All Forum Posts by: Tom Anderson

Thanks @Joe Splitrock. Yeah including the owner occupied unit as rental income does change up the numbers than pretty drastically. Overall though I guess I'm just curious if folks are more interested in Cash Flow right now or the long term upside of the larger property.  Trading up for the larger property does seem like the better option over time! My personal goal here is to eventually get both but just trying to determine which I should start with. 

The STR's are definitely a job too as you mentioned, but I've got a pretty solid system in place now with property managers so it's slowly but surely becoming a lot less work for me.

$4k a month or own a 4 unit multifamily property worth 4.8x the STR but just breaks even month.

Here are the details. You have approximately $100k to put into a property. Property A is a Short Term Rental investment property that's selling for $300k. You have a very similar property now that makes roughly $4k a month in cash flow so you're considering doubling up and purchasing another one in the same area. You would most likely put 20% down and be able to get this property as an investment loan for say roughly 4.5% interest rate on the high end. For this discussion we're going to assume that you can get it to cash flow at $4k a month similar to your other STR.

Property B is a 4 unit Multi-family selling for $1.45M that you can get with an FHA loan for 5% down at $72k and most likely an interest rate of say 3.5%. You will live in one of the units and with the rent from the other 3 units you will just break even each month. This breaking even each month is however a cost savings to you though as you will save money from the rent you're currently paying each month.

So in summary, would you rather have a Cash Flowing Short Term Rental that makes you $4k a month or a 4 unity multi-family that runs at break even? 

To try to make a fair comparison I'm looking at the cash flow value from Property A over the course of 30 years. I'm increasing the cash flow by 3.25% each year to account for inflation. I'm also assuming I'm going to save every dollar from that cash flow over the next 30 years which if my calculations are correct would be approximately $2.3M without any interest being generated from the savings account I'd be using. I know what your saying. There's maintenance and property management and other non fixed fees that come up each year which I have taken into account already and I'm just looking at this $4k in cash flow each month. I'm also going to include the overall property value which if I purchased it at $300k in 30 years at 3.5% increase in property value should be worth roughly $814k. So hypothetically in 30 years Property A has generated $2.4M in all time cash flow and is now valued at $815k for a total value of $3.2M. 

Now let's compare that to the 4 unit Multifamily that breaks even every month. If it's current value is $1.45M and we can average that property value will increase by say 3.5% over the next 30 years that property would be valued at roughly $3.9M. I know rents will also increase and so hypothetically the property will eventually cash flow but for the sake of this "Real Estate Would You Rather" we're just comparing the property value of a break even multi-family over a high cash flow short term rental. 

So... Would you rather own the cash flowing short term rental or the high value break even 4 unit multi family. Which would you choose and why?  

I recently read this article by Fast Company on a new real estate startup called Rhove out of Columbus, Ohio. The quick summary is they're offering renters in their buildings a small piece of equity on the property they're renting and calling it Rentership! I love this idea!

As more and more of the Gen Z population moves into the working class I don't see them wanting to own homes like generations of the past. They want to travel, they want experiences, they don't think about signing up for one job that they'll stick with for the next 30 years in the same area like previous generations. This makes them a generation of renters. 

Rhove is only offering them a $50 stakes per year but you could see how that could add up over time and it could help to drive renters in their buildings vs competitive spaces in the same neighborhood. Rhove also gives renters the ability to invest more if they're interested. 

Rhove founder and CEO Calvin Cooper also discusses the community and pride of ownership aspect beyond just the financial upside. ““Ownership is not just about finance, ownership is about citizenship, is about social responsibility. It binds us more closely to our neighbors." 

I have to imagine tenants that have a vested interest in the property will do more to take care of it and take serious pride in knowing they're a part of something bigger, not just a row on a rent roll excel sheet. 

While I don't know if Rhove has perfectly nailed the execution of this offering just yet, I do think they are headed in the right direction and I do think we'll see other Real Estate Investors following suit here. 

Interested in hearing what this community has to say about this? I'd love to do this in some of my rental properties in the future especially if I could legally do it to fund new projects and investments. 

@Joe Hughes what was the name of this company? Thanks!

Thanks @Odie Ayaga  Good to know they're at least out there. Let me know if you happen any to know of any. Thanks!

Hi BP! 
I'm looking to find a private lender that is open to doing some creative financing for a commercial property that I would need to do a quick close on.

