All Forum Posts by: Robert Leonard

@Xavier Martin Welcome to BP! 

Unfortunately, it likely will take some capital to get a deal done. Keep going through your network, attend networking events, real estate meetup groups, etc. Hopefully, you can find someone to split the down payment with, or to fund the down payment completely.

An alternative solution is that you could potentially find a hard money lender to fund the deal, but that will likely be difficult with no experience, even if its a homerun deal.

Robert Leonard

@Veronica Duran Welcome to BP!

It depends what your strategy is, but I personally would not buy this property at $148k. My analysis shows that it will NOT cash flow, and therefore have a negative cash-on-cash ROI. The IRR is low, and the cap rate is below my threshold (although cap rates aren't generally used for non-commercial properties, it is still an interesting metric to consider). Also, I definitely would not want to have my capital/cash stuck in this deal. It likely won't be able to be refinanced and have the cash taken back out, so your capital would be stuck in the property.

The property would have to be purchased closer to $50k for me to be interested in it, based on the numbers you've provided.

A screenshot of my analysis is below:

I'm happy to answer any questions you have - I can also send you my spreadsheet/analysis if you'd like, just send me a PM. Hope this helps!

Robert Leonard 

@Karla Barbacena Congrats on starting your journey into real estate investing!

That question is very loaded and complicated. Everyone's situation is different, and the truth is, it depends.

If you're looking at more than 4-unit properties, you will most likely have to have a legal entity to get financing (LLC, corporation, etc.). However, if you have 4 or less units, you may be able to keep it in your personal name. It varies from lender to lender. Some won't lend on a residential property (less than 4-units) with a conventional residential loan product, while others will.

If you do decide to keep the properties in your personal name, I would highly recommend getting sufficient (and likely even more-than-sufficient) liability insurance. I would get insurance to essentially replicate the liability protections of a legal entity, like an LLC. In regards to tax benefits, I would recommend talking to a quality CPA in your area.

Robert Leonard

@Brent Shaffer Congrats on starting your journey into real estate investing, and welcome to BP!

It's nearly impossible for someone else to tell you which strategy you should follow. It truly is up to the investor (you). 

Many, many people like fix-and-flip, others like large apartment buildings, while I personally prefer smaller buy-and-hold multifamily rentals. 

I'd recommend picking up the  How to Invest In Real Estate book that BP just released. It discussed many different strategies and might help you decide what is best for you. 

That being said, I would start by finding a trust-worthy and investor-friendly real estate agent. They will be invaluable to your team (granted you find a great one), regardless of which strategy you go (maybe not so much with turnkey, but all else). 

Hope this helps.

Robert Leonard

@Tyler Erickson If millennials aren't buying homes, they must be renting, as they have to live somewhere. Sure, many are living with their parents longer, but eventually, they must leave the nest and find their own place. If they're not buying, they must be renting. 

Like you said, investing strategies might need to adjust to capitalize on new/changing opportunities. Maybe fix-and-flips aren't as popular because millennials aren't buying homes, but rental properties became all the rage. 

I personally think multifamily and short-term rentals will be interesting investing strategies if current trends continue.

Robert Leonard

@Brian Jolliffe I agree with @Joe Villeneuve about. It's the cash you payout / cash you receive = cash on cash ROI.

The cash paid out consists of downpayment, closing costs, and renovation costs - all the cash needed to get a deal. Cash you receive is the net cash after all expenses have been paid, including debt servicing. 

@Janeile Cudjoe-Myers A few things that quickly stood out to me - that may or may not be an issue, but I would research further - are the restrictive covenants and the "city owns fee simple interest in the land". 

Other than that, I would just run an analysis on it using BP's calculators, or I'd be happy to provide you with the spreadsheet I use for my analysis. 

Happy to answer any questions you have about analyzing a property.

Robert Leonard

@Brian Jolliffe Overall, I think it's a great spreadsheet. I did not go through every single cell, but I did spend some time looking at it. It looks like it covers all of the information an investor could want when analyzing a property/properties. 

However, it's a bit complex for me, personally. As I said, it's a great spreadsheet, but it seems like it would be quite time-consuming. In general, when I am analyzing deals, I want to do it quickly and get a general idea if the property is in the ballpark I need it to be to make an offer. Then, I can do deeper analysis if need be. I want to be able to analyze a property confidently in less than 5 minutes, and I don't think that would be possible with that spreadsheet. But, it all really depends on the individual doing the analysis.

I have a simpler spreadsheet I've created that I'd be happy to share with you if you'd like - just PM me your email and I'll send it over. Here is a screenshot of it:

4-units is good! BUT, less than $200 per month in cash flow from 4-units is not good. I personally wouldn't invest in a property with only $50 cash flow per month per unit. That doesn't give you much margin of safety. However, if you're able to get an additional $75 per month in cash flow out of each unit, that'd make it more interesting. My initial reservation is that this estimate would more than double the current cash flow per unit, which seems like it might be difficult to do in practice - I'm not saying it's not possible, I am just hesitant. I would just have to be 110% certain I could increase the cash flow per unit by that amount. 

Zero money down is interesting - will you be living in one of the units? If not, is the VA loan still available for a non-owner-occupied investment property with zero down?

Seller concessions for 3% of the closing costs is good, but that still leaves you having to pay 97% of the closing costs. I would be certain to add at least some amount for that in your analysis. 

Robert Leonard

@Tucker McCarthy I appreciate the input, but unfortunately, we didn't get the property. The seller accepted another's offer.