All Forum Posts by: Sean McCluskey

Hey BP Indy!

I'm under contract on a BRRRR single family in Indianapolis, but there's one thing I still need to check out. The water and gas were off at the time my inspector went through the property, and I'd like to get those checked before following through with the deal.

Can anyone recommend an inspector who can test those systems w/o getting the utilities turned on? I read that it's possible with a compressor, to test the pipes for leaks?

Or do you recommend that I get the utilities put in my name before closing, in order to do this?

Thanks in advance for your help!

@Isaac B. I think you hit the nail on the head there. $100k profit on a flip definitely kills any potential BRRRR, when prices are this high and fully loaded cash flows are this low!

Hey @Isaac B., did you end up doing those two deals, and keeping them as BRRRR? If so, do you regret it?

I'm considering a similar scenario to what you describe, a relatively high quality SFR BRRRR that about breaks even on cash flow after considering all taxes and equity paydown, but not Capex reserves.

I see what you mean about holding the asset and eventually owning it with no initial equity investment. That would still be a very nice return over the long long term, despite a few years upfront of fronting a bit of negative cash flow.

Also, another consideration is that any increase in rents caused by inflation can push these from $0 cash flow to positive cash flow.

@Mike Flora, how are you doing with your strategy since your posts here? Any change of heart?

I think this question hinges on the following 2 questions:

1) Are there really no available deals you can do that would cash flow, for $0 of equity in the deal?

2) What % of your total income would the negative cash flow be, in the first X number of years?

@Nicholas Gray With your background, I recommend that you learn about acquisitions or asset management roles at REITs or REPE firms. High paying roles in real estate, that you can probably access with a lot of networking since you have a demonstrated quantitative ability.

Hi @Andrew Postell, thanks so much for this thread, it's a wonderful source of clarity and information!

I have a question - I live in California and thus would prefer to avoid paying the $800/year CA franchise board LLC tax. Do you know if it is possible to structure a transaction in the same way you've outlined, but using a Delaware Statutory Trust DST instead of an LLC?

Hey BP, I am looking at deals from wholesalers in Indianapolis. My objective is to buy and hold, achieving as close to a BRRRR as possible, but with class A- SFH assets. My question to the community is this: does anyone (everyone?) really put down a $2,500 non refundable deposit when they make their offers? I’m feeling pretty gun shy about doing that before having a title search. What if there is a large lien outstanding against the property? How non refundable are non refundable deposits? What is your average EMD, over your last 5 deals? Am I over thinking this?

@John Leavelle thanks John, this makes total sense to me.

It's pretty encouraging that you have not needed to access any of your CapEx reserves yet, in 4 years of activity! I've been imagining large capital events happening more regularly than that, and I think that is definitely one of the things that has been holding me back from taking the plunge so far.

It sounds like you have 1-2 years left before moving into a MF - I'll have my fingers crossed for you to find the right deal!

@Todd Dexheimer Thanks for the input, this is a very good point! Greed is good but pigs get slaughtered.  

It definitely sounds like a responsible strategy to only load on the debt that makes sense for that specific asset as a rental property - that way it can stand on its own in case of a down market or problems else where in the portfolio. I like it!

It must be tempting to take out extra and get into more deals though! Do you set your limit before getting the asset / before appraisal, to help avoid temptation during financing?

@Alexander Felice That sounds like a great contractor relationship! Just curious, is he a GC and he organizes certain subs, or does he have everything in house? Do you recommend one type or the other?

@John Leavelle One thing that really sticks out at me in your post, is that you mention only keeping properties for about 5 years. And therefore, you aren't repairing/replacing things that would last at least 5 years. But then you mention reserving against those in Capital Reserves.

I'm hoping you can help me understand - are you saying that a roof with an estimated life of say 10 years, you would include a monthly capex reserve in your numbers, that would add up to the replacement cost of that roof in 10 years? And that reserve is included in your cash flow estimate? This is how I'm calculating my numbers, but I was doing it that way because I'm planning to buy and hold for a longer period of time. I know many people on BP who expected to hold for 5 years would be tempted not to include a roof accrual in their cash flow numbers. Do you do that to be conservative?