All Forum Posts by: Timothy Moore

@Devin Olson I think it's great that you're looking to put more time into building your future wealth and income. The choice between both options will depend heavily on your set of skills and market. I own a management company and I can tell you, as with most businesses, it's a very time intensive endeavor before you can expect to see any sort of returns. Most markets have licensing requirements (broker's license in MI or working under a broker) and you have to get insurance given significant liability and exposure. While it may not be too difficult just to manage a few properties in nice areas, it can be very time intensive to get the right team and support set up for efficient operations, leasing, maintenance, and turnovers. Honestly without being coupled to a real estate profession that benefits mutually with the management company, I'd advise against it. 

Landscaping / snow removal can be a good business if you know the work and are willing to get the equipment. It's very simple to scale at your own pace and schedule around other work (snow removal isn't as flexible). Ultimately though you should assess your current skillset and do a side business that is the most efficient for you personally so if you're really good at customer service, it may not be labor work. It might be getting a real estate license for part time realtor work, insurance, mortgages, etc. 

For your house, this may depend on your personal preferences of staying or moving but given the 3 options, I'd recommend prepping it for sale in spring, focusing primarily on cosmetic value add items rather than your outdated systems, provided they are still functioning. You should be able to sell after 12 months of holding without short term capital gains tax (confirm with your CPA) and then you can roll these proceeds over to the next property, buy two, or even house hack and grab a 2-4 unit ideally. It sounds like there are multiple capex items that will come up in the near future if you hold the property and if you're serious about REI, you'll likely be able to leverage your equity in a better way by transitioning it from this home into more rentals but that would be assuming your valuation is accurate.

@Luka Jozic I think it's good to be smart about your deal analysis even if it leaves some on the table. From the other investors I've talked to, the Cleveland market is similar to Detroit market where I work and I've done 5 BRRRs here personally and managed over 100 BRRR style rental projects for clients.

The current interest rates are certainly putting pressure on cash flow for financed deals, this is seen both on the hard money loan costs and on the back end for the long term financing. Given you're positioning yourself into cash flow deals not equity, then I don't think it makes sense to take a deal that's breakeven just for the appreciation and tax benefits because there are lots of challenges in rehab projects and with the market shifting and softening rental demand, you should always have some margin. Personally if I can't cash flow at least $200-300 per month on the back end of a BRRR, then it's not worth it for me.

Now there are a few different ways to look at BRRRs and sometimes it's not just about pulling out 100% cash back. In my opinion, if I get 75% of my cash back but I now have a fully renovated house with minimal future repair and capex expenses, then it's still better than buying a similar home and putting 25% down on the front end without all the improvements. Sometimes you don't want to pull 100% out because of the pressure on your cash flow. My average BRRR landed in the 85-90% cash out range but there's been a bunch that hit over 100% cash out and still had good cash flow.

It may be worth reviewing your operational strategies. On the revenue side, can you get more than 1% rule at similar price points? In our market, around 100-140K price point, we can often get a little higher than 1% rule. A few of our recent BRRRs were as such:

ARV 120K - initial rent 1250

ARV 80K - initial rent 1100

ARV 160K - initial rents 1900 (duplex)

ARV 150K - initial rent 1500

ARV 130K - initial rent 1500

Find ways to maximize the area rents, especially since you're typically improving the house to better than average standards. 

Also look at your expenses. Can you negotiate to keep taxes down given initial purchase condition? Can you self manage until you have more units? Did you math out your capex over the next 10 years? (this should be minimal in most BRRRs but will depend on project scope) Vacancy, bad debt, maintenance, and all costs should definitely be factored in.

In our market (Metro Detroit), it's common to pay $450 to $500 per standard sized window. This includes parts, labor, and wrap. Talking to a few other investors from your market in Chicago would help but at first glance that seems high.

There are other factors. Larger and curved windows certainly cost more, same with buildings that are 2+ stories but that doesn't sound like your case. Basement windows I often do glass block in our lower income properties and that is much cheaper than standard windows too.

Hi Caitlin and welcome to Biggerpockets! It's great to see that you are already planning your next steps of your real estate journey. REI is a long term journey so while you may have some short term pressures, it's ok to take it at your own pace. With that being said, I think you have 3 options here:

1. Find a suitable house hack (ideally 2-4 unit) within the 6 to 8 months

2. Find an affordable starter home that you can sell or rent later (or even house hack individual rooms)

3. Find an apartment or rental and then start preparing for the home over the 1 year lease

Option 1 is going to fast track your REI career the most but will also be the most challenging from a timeline and cash reserves standpoint. Your market may be different but in most markets there are not a significant amount of 2 to 4 units available, especially at reasonable price points for an entry level purchase. Buying a property that is too reliant on rental cash flow could put you in a risky situation and similarly the larger the property, the more costly the repairs will be. Typically purchasing an affordable duplex in a relatively safe but lower income area can be a good place to start and then you scale up from there. Finances are a bigger concern in my opinion since you are newer to real estate and your wife's income is newer too so it's best not to overextend yourself into a higher price point 4 unit for example that may be really nice but will be tough when you have vacancy or a roof replacement due.

