All Forum Posts by: Rikard Lorén

Hello Jabari !

I haven't started to invest myself yet but i can share what i know with you:

You have some choices:

1: save the money up yourself for the DP and additional funds for earnest money and due diligence costs, also for reserves.

2:  Take a "producer/finder of the deal" position with a % as the "producer", you will base this accordingly on your experience with deals overall. ( If you know what you are doing and have a good track record, you can take a higher % rather if you have little experience, then you can't take the same % due to lack of experience/knowledge) you will do this and bring investors in, that get the most % of the deal. Usually they will get a prefered return and first hand on the money in the deal. I can explain even deeper in the subject later on if you want.

3: Same as the above ( option 2 ) but u will also be a investor in your own deal. ( i don't know if this is legal but in my mind it shouldn't be a problem )

4: continue to build a good track record with smaller 1-4 units with smaller funds required or if you find a good deal on a 5-10 unit building that you can bring to investors that want to join you allthought your lack of experience. You have to feel urself what you are comfortable with, are you comfortable enough to use other peoples money with not much or little experience ? If you are, then go for it, if not? Get more experience.

Personally i am aiming to buy at least a 5-unit building as my first property with investors. Before that, i'm going to educate myself and get more knowledge so i'm giving the investors a good vibe but also the deal itself should show them why they should want to invest. That's my plan..i will maybe change it overtime but for now, that is my goal when it comes to wich property i will buy as 1:st.

Hello Prince !

I haven't done any deals atm but here is my opinion if u are interested:

What kind of investor are you? Wholesaler ? Buy and hold ? Flipper ?

The question that you have to ask yourself is: What of my options with these 2 properties will take me closer to my GOAL? 

Will renting these houses out make me get closer to my GOALS ? Will wholesaleing these 2 properties get me closer to my GOALS ?

It all comes down to what Goals you have.

Personally ( my personally opinion is  what i can give you right now becouse of the lack of numbers ) i would rent them out becouse i want to become a buy and hold investor. I would do this atm becouse of the fact that i don't own any apartment complexes wich is my endgoal, if i had those apartment complexes i would probably not been in your situation but IF i was, i would sell them and invest in more complexes so i would get closer to my GOALS...

So if I were you i would look where i am atm/what situation i'm in and what i can do with the situation to get another step closer to my endgoal....

I'm glad that i could help you out Arlen !

See you around !

Hey Maurice !

I don't know if you have made a decision yet but it all comes down to your goals and priorities.

Goals: Are you going to aquire more rentals or is it just the fourplex you'r gonna own? 

If u are comfortable with it and like it, go for it, if not---> get a pm.

Priorities: Your time, do you like the feeling to get called over and fix things or would it just be easier to sacrifice a % of your cashflow and let a pm handle it ? And/or use your time to look at more deals and increase your cashflow or just do whatever you like to be doing?

Either way i would suggest you to look at the apartment/building as a business whatever the size it is, pm usually have better rates for equipment/work so in the long run, you are better off with a pm according to me.

Summary: If you look st it as a hobby, do it urself if you want. If you are serious about it you should threat it as a serious buisness and have a pm in place so the operations goes smoothly.

PROS:

1. A pm will have a better eye how to operate the property if it's a serious pm that can see that when you/your estate is succesful, he/she also is.

2. Size dosen't matter, it just comes down to HOW you operate it, if u think you can operate it better than a pm, then do it urself, if not: let a pm handle it.

3. You will not be dealing with the residents, your pm will.

The only time size matters is when things aren't going your way and you have poor management in place, then you will see a bigger loss @ a bigger property and a smaller loss @ a smaller property.

CONS:

The only con atm that i can see is if you have a bad pm @ your property, then they will destroy your property value, and that is not your goal if you invest in properties, so make sure that you get a good pm and not a bad one.

I hope my advices were to some help for you to reach a decision, cheers!

Hello Michael !

I have not yet started to invest but this is what i have learned so far:

1: Figure out why they are currently under market value. ( is it the property that is in bad condition ? If so, renovate up to standards. Is the demand in the area low? ( maybe it's better to wait out the low demand a little and stay at the current rent to not get a vacancy )

The goal here is to increase cashflow and not to fill all the units ( if you can choose between to have 3 renters with lower rents or 2 renters with 1 vacancy it's better to have lower rent and 3 renters)

If you still aren't satisfied with the situation, you can try and raise the rent in one of the month-to-month units to try the market, if the rent works and u get a renter=good, continue with the other 2, if not, switch back to the old rent to fill your unit again.

About the month-to-month leases, i would personally try to switch them to 6-12 month leases with different expire periods ( 1 in april, 1 in august and 1 in december/spread out over the year so you get more flexibility with higher/lower rents when the leases are up to maximize your cashflow) this type of thinking works better the more units you have. 

