All Forum Posts by: Steve Shaffer

Hello all!  I don't know if there's a better place to ask this question, but I am captain to a small but loyal crew.  I've picked up a few young bucks along the way who have worked along side me to learn how to find, fund, and improve properties as well as much about property management.  I pay them fairly and have paid a few bonuses here and there, but each of them is starting to look for their first property.  I am still in acquisition mode and not in a great position to peel off some of the deals I'm currently sourcing as I'd probably have to back them on their first few projects financially at some level.  Any advice on how you incentivize your team/start to share more with them on the deal/equity side? 

@Joseph Errett congrats Joseph! Sounds like a good one! If you’re in Fargo sometime, we should connect.

@Andy Garcia yes sir! We have 62 units in Fargo. I really love the market and metrics for a number of reasons. What are you looking for?

People of Earth,

I'm an investor in Fargo, ND and we have a shop in town that will offer a 30-year fixed loan at around 4% for 1-4 unit properties that they keep in house. 70/30 LTV but no other real gotcha's or catches. We can quit claim stuff into or out of an entity without any hassle. Since we've had a relationship for a bit here and they have all our financials, a deal can be put together pretty quickly.

Anyone else have anything like this in their market?  We’re hoping to move into a second market for some geographic diversity (and ideally a place to stay warm in the winter).  In what I personally believe to be a bit of an inflationary environment, I’m looking to fix what I can for as long as I can and the 30-year amortization is pretty great for cashflow.  Thanks!

What are your goals?  

When I hear an investor ask about cashflow, I think of it in a similar manner to cash-on-cash return.  They are numbers you can manipulate significantly based around your goals.  I invest in Fargo, ND (the ND keyword alert brought me here), and there is a shop in town that has an investor loan that is 30-year fixed at around 4% and in house.  If you’re going for cashflow, that’s pretty tough to beat but if you’re trying to buy a house a year for 15 years and put them on a 15-year fixed am schedule and have a paid off house every year after 15 for retirement purposes, then it would be a no-go (for example).

Also, depends on the work you want to do. In Fargo, we can't go buy a 1% deal off the MLS, but we can (real numbers) purchase a SFR for 65K, put 65K into it, refinance at a 70/30 LTV on a 30-year fixed and get all our money back (appraised for 205k) and cashflow $350/month after setting aside $375 for reserves and paying PITI.

@Teresa Gimenez congrats on getting started!

I strongly endorse working-class neighborhoods and it is the pocket of the population I most actively cater to.  My personal strategy is to play the long game.  If these are older houses in need of more extensive repair with an active municipal inspection body (as referenced by an above poster), your biggest asset is going to be a competent GC and some great subs.  Learn how to do low cost material, high cost labor jobs yourself (paint and tile) and whenever there is a choice, slightly over improve the property.  Getting roofs, windows, and furnaces out of the way prior to occupancy will keep future maintence and capex at bay.  They biggest advantage to slightly over improving in these areas is that almost all of your competition will look exactly the same (I hope) and you will stand out head and shoulders above for the cost of only a few months of vacancy.  This will allow you to avoid vacancy and, since you’re providing such a great place to live, turnover which are by far your two biggest expenses.  Congratulations again!  Keep us posted.  

Thank you @Rick Martin for the unbiased and helpful breakdown.  As an accredited investor who has looked hard at a number of syndications, sponsors, and attended several events in the space I would like to briefly argue the counterpoint which represents my investment strategy.   I think there is a some considerable blue ocean in the 15-80 unit space for investors who function as operators and are willing to embrace the pain of being quite active.  

The difficulty, for me, in the comparison is that both investments were sold.  I understand that there are exceptions to the rule, but syndications have an exit.  The vast majority of these exits are sales.  You do not get to impact the time or details of the exit.  The laments of the $200/month cashflow are short sighted in that the cashflow is compressed by your debt service which will, with the aide of your residents, expire.  Then cashflow is to the moon, but your return on equity has to be examined.  Harvest the equity and compress the cashflow according to your desire at the time, but wherever you decide to move that slider the considerable difference is that you maintain the asset.

 If you can function in that 15-80 unit niche, can successfully reposition yourself, refinance into agency debt, and then hold... In my humble opinion, that is the promised land.  As @Steve Rozenberg wisely pointed out, there are many roads to Rome, but if there’s anyone else out there discouraged while negotiating truck pricing on your flooring for your 20 unit, take heart in the fact that you are not alone!

@Seth Trost congrats on slaying school!  Are you still in Grand Forks?  I'm in Fargo, but you're welcome down any time and I'd be happy to run you through some of the stuff I've got going on.  My business line is below, but the best way to get a hold of me is to text my mobile at (304) 654-0168.  I hope to hear from you!

I'm a Fargo fella, but I'd be happy to weigh in where I can!

@Thomas Caldwell I've been fortunate enough to read everything BP publishing has kicked out so far.  The Book On Rental Property Investing would be my vote for someone in your position.  Good luck and congratulations on the final lap of this education cycle!  You're going to do great.