Option 2 is a great starting point and gives you the advantage of picking through single family homes which are the most available asset on the market. This will give you many options for style, beds, location, price, etc and still provide multiple exit strategies whether you rent rooms out, sell it later to transition into a 4 unit, or hold as a rental when you buy your next home. Since ultimately your personal living costs are an expense not income, I'd recommend being very modest and comfortable living in an affordable home to keep those costs down, don't worry about your dream home yet. Ideally it will still be appealing but affordable and probably smaller in size(for example 3 beds are much more popular than 2 beds in my market)

Option 3 is still fine. 6 to 8 months, especially if your family is not flexible on timeline, is a doable timeline to find and close on a property but could be a tight timeline depending on your market conditions since many markets are low on inventory right now and it's good to have a back up plan so you're not in a precarious situation with your family. Even if you end up renting for a year, that gives you plenty of time to build up savings, get used to your market, and start learning from experienced agents and investors before making your first purchase.

@Chad Brizendineit sounds like you're off to a strong start! I'd love to hear more about your progress in the last few years and the group you're working with

Syndication might not be too bad of an idea if it's a value add play and allows them to get into a larger more stable asset. 

Flips are good if you're comfortable with them but it's more risky and better to have a market with a strong team that you are confident in. 

I'd imagine best scenario if you want full ownership is a BRRR on a small multi-family. Ideally you could a value add play on 6-10 units by leveraging financing.

Strategy may vary depending on market. In the Midwest, I can get a small multi with 300K but in more urban markets that is tough. 

I'd recommend consulting a business broker, ideally that has experience listing and selling hotels and is familiar with the dominican republic and international hotel buyers.

Real estate investors often consider hotel investments too so this and other real estate forums would be a good method for marketing.

Our team at Zest PM has been working with Martel Turnkey as a PM in the Detroit market for a little over a year now and we've had a good experience with their team. We did work briefly for another turnkey company, which I'd prefer not to name (they had good intentions), and that nearly turned us away from that type of work. As a broker, I've come across many other turnkey companies that our clients have bought from and the biggest differentiator I've seen is in work quality and expectations. I've seen this with flippers too. Many I've seen cared more about the profits than about the long term product and success of their buyers (which was strange considering many of them offer warranties). 

My experience with Martel has been the opposite. Yes they need to make money like any other turnkey company, but when we find a new issue during a renovation, every time they fix it. In most scenarios where there is a short term repair vs. long term repair (roof patch vs replacement), they will do the long term improvement if that is what's needed. Even on the purchase side with realtors, they often pass on any purchase that won't have enough budget to do a quality renovation. I can't speak to all of their processes and no team is perfect, including my own, but we've continued to do business with them because it's clear to us that they care about their clients. 

Like any other investment, do your due diligence and know that repairs and tenant issues will come up even on a new build.

@Jay Hinrichs I am curious what your concerns are about the mid west? I am most familiar with the mid west markets and admittedly not very experienced in other markets but from the other investors I work with and talk to, most other markets in the US have good and rough areas just like any of the markets I invest in. 

@Thomas Harari I do appreciate the feedback about your purchase transition but I thought Michael and the team was resolving those issues for you. One of the processes we've been working to improve is the billing transition of final repair items on the purchases. It is common for vendors to invoice us 2-4 weeks after work and then we issue payment in roughly 2 weeks turnaround so most of our bills don't process through to owner statements for 30-60 days. Our accounting team has improved over the last 6 months at catching these but it is not a perfect system yet and occasionally a warranty item comes up, which we have to verify with the contractor or Martel team.

I'd recommend doing it from the start. If you're not doing real estate as a hobby and actually investing, you're also taking on some liability and need to treat it as a business. Separate accounts, tracking, EIN, etc.

In Michigan, it's very simple to set up an LLC and Quit Claim Deed the property to it. Then make sure everything operates through the business such a leases, banking, management, etc.

That is great Aiden, you're starting early and off to good start! The way I started and I think the best start for most people is to purchase a house hack with an FHA or Conventional loan. Buy a 2-4 unit or a 3-5 bedroom house for only 3 to 5% down and live there while improving it and renting out the other units / rooms. Ideally your rents more than cover your mortgage so you gain equity and cashflow. Then from there you can transition into acquiring additional renters or fixer uppers depending on your skillset and preference.