All Forum Posts by: Tom Moran

Hi @Jerry Pfeiffer 

Right now, Inventory is tight and times are uncertain - as always some methods work better than others (at different cycles) and you need to be hitting as many options as possible. Any RE resource will list a blend of strategies, how many are you trying? The life blood of what your considering doing is finding the deal. You might always find that deals in your area in your cash price range are difficult until you find a method that works. Maybe it's not cash you need to fixate on... you need this to fund the renovations. What type property are you looking at? I find a range of properties at any time and I'm sitting on 3-4 today all which could work well and each arrived from different sources. Contact me and we can discuss, I'm looking to network (always) with as many people as possible. The complicated thing with RE is the see-saw effect - more money in the deal limits your cash to do other deals, higher % loans lower rental returns, low priced deals may be in less desirable areas etc. etc. One thing is to have a plan and stick with the formula. You should start though with knowledge of dealing/financing as it sound like you have the renovation part down. Hope this helps  

Awesome suggestions by @Matt Shields - adapt and try approaches that will succeed. 

Quite honestly low offers in the past were easier; with at a rising tide you need to know current market price. Know also the agent represents and look to get best market value, would you sell your house at 80% value? 

I'm in NPR & know realtors, lenders & the neighborhoods here. PM me and we can chat about your specific situation I would be happy to give you some guidance. 

Hi @Julie McCoy,

You shouldn’t have a problem getting financed once the numbers work, the money will be based on the cash-flow and as mentioned the most likely option will be a 20% down at around 4.5- 4.75%, 5 year / 25 years amortization. You will have a fixed 5 year term after which the loan resets. There are also a number small balance loan programs but you’ll pay more in points with these. I have a number of contacts if you wish.

As far as property is concerned here are my thoughts:

1925 is an older building you might allow greater set aside for capital expenses in case.

In order to get your rent numbers (which is doable) updating these units may be a factor. As high as the prices are where you are, this is not a clear bargain at 105K per unit - Two of those are 1/1 which are more difficult in terms of long term occupancy.

Be mindful of Insurance costs which have ticked up esp. since Irma, your loan may require full endorsement for Wind and Flooding.

I would estimate all your calculations from the Rental Calculator in the BP Tools section, try running a number of scenarios rosy and pessimistic – you may be using these as ‘justification’ with the loan officer you finally work with, everything is a negotiation!

I hope this helps, contact me if you wish.

Welcome @Joseph Mattucci

I’m wondering how everything has progressed since your post!

There are a certain number of tough facts in the market right now – prices are rising, the economy is in change & since multifamily became so fashionable there is scarcity.

Money fortunately can be made in a wide variety of ways. I think you will succeed with the following: Hard work, willing to take risks, don’t follow the herd, use leverage carefully, and learn as much as possible esp. here on BP. 

If you ever wish to swap notes reach out to me maybe we can do a deal in 2018!

Welcome @Mark McKeny

Nice to find someone nearby and Thanks for your great post! There are so many options out there and many people advocate from the standpoint of what they like or currently do. However your stated goal of many purchases over the next few years will ultimately run your reserves down no matter! You should consider it as investing in your future - the biggest thought you should give is to ‘what is the acceptable timeframe’ to retire early?

If eventually you want to own 20+ units but want that to be a smooth transition with a large margin of safety then you might be fine with doing it slowly over time and playing the long game. If you need a faster and greater leveraged method then to  @James Wise discussion you can finance multiple 2-4 unit properties, their financing will be based on cash flow. You’re certainly better off than most with a zero mortgage but you’ll have to think through whether (or not) to tap into that reserve if your need is for speed. The difference is which approach matches your goal.

Your next consideration might be in choosing the right property.

A cash flowing $800 Multi-Family is ‘better' IMO than dealing with 4 cash flowing $200 SFH's. As you probably know in our area (and many others) the MF market is red hot so I'm not sure you're going to find many deals that others aren't already chasing or prepared to pay more for. But the MF is still a good option with good returns if managed right. Depending on what time your full time jobs take, often time is a restriction on what you can do. As you are on the business planning stage, you are starting out perfectly esp. here on BP asking and checking!

if you’re still needing a margin of safety think about partnering with someone to start. Wish you the Best of Luck and keep in touch and let us know what worked for you.

I would hold off until everything is ready. You are trying to set a system where if they are immediately ready they can sign up that day (and for a place at top price). I would only show the best finished product – with the expectation that this is the normal appearance (and everything is in order) it’s also what you except back after the lease is up. So you can have a completed property condition checklist already in hand on the viewing day too. It can take time to get the right people in and hopefully not miss a month's rent but you can also pro-rate into a month & you’re still collecting security. Best of luck!

What an excellent topic! While there might be two different strategies to think of - paying off fast Vs more gain now, I have to agree with @Joe Villeneuve There should be the base assumption that in order to maximize profit you need to reduce costs that's simple math. Leverage is used in these cases to perhaps to arrive at 20 mortgaged properties following the 30Y Vs maybe only 10 following the 15Y. The long term reduced cost strategy aligns better with the 1% rule and need for greater ROI, which you might pass up considering the added (15Y) loan costs. In my mind it's a business, which needs to maximize income, those rich enough won't care. I wouldn't run on a shoestring just to pay off when I could leverage and repeat. Actually the banks in both cases (and as mentioned follow the money) are doing this to one extent or another.

Nice work @Randy Pineda

Great feeling getting the first rent check isn't it - Onward and Upward.

I actually like working class rentals, and it has to do with cash flow - but I think what you get really depends on how you screen people. My worst experiences were not low income residents, a high earning resident can easily be more trouble. When you hear there is always drama, late rents, and high turnover with extra maintenance expenses it’s a sure sign it’s your own fault unfortunately. You need to screen residents & maintain your end of the bargain @Denise Brown-Puryear Says it so well. Pick well and keep a good property. A lot of people expect this business to run on auto-pilot or turn it all over to Management Company – you’ll still have to manage them and you still need to check & verify to stay competitive. 

These are some EXCELLENT comments by @James C. and should eliminate any anxiety in the process for you, no better advice here – Your numbers have to be the guide you use!!

I would say that Cincinnati has always had a very strong local Real estate interest which is increasing with out of state investors – it’s on the circuit for many seminars and events (Great Wolf Lodge last November) and has Vena Jones Cox on WMKV and the OREIA organization etc. etc. And of course I would agree this is now an irrational market as @Brian Robbins mentions.

However I suggest you stick to your plan, the best success I had there were in the outlying areas where prices remained unaffected by what happens in Greater Cincinnati (inside the 275 loop). Try place like Clermont, Brown and Highland counties - Eastside. You could make a whole business in smaller locations places like Hillsboro, Wilmington etc. where there is value, less regulation, less investors, greater community, where word of mouth will work for your next and then next deal. 

Hope this Helps & Good Luck @Joseph Cornwell.