There's a commercial property that is going into a foreclosure auction in two weeks that I would love to try to win. I currently have a portfolio of 3 cash flowing property with roughly $900k in equity, but I won't have enough time to build out a line of credit on these properties in order to leverage this equity for this purchase. 

Are there Private Lenders or Hard Money lenders out there that are willing to do creative financing on properties purchased in an auction? I have the $50k deposit to sign up for the auction but would need the financing to actually close on the property a few weeks after the auction. The overall goal then would be to get a conventional commercial loan in the next 3 to 6 months after closing. 

I'm hoping to use my equity as collateral with said creative financing partner and offer up percentage points in the overall deal on top of the traditional interest on the loan. 

Does anyone have any advice on who I should be talking to in order to find someone that could move quickly here to make this work?  Thanks in advance. 

Tom

I ended up using ServPro, who did the job for about $4,000 vs. $48,000. I called around and a bunch of other sketchy companies came out of the woodworks while enquiring. In doing my due diligence with most of them I asked to see the contract and most clearly state they'll try to collect from your insurance company but will put a mechanics lean on the property if they can't collect the full amount from you. One even asked me to list assets like cars, furs, jewelry on the application.  It's very sad but there are a lot of companies looking to prey on people going through what could be the worst time of their lives. Message me if you ever need help here. BP saved me in a lot of ways when this happened to me. 

Hi BP, 

I found a commercial property that I really like but the agent is telling me he won't share the financials on the property because the owner isn't ready to "market" the property unless he finds a 1031 Trade. It's already on LoopNet so our definitions of "Market" are clearly different.  I'm kind of at a loss here as I've told the selling agent there may be an opportunity for me to pay in all cash and pay way over ask, but obviously only if the numbers work for me. 

I've never run into someone only willing to do a 1031 Trade and since I don't have a property to trade down to I don't know how to go about convincing this seller to sell me the property and just do a 1031 exchange within the normal window of time, like everyone else in commercial real estate. 

Any advice? 

Am I crazy in thinking this person is looking for a needle in a haystack when looking for a 1031 Trade?  Trade only? They'll have to find someone willing to do a very large down Trade as the seller (like most normal people) is trying to do a 1031 Trade up, to a much larger property. 

Thanks in advance! 

Tom

Thanks, everyone! I'm going to continue to call companies looking for quotes and continue to do more research on everything. I'll let everyone know how things end up. Thanks!

Hi BiggerPockets!,

I'm hoping someone can give me some solid advice here. The police called me this morning to let me know that a tenant (not on a lease) but living with someone who is on the lease, took his own life this morning with a gun. 

The police told me I should find someone to clean the property as soon as they were done. I did a quick Google search and Aftermath was the first company I called. 

They came by right away and took photos and got back to me with an estimate!  $48,000! 

Their explanation here is that the insurance is going to negotiate this number down so I don't have to worry about it. They even sent me a letter along with the estimate saying they'd give me an additional $2,500 off. The sales person was just so pushy to get me to sign that I knew something wasn't right. 

I then called another company Bio Recovery who's parent company is Prestige WorldWide Industries (http://www.prestigeworldwide.company) which if you've never seen the movie Step Brothers is the name of their "Fake Company" which makes me now question doing business with these guys. They spent a lot of time trashing talking Aftermath and said the bill should never be $48k and that AfterMath has been known to hold business owners personally liable when the Insurance Company refuses to pay. They then put a Mechanical Lien on your property if you don't pay up and try to push you into foreclosure to try to get the property from you. 

I then found a news report on Aftermath which makes them look pretty shady

http://www.abc2news.com/news/local-news/investigat...

Ironically though I was looking through the fine print of the Prestige Worldwide's contract and they specifically highlight mechanical liens in their contract so I feel like they're just as shady. They also ask for family members and friends or descendants with their known addresses and their assets. (Cash, Securities, Artworks, Furs, Sports Equipment, Vehicles, etc.) Like what? You want me to list out the assets you're going to try to come after me for. 

This whole industry just seems so shady. They pray on people are going through something insanely hard. I can't imagine if I was doing this for a family member how much more frustrated I would be. 

Does anyone know of ethical companies that clean up after crime scenes? The property is in Southern Maine 30 minutes from Portland.

I also called ServPro and they immediately sent someone out but he said he couldn't get me an estimate until Monday. 

I have StateFarm Insurance on the property and a really high deductible. ($5k). Which I'm not so worried about compared to getting sued and having a company come after me for $48k because I hastily signed some contract. 

Has anyone been in this situation? Have any advice? These companies all seem so shady to me. 

Thanks in advance!
Tom