All Forum Posts by: Ryan Phelps

Hey @Karla Simmons,

I looked into it myself, however I didn't follow through on it based solely on the revenue factor. Section 8 vouchers are typically paid via a flat rate based on the number of rooms in a property. The rentals I own are 2 bedroom properties, so the revenue I would get from Section 8 was well below the market rent. I would recommend comparing what you would get from Section 8 and the market rate for your area.

Section 8 is intriguing to me as it doesn't necessarily mean "low-income", it can also mean "fixed-income" such as long term disability, etc. So the upside being potentially long-term tenants and on-time rent checks. However, given the current inflation we're experiencing, HUD could take a long time before adjusting for that inflation, my guess is that Section 8 won't be competitively priced for a while.

Ultimately, it's based on your goals. I know a few investors that have Section 8 properties and they're performing well but it really depends on what you're wanting to achieve.

Hope this helps!

Ryan

Hey @Phil Clark,

I also live in California and invest out of state and I currently do not have an LLC but have good insurance in place. I agree with several of the other replies here about sitting with an attorney, however something to keep in mind, depending on your investment structure, is that most banks will not approve of a loan for a property being bought or kept within an LLC. Banks need to protect their risk, and giving a loan for a property within an LLC gives them no protection.

Now if you have several properties in an LLC with a strong equity position, then some banks may approve of a loan, but all of this may be moot depending on your position.

Best of luck!

Ryan

Hello BP Friends!

My wife and I just bought our first long-distance rental property (woohoo!), we are rehabbing it to flip-worthy status and there are a few big things and a lot of little things that need to be done. So I have a few questions:

1. When it comes to getting quotes from contractors, I know I need to give them a list of things that I want done, but do I include specific products (type and color of LVP flooring, paint colors, brand of kitchen cabinets, etc.)? Or does this detail come later?

2. GC's are VERY HARD to come by in this area. Do I subcontract out all the individual skills or try to find a handyman that can accomplish a wider array of items (like outlets, lighting fixtures, exhaust fans, LVP flooring, etc.) and then hire subs for specialty items (roof, siding repair, painters, etc.)?

3. Is it worth putting together a binder/report that shows pictures of what I want with the color, style and brand? Would contractor's appreciate that or is there a better way to make this as efficient, trouble-free and budget-conscience as possible?

Thank you for any input you can provide. I want this to be a quick rehab and will obviously keep change orders as minimal as possible but want it to be easy on those that I hire.

Thanks!

Hey @Joel Lwanga, I'm in southern California and I'm investing in Pittsburgh as well! I have a property under contract right now and have discovered a few things (disclaimer: I'm new to the area too but have learned several things already). Pittsburgh is a really interesting market because the rental demand is strong, but a majority of the homes are 100+ years old and need a lot of work. As a result, I've found (along with other investors in BP investing in Pittsburgh), that GCs are very difficult to secure right now. There is so much rehab and investing going on from retail and investors with deep pockets (hedge funds), that contractors are booked at retail prices, and finding a good contractor willing to spend time on investor level prices is hard to find, for now. I've reached out to several contractors, only 1 has returned my call and they seem ify. Keep in mind that you can still find good subcontractors, but you may need to manage the entire rehab yourself (or find a PM or residential construction project manger).

I don't want to discourage you, I'm just letting you know what I've found. Through several property walkthroughs and studying comps, here are some things I've noticed:

- Closing costs are more expensive than you think! Going through a purchase right now, within Pittsburgh city limits, all real estate transactions charge a 2.5% Transfer Tax on the purchase amount (ouch!). Property taxes are a bit high as well. Make sure you account for these in your analysis.

- A majority of these older properties only have 1 bathroom (often times with really strange layouts/captive rooms), but I've found significant value changes for 1 1/2+ bathrooms in a property, so if you can add even a half bath, you're ARV will be much higher.

- Water seepage and moisture is extremely common. That's why most properties here have unfinished basements and run dehumidifiers often. Don't count on finishing the basement unless it's uncommonly dry at that location.

-  ARVs range pretty drastically based on the area of Pittsburgh. Make sure that the comps are very centralized to the property in question, you may need to run comps on a larger date range, than the geographic area. 2 miles from my property shows a $80k difference in value for a similar property (and I'm not even in a warzone).

This is what I've discovered so far, I really hope it helps. I think there is a ton of opportunity here, but it's very different than Cali, lol, and requires a lot of learning.

I'd be more than happy to talk to you further if you'd like. Good luck! 

Hello BP!

I'm working on buying my first BRRRR property soon (have several I'll be putting offers on). I've got a great agent, lenders lined up, but I'm running into an issue with the rehab portion of this process. I have a great rehab estimation tool and get decent ballpark figures, but in the current market, a lot of the highly rated general contractors are fully booked and investors are last in the pecking order compared to retail customers or large developers. I've heard from a lot of investors in this area that GC's (at least good ones) are impossible to lock down due to the nature of the market.

I'm considering hiring individual contractors for all the different specialties, and trying to find a PM to oversee the rehab to make sure work is getting done. This is obviously much more time consuming and likely that I'll be paying higher prices (since I'd be viewed as a retail customer).

So I guess my question is, is it best to proceed by hiring all the subcontractors myself and finding a PM to oversee the rehab, or is there another way to proceed that I'm not seeing?

Thank you!! 

@Andrew Postell, do you find that private lenders are happy with a 6-8% ROI with no equity stake? If I'm wanting investors to invest with me over and over again, a small equity stake that provides mailbox money for every property they invest in with me seems like a great way to generate ample capital for scaling.

I'd be fine giving up some equity for faster growth and scalability but I'd love to hear your thoughts for not giving any equity while still keeping investors engaged with all your projects.

Thanks!

Ryan Phelps

@Scott Wolf, I'm looking to BRRRR small multi-family properties in the Pittsburgh area. The market analysis I've done shows a pretty promising investment opportunity there.

Thank you Curt, 

For a BRRRR property, would an experienced investor want a higher interest rate or equity share or both?

Hello, I'm a first time RE investor looking to buy my first BRRRR property out of state as my local market would not work well at all for it. I'm in the process of identifying my offer to private lenders, so my question has 2 parts, 1) Do you think my offer is enticing for passive investors, and 2) What type of clause should be in the agreement if the refinance doesn't fully recoup the initial investment?

1) Private Lender Offer: 8% APR, paid monthly, while the money is invested. After refinancing, initial investment amount paid back with a 25% equity holding for the life of the property (meaning they receive 25% of the cash flow after all expenses/reserves for vacancy, maintenance, capex, etc. and/or 25% of profits when property is sold)

2) When executing the BRRRR strategy, ideally 100%+ of cash invested is returned after a refinance, but I've seen a lot of investors still may end up leaving some money in the property (~$5,000). If this occurs when using a private lender, what's the best approach for this situation? Should I cover the gap so I can fully repay the investor? Continue to pay the 8% on the remaining funds owed until the cash flow pays off the gap?

I really appreciate the feedback and insights that any of you can share with me!