All Forum Posts by: Bruce Harding

I have very little real estate experience.   But I can figure out the numbers on real estate investments.

Since I have little experience I am thinking turnkey to start.

Been reading a lot about Cleveland.   Compared many other markets .... TX, FL etc....  

Cleveland seems to have some potential for appreciation.

Seems a lot of revitalization going on.

Good cash flow probably more expenses than the Southeast or TX.

We are coming into a down cycle in real estate I think.   Those buying for appreciation may not be so happy in a year or two.

Or would you stay away from Cleveland as an out of state investor ?   The turnkey company is rock solid BTW.

This would be my very first property. I have had it said to me that I should have a little more experience before attempting a BRRRR. I can do them however through a syndicate I know of however. They would handle all the reahab and property mgt.

The syndicate felt I should have experience with a SFH prior to getting into rehab on very first property.

I could use advice on which way to go here.  

I have approximately $180K to use for real estate purchases.

I am specifically going to purchase SFH - building up to 10 of them.

I am looking to buy in a growing area where the prices are still fairly inexpensive.  So this is more of a cash flow market I am looking at with some modest appreciation over the long term.

Houses range from $90 - $150 K.

I am thinking it might be better to outright pay cash on the first property.

Why ?    First:  I would save about $4K in fees if I don't have to borrow from a lender.      

              Second:  Rent Income from the first property would be high since there is no mortgage which would be favorable to financing on the subsequent properties as my income would be much higher in the eyes of a lender.

              Third: I could use the income from the first property to start making higher payments on the second property's mortgage.

               Fourth:  I can always refi the first property to some extent in the future if needed to buy additional properties as I go along.

For these properties I would have to put anywhere from $25 - $35K down per property.

The alternative would be to buy several properties within a couple years using all financing and the down payments would come from the $180K pot.

Let me qualify by saying I have $35K currently in a syndicated deal paying 20% interest.   I will probably get this money back in one to two years and could use this for one of these properties.

I also have $135K invested now in two properties with a realtor who is paying interest and proceeds as these properties are being converted from homes into businesses in suburbs. This money is tied up for 18 - 24 months. So this is another pot I can use in a few years to purchase more SFH.

Is my thinking correct on buying the first one for cash ?  

Looking at retirement in 10 years.  Putting my 401K Trust to work.  

All the following opportunites are with the same syndicate:  

1) Can make 18% on a syndicated new build,   Money returned in 3 years if no delays.  

     Interest payments start year 2 most likely.      They have excellent reputation on their past ones and are totally up front.

     Risk here is delays could be an addiional 2 - 3 years but that is rare.

2) Take the money and put it instead into multi family homes and apartments that syndicate owns.  Make a 8 - 10% return.

3) Start purchasing SFH in hot neighborhoods where teams have been working together

    and proven working with the syndicate for 5 or more years.  Mangement and rehab all under

same umbrella.   Returns $200 - $300 per door per month plus appreciation.    Out of this cash flow I probably would save $1200 for cap ex. per year.  Since 401K Trust no taxes on income.

Build up to 20 - 30 of them.

4) Put it with the team that is remodeling and flipping and has done so for years with guaranteed 8% return checks paid monthly.  Can pull money out after 3 months no questions asked.

The developer is a real estate agent who is putting her own money in.

I just wanted to get some feedback on my thinking.  I am working with a syndication who has different opportunities.   The syndication has teams all over the country and have been around prior to the last recession.   They came highly recommended by my attorney.

I am using a 401K Trust so although I get no depreciation benefits I do not pay taxes on gains either.

I am looking at investing in BRRR's vs. an more passive syndicated investment returning 18%.

I am leaning towards the BRRR (all cash - no financing) due to these factors:

1) Equity in the property of 25 - 30%

2) Cash Flow Every Month

3) Ability to Roll Money to the next deal building up a portfolio of properties

The syndication is nice and a lot less work. But looking at the BRRR it seems I can develop wealth faster with equity, appreciation and cash flow.

Am I missing anything here ?

I have a property that is a townhouse catagorized as a second home.

After I purchased my wife's son moved in and has been paying rent.

I am wondering is it more beneficial from a tax standpoint to keep the home catagorized as such or switch it to a rental unit for accounting purposes ?

Thanks

Am I getting this right ?   Start with one, work up to 10 , equity in each, collecting rents on the way.

Starting wtih enough of your own cash for one or both units....

So lets say 30K equity after refinance in each property plus rental income say $250 per door x 12 months.....  $36K in positive cash flow in rents per year plus appreciation ?

Is this about right ?  

So 5 years to get 10 properties x $36K  per year in renal income year 10 plus 10 x $30K in equity pluss appeciation of the earlier purchased properties ?

Starting with your own money and buying 2 units ......  all of which I have to research yet for maximum financial benefits and pitfalls....   how do you get over 10 units ?

I am working with a real estate agent who has vetted the property and has developed this kind of property before.  We have met and gone over the property.   The property is worth $309K and I would be lending $75K.

I have all the information on the property.

Will be secured with a mortgage and lien.

Long story is I was going to go in as an investor half and half with the agent but there is not enough time to put together a proper Operating Agreement and run it by my attorney by the time of the close because I am using a Trust account.

So the agent committed to the property.  I came to understand the time it would take to put together a proper operating agreement and run it by my attorney and there just is not enough time before the closing.  So I am going to do a Promissory Note.

I have the ability to do this through my 401K Trust.  Already looked into that.