All Forum Posts by: Seth S.

Thanks @Andrew Syrios

In your article, can you clarify what you mean by this: 

The upfront financing is outside the scope of this article, but what’s important to note here is that different upfront financing options will result in different acquisition and holding costs, and you need to account for those [...]

I think that is one of the items that I have not accounted for in my calculations. 

Hello BP!

I got a deal today form my agent on a turn key property I am interested in. The numbers look good (see below) and the 2/1 SFH looks really good after the rehab (at least, in the pictures).

I was wondering if with the numbers below, it makes sense for me to buy it with a conventional mortgage and and if there was any downside to doing that, instead of looking for a BRRRR and taking the longer route?

Is there any difference in the loans you get from a conventional financing VS a BRRRR financing of something you own?

Thanks!

Hey BP! 

I have some money saved up and am ready to start my REI journey. When I sat down a while ago to figure out exactly how I want to go about this, I decided on the following:

1) Save up money enough to finance a BRRRR deal myself (duplex preferably) out of state

2) I am quiet handy, so when the deal closes, I would spend some time working on it + hiring out contractors for some of the rehab

3) I want to document the complete process (how I analyzed the deal; came up with numbers for rents & costs; closing the deal; rehab costs & times with before & after pics; the PM process until being rented out) and set it up in a neatly looking binder/PDF so its very presentable. 

4) Present the deal to potential investors I have already lined up and go from there

Does that sound like a good way to get started? I know that a lot of deals are made starting off with other people's money, but I personally feel that if I ask you for money, I want to show you what the process looks like, that I've been down that path and how it all looks. 

I appreciate any feedback & suggestions to try and see if I am missing a bigger picture!!

For residential, I know people do Realtor and agent-based listings. Trulia/Zillow/Redifn don't really give you the option for multifam. 

Another option - go on craigslist and look at people that are renting a place in a duplex/triplex/4plex. Call up / email that person and tell them you want to buy multiplexes, are they interested in selling?

Same thing goes for looking at newspaper ads (actually probably even better). Mom & pop owned places are the best for this. 

Get leads from data sites (owned/owner missing properties). 

I agree with @Jaysen Medhurst that a multifam could be a great potential replacement. 

I would start looking at places just to get an idea of what's out there and milk the 1450$ / a month until I see a change starting to happen. Even if you can get another 6 months worth, its almost 9k in cash. 

Hey Jeremiah - 

I am by no means an expert but I guess it depends what you are looking for. Here's the way I see it (3 options).

OPTION 1

Let's say you spend 30 000$ to get it up and going (all fixes you mentioned + new appliances and all), then rent it for 1100$ / month. I assume you will be paying all utilities, as well as other  expense (additional insurance, cleaning, yard work, snow removal etc). So let's do a simple pretend calc:

Utilities = 150$ / month
Other expenses: 100$ / month 
Vacancy: 5% 
CAPEX: 5%
Repairs: 5

(1100$ - 250$) - 15% = 722.5$/month = 8670$ / year --> This gives you a 28.9% ROI.

Even if you use up all 65k in equity to make the rehab, and if we are conservative and use the 50% rule, you are still at 10% ROI.

If I was in your shoes, I would find the best way to rehab for lowest possible amount (but still make it really attractive to potential renters) and do it! Then take the rest of the money and look for a turnkey somewhere (if that is what you are interested in) with a conventional mortgage. 

Let's say you get something in Memphis (as you suggested) for 70k. And the rehab of your place took out 35k. That means you are putting down a 25k down payment (5k for fees and others). You are looking at:

P&I = 269$ 
Taxes = 95$ (approx @ 1.5% cost)
Insurance = 85$ (approx cost)
CAPEX & repairs: 5% (total as it is turnkey)
Vacancies: 5%
Property Management: 10%

(269 + 95 + 85) + 20% = 538.8$ / month in expenses

If you can get the place rented for 600$ / month, you cash flow 61.2$/month or 734.4$/year - only 2.9% ROI - horrible.

OPTION 2

If you can get that same Memphis place for 70k with the same numbers as above, but you buy it cash (no mortgage), then it looks like this: 

Taxes = 95$ (approx @ 1.5% cost)
Insurance = 85$ (approx cost)
CAPEX & repairs: 5% (total,as it is turnkey)
Vacancies: 5%
Property Management: 10%

(95 + 85) + 20% = 216$ / month in expenses

If rent can be 600$, then you cash flow 384$ / month or 4608$ / year - a 6.5% ROI only.

OPTION 3

Do the first part of OPTION 1 (fix your place and rent it). 

Then do a BRRRR for the Memphis market - whatever is left over from your place's rehab, put it to buying a home in need of work, then find investor/lender/partner and work on it to BRRRR it as soon as possible and see how those numbers go.

I would personally pick option 3 if I was placed in a situation like yours. Having something at home that I can do and manage, and avoid a lot of the fees that come with an out of state investment - priceless! 

Hey there!

Depending on the location and the way the property is, I would suggest renting it out to a tiny home or multiple tiny homes (if the local laws allow it, of course). There is a big community out there that has a hard time finding a place to install their tiny home, and you could be it.

It would help if you could provide an electrical hookup and perhaps access to water.

S.

Hello everyone. 

My name is Sev and I am originally from Montreal, Canada but currently am in Silicon Valley working for a medical device company. Five years ago, I bought a duplex and kind of stopped looking for more investment opportunities until recently. 
I am dedicated to finding a network of people and resources to improve my skills and help me reach my goals to invest in residential properties and achieve financial freedom. 

Thank you all for having me!

S.