I would personally do this to have less turnover and some stability on the rent income side ( preferable 6 months, then you are not to far away from good stability @ 1 year but still have a little flexibility as the month to month lease. I belive this is the better solution becouse in theory you can have 11 turnovers in 1 year ( 1 at the end of each month ) and now i don't even count with the turnover timerate so you would not only have more turnover rate, you would also loose rental income for the days you can't rent out the unit. If you look at it from the big picture you will/would loose more money on month to month deals rather than longer/6 month leases. I belive you will have better quality renter with longer leases also. From what i have been reading you can take around 5-10% more for the risk of month to month, but in the long run i think you will loose, it's up to you to decide.

*Just wanted to mention as a friendly reminder that all of this should you guys have planned BEFORE buying the property/have a bussiness plan in place so you know what actions to take to maximize your cashflow for the property*

!! Warning/Caution !!

I have no experience with the legals/papperwork required to make the changes i just wrote above, so check that part up before taking any action !

Hello Jonathan !

As Adam just said, there is no right or wrong formula to structure deals.

You have to develop your own agreements and terms, something that you AND your lenders will be satisfied with. You could create a base concept and build on and change things from there with each approach to lenders since each lender is different from the other in what they value in a loan/deal.

Don't just look at the lenders as lenders, you should look at them as your partners and threat them fairly. Becouse if you threat them right, they will come back and lend you more money, threat them unfair and they will not come back or even join you from the beginning. At the same time you should not change the whole deal for a lender so it just fits them, then that particular lender maybe is not the right fit for you, skip and move on to the next one.

My point is: Don't be greedy, make something up that works for both you and the lender and if u want the borrowing/loan to appear more attractive, favour the lender (  an extra % int rate for example ), just small things that makes the deal/loan appear more favourable for them. I guess this concept is more for investors but i still think you should have the same mindset when dealing with lenders.

Hello Arlen!

I have not started to invest my self yet but as far as i have learned is the following:

If you want to go alone at it, u are better of using smaller amout for downpayments for several properties than just one. And now i am not talking about to max out your 100 k on 5 properties with a 20 k down, rather that you go for like 2/3 properties ( i assume that you will buy 1 each and not both/all three at the same time ) and with each one you will have escrow/earnest money and reserves for repairs and budget for future repairs/fix.

 I mean if you would buy 1 property for 100 k and you do not have more money and you would back out of the deal becouse of your findings during due diligence and you are not getting to a agreement with the seller for a reduced price or that you simply do not get your loan from the bank when they do their own due diligence then you are out of your due diligence money. ( since you have a pretty big DP with 100 k, your due diligence will cost more than a smaller estate ) and you will also be out of your earnest money if your not having the agreement that if you fail to bring the funds your escrow money will be return ( can not remember the name for it ) but this should not be a problem becouse you should never go forward with a contract that not has this option built in it.

So now to the point: I do not know the exactly sum of money you will be using for your due diligence but you will be out of that money and will not come back with the same amout ( 100 k ) for your next deal and if you would go through with the deal you will not have the reserve money becouse all of your money is in the downpayment.

This example is just for you if u do not have extra sources for reserves and due diligence and the small other stuff ( depends on the contract with the closing costs and permits/contracts ). But the. again, even if you have those costs covered i would personally not go in with all my money for 1 100 k deal. Then my investing would come to a stop and i would not want that.

*Summary* Don't use all your money for 1 DP on 1 deal and make sure that u have extra money for all costs for every deal so you keep urself floating after each deal.

was also thinking about the computer / car / meal meetings that is for the company, this would then be under/in Rgcompanies fees, right? 

Hi!

So currently I'm learning and reading about real estate. My plan is to start small ( 5+ unit ) and get experience and snowball forward.

So i was just thinking that it would be a good thing to have my business set up and ready to go once i decide to look closer on a property. How does the flow work ?

From what i have learned so far/ the picture of it that i have is that u have a company ( LLC ) "Rgcompanies" as example, that i own myself where i will also put in some money for exspenses, fees and sush that i will be using thruout the the day i decide to look closer on a property until i own it. The property will be in its own LLC and as the cashflow comes in, i redirect it back to my main company "Rgcompanies" and continue to do so with all new properties.

Have i got the picture of the flow right or did i get it all wrong? 

Question: what companies/titles do u set up before buying properties and how does the cashflow between  them work?

So sorry for the late reply, but i want to thank you all for your insight and opinions!

I guess we will buy private but the option for llc is still there, the plan is to put it in a llc later on anyway further down the road, but when we buy it, it will be without investors, i don't feel enough confident to bring investors on my first deal with no experience.