All Forum Posts by: Shawn Ackerman

@Tom Grieshammer Hi Tom, Good question about how to apply $120K in capital.  I would suggest one of two options if you are looking for a passive income approach.

1. Becoming a HML-Hard Money Lender - Lending on investment projects at 65% ARV at 12-15% with a 5% extension, 6-12 Mo terms. This could yield anywhere from $750-$937 per month interest only.

2. Buy a turnkey asset wherein someone can manage your investment on your behalf.  Not my favorite choice because you will likely have limited to no equity, but you will be able to make money on your money rather than inflation eating at it in the bank.

3. If either of the above do not interest you then I would consider a REIT.

All the best!

 Thanks @Jaycee Greene I appreciate you.  @Jose Hernandez let me know how I can help.  There are so many directions to take.

Hi @Mark J. I totally understand where you are coming from. we invest OOS alot further than 1.5 hrs away and hired managers over the years but the attention to detail is simply not there. And no one will care for your assets better than you will. That said, look into hiring some VA's and get cameras.

We use the Eufy Floodlight cameras on our properties and have VA's from the Philippines. Now you cannot go completely virtual, you will need boots on the ground for things that cannot be done remotely. So we have a showing agent for buyers and tenants and a host of independent contractors for handywork, cleanouts, unit turnovers, HVAC, plumbing, electric.......ETC. I've watched the repair orders drop dramatically over the past year and half while putting this in place. Also the mgt cost went from 10% to around 3%

The current VA to Unit ratio is 1 to 17/18 doors - the apartments rent on average of $1100

V/A cost for 20hr work week is around $140-$150 so lets say $600 per month vs the 10% or $1,870.  Happy to pay a little over 3% and maintain customer service.

I am still involved with the day to day but more like oversight and approvals.  I don't deal with any tenants directly. 

Just a though. Best of luck!

Hello @KeAnna Dakwa Welcome to BP! Goodluck on your REI Journey.

@Vincent Pflieger I see the wheels turning..... This is where sourcing your own deals off market comes in handy. If you are looking for turnkey properties, buying at or below lender LTV will likely not be possible because you are paying for someone else's value add/profit. but if you are adding value(Buying distressed) and adding your own value, then your possibilities open up tremendously.

The mission is to limit the amount of cash in the deal.  Otherwise your scaling will eventually STOP!

Don't be afraid to walk away from a deal if it does not fit. I do it all the time.  

Hey @Vincent Pflieger I got you. Let say your lender will lend to you at 75% of the After Repair Value(ARV), so property worth $100K, max lender will lend is $75K or 75% Loan To Value(LTV)

Your deal, after purchase and repair should be at or below the lenders LTV. This way on the cash out you can retain as much of the HELOC capital as possible so that you can put those funds back.

Here are some numbers

property value: $100K-ARV

repairs: $20K

Lender LTV 75%

My offer to seller will max out around $50-$55K. with a max offer at $55K you can add the $20K in repairs and be at the lenders LTV threshold thereby getting back the majority of your HELOC money used to purchase and renovate. You still have to account for lender closing costs, title closing costs etc.... but those are the parameters for scaling while minimizing the amount of money you keep in the deal.

Hope that helps!

@Christian Artuso All the best.  Regarding contractors, I've found that the best way to find a contractor is to go through a property management company.  Especially if the manager will manage the property and lease it up after completion.  

To date, I don't prefer to work with contractors directly as an OOS investor.  I prefer to work through a project manager(this can be a property manager or an independent designee).

The role of the project manager is to be your eyes on the project and to be sure everything stays on schedule.  I pay either a flat fee or % of the project to this individual. Not saying you cannot work directly with the contractor but when it comes to pay, deadlines and overall project oversight I'd prefer to have a independent pair of eyes on the deal.

Be well!

@Vincent Pflieger having the capital is only one part of the puzzle. Regardless of what approach you take you must find an avenue that would yield a return greater than the cost of the HELOC.

I've been in this position and chose to buy investment properties in the Milwaukee WI market. As a Ny'er I wanted the ability to buy off market, cash, close quickly, renovate and rent. This was all done while understanding my lenders LTV, DSCR and seasoning requirements.

The puzzle consists of finding deals that you can buy at 75% of ARV minus repairs if your lenders LTV is at 75%. Having a team who can take the deal from the closing table to completion and rent the units. Once completed you need to have a lender at the ready who can delay finance the deal so that you can pull the HELOC funds out and put them back in the HELOC acct.

That is the gist of what I would recommend for your situation.

All the best on your journey!!!

@Christian Artuso I only know OOS investing so cannot speak to investing locally as NYC is not my idea of a cash flow market. With that said I chose Milwaukee. Regarding the BRRR strategy, that is the way I have scaled my portfolio but I also built a direct to seller business which allows me to make offers on property using the following guidelines.

I need to buy at 75% of ARV - Repair-Assignment fee. So $160K valued property needing $30K in repair with a $15K assignment fee, I have to buy the property around $75k.

It is also important to know what your lenders seasoning requirements are as well as their LTV and DSCR.

Delayed financing is an amazing strategy. And when you combine that with buying off market going direct to seller, you can build a real estate empire while being vertically integrated.

All of this aside, whatever market you decide to invest in, please be sure to develop a relationship with a reliable contractor and a project manager.

All the best!!!

 1% will typically allow you to break even.  I'd say 1% deals are going to be more of an appreciation play rather than a 2% deal which will undoubtably cash flow.  I don't look for 1% deals which is why as a NY'er I chose to invest in the Mid-West vs East Coast.