All Forum Posts by: Robert Leonard

@Michala Vander Ploeg and thank you!

@Michala Vander Ploeg Absolutely! Just send me a PM and I'll send you the link.

@Kirk Perecich I recently put out a thread that was similar to this if you’re interesting in reading through the responses.

https://www.biggerpockets.com/topics/660622

@Adam Scheetz Absolutely, that's what can make a BRRRR deal sometimes tricky.

You must run the anaylsis both ways, once using the original mortgage cost and once using the new, and usually higher, mortgage cost. Investors often forget to run the analysis using the higher mortgage cost. There are two ways to negate the higher mortgage cost:
1. Being able to demand higher rents because you've renovated the property, then in turn the higher rents cover the increased mortgage expense. For example, if you would earn $1,200 in monthly rents for a net cash flow of $200 before you renovate the property, and then you renovate the property and your mortgage expense goes up by $300 per month, you'd want to make sure you could squeeze out an additional $300+ in monthly cash flow from the rents due to the renovations.
2. If that's not possible, you'll want to make sure that the initial cash flow, before refinancing, is high enough so that you can take a hit when you increase your mortgage expense from the refi. If you have $1,000 in monthly net cash flow, then your mortgage goes up $300 per month, you're still going to have $700 leftover. This might not sound like as good of a return/monthly cash flow, but you have to remember that you're now into the deal for essentially $0, and you can put that money into more deals. Also, renovated properties generally have less upkeep/maintenance/capex/repairs, so your overall operating expenses should be decreased, increasing your cash flow. Lastly, a renovated property can usually allow you to obtain higher-quality tenants, which in turn reduces your turnover and your vacancy expense, increasing your cash flow.
Hope this helps. Robert Leonard

@Jamee West Absolutely - you want to make sure you understand the analysis portion, and are confident in it, before making an investment. Education prior to an investment is very important, in my opinion. That is one of the benefits of house-hacking as well - you will learn A LOT on the job while managing that property. Then you can use that knowledge to expand into future properties. 

Robert Leonard

@George Gao If no one on BP has this specific experience, don't be afraid to pick up the phone and talk to some local contractors. Not only should you get the information you're looking for, but you can also start building relationships.

Robert Leonard

@Steven N. Your vacancy is too low for my personal preference. I generally estimate 8-10%. Your Repairs and CapEx are also both far to low. Those together should equal about 15%, depending on the condition of the property and the value of the property. Other than that, the other expense numbers look okay. However, the cash flow is unacceptable and will get worse when you fix the vacancy and CapEx/Repairs. I would pass at this purchase price.

Robert Leonard

@Jonathan Neves Small world - my team and I were actually just analyzing/considering this property the other day. Are you from the MA area? We are based out of Southern NH but half our team is south of Boston so we invest in NH/MA/CT mainly.

Your numbers are a bit different than mine in a few different ways, but it still seems like an interesting opportunity from a numbers perspective. Below is how I analyzed this property.

Our biggest concern is the location. Springfield has very high crime rates and therefore isn't a great area. There are a LOT of very cheap multifamily properties, especially in comparison to other parts of MA/NH/CT.

Robert Leonard

@Bradley Wood I think there is a lot to unpack here. Why are you looking to build your business credit? Of course, credit is important, but I haven't found that my business's credit has been all that impactful. Also, why are you looking for a virtual office? It likely varies from state to state, but I have formed a dozen LLCs and never had to set up a virtual office. I would research the requirements for your state/situation and make sure you're not wasting time/money/effort on things that don't truly matter. 

Robert Leonard

@Earl Hatmaker Don't be nervous - just be yourself. He is a normal person too, and he's likely meeting with you because he enjoys helping others in real estate.

As Zachary mentioned, let him do most of the talking, but make sure you ask questions too. Show you're engaged in the conversation and truly looking to learn from him. Provide him with value in some way. Find a way that you can help him/his business. Don't expect anything from him in return, or immediately. It may take months and/or multiple meetings before you gain any benefit from talking with him - that's OK! Remember you are building a real RELATIONSHIP - it takes time.

Have a strong set of questions prepared, but don't be afraid to deviate from the list if the conversation goes that way. Don't worry about following a script. 

Ask about his successes, his failures, what he's learned, what he wishes he knew at your age/when he was getting started, what would he tell new investors, etc.

Hope this helps, and good luck. I'd like to hear how it goes.

Robert Leonard