loans and you're good to do what you're proposing minus all the LLC shenanigans. You can actually move before the year mark if you have a legitimate life event that caused you to move out. It would definitely raise red flags if you did this multiple times.

Making broad assertions here, but unless you're paying in cash, you're unlikely going to find a property in SoCal that will "pay for itself" let alone also have a living space you can use. Pricing over there seems to be more speculative on what it could be worth 15-20 years from now rather than tied to the fundamentals of cashflow.

Also if you start in Inglewood, 2 hours in LA traffic doesn't get you very far haha

I'm not a lender but FHA is typically if you have poor/average credit and want to buy a minimum 3.5% down. You can get a conventional Fannie Mae loan for 5% down with far less scrutiny and fees.

If I could do it all over again, I would invent a time machine, go back to the age of 21 and start buying buildings then.

A mistake I often see with these kinds of structures is it works when the deal goes as planned but when things go badly, those scenarios aren't taken into account. What happens if he mismanages it and you end up losing money - do you split losses 50/50 or do you get your capital returned 67/33? 

A better arrangement would be, paying him an acquisition fee, a property management fee and then splitting profits pari-pasu to your capital contributions. Or if you want to get to 50/50, he could pay his acquisition and pm fee to you until he hits 50% contribution.

Many ways to slice and dice it but the key is to keep incentives aligned whether the deal goes up down or sideways.

Others have answered this question well - I will add don't believe a lender when they say "no one will approve you for this". I've been told this so many times by various lenders over the years only to go to another lender and them tell me, yeah no problem. Not saying this will be true in your case, but always question the status quo!

Fair points - I am saying percent value.

And sure thing on including Nashville on Nashville and Raleigh. I'm not married to the list, I was more trying to prevent people saying small towns like Fayetteville, NC or Huntsville, AL. Actually surprised Nashville isn't on that list.

CapEx is not included in NOI because it makes the property more valuable which lowers cap rate. If you have an old leaky roof, patching it (maintenance, include in NOI) does not improve the value at all. On the other hand, spending $30k to replace it with a brand new roof, in theory, makes the property $30k more valuable than the same place with the old leaky roof. Therefore its considered more of an asset and not an expense.

Getting a partner is your only option. No bank would finance that much for a first timer who doesn't know what they're doing. I'm of course assuming you don't have $7.5M cash and need a loan..