All Forum Posts by: Zach Scherschel

Hey Bryan, you've come to a great place, before diving into a mentor/mentee relationship on this, I'd lay out some specifics:

1. Set a goal/your why for getting in. Are you looking to retire early? Get out of the 9-5 to start a non-profit and give back? Etc.

2. Based on this goal, what are your criteria you're then looking for in the property? Single-fam, multi-fam, etc? On your first, I'd also advise you pick a "model" - STR, MTR, LTR - limit your own criteria to avoid causing more churn with the first one, do it, do it well and then think about different options/strategies.

3. Area. Based on 1 & 2, do you have the area in mind you're already looking? Is it set close to home? Considering out of state?

4. Budget. Do you have this already? A mentor can give advice on how to think about it but everyone has their own budget. 

I'm certainly not the most expert in these forums but would be happy to help! Having some thought around those items will help drive the conversation the right direction though, and it will be easier for any mentor to set you on the right path and give better advice with some of those/your own questions answered in advance!

Aligned with many of the other posts, no matter how good of a friend, new LLC and OA (operating agreement) in place is your and your friend's/partner's best and IMO only option.

I have a property with my best friend of 27 years, we still have an LLC with OAs drafted by a contract attorney for both our and our families protection if something should happen.

Good to have options, and nice work!

Similar to @Bjorn Ahlblad, I have a $3M umbrella over all my assets for ~$800/year through Progressive. I just bundled with where I hold the majority of my policies that are outside of an LLC.

I'd note with @Caroline Gerardo's comment, in most cases to get an Umbrella policy through an insurer that you already have standard coverage through for the properties, you'll need to already have a high quality policy for cost of rebuild, maybe replacement cost of items (depending on price/deductible), etc. So your primary policies should be premium coverages, and then your Umbrella over the top should really just be viewed as the safety net for potential lawsuits. 

As your primary appreciates, refi'ing/pulling equity and putting it into another appreciating asset/property allows you to lower that final cap gains impact. I.e you bought at $390k, appreciated to $1.375M, had you pulled $150k for a downpayment on another property, you'd be looking at only $350k in cap gains. 

If you haven't sold yet, you could theoretically still do this but may have to wait a month to avoid any penalties from your bank before sale. 

We bought our WA home for $520k, sold for $1.25M, 3 years later. I pulled equity from the home twice in total of $200k and used the CO refis to buy two other REIs. In the end my mortgage was $600k and we would've paid on $100k of cap gains but lowered that due to improvements made (landscaping $55k, finishing garage $20k, etc.) - The last refi was 6 months before sale, knowing we were going to sell, into an 5-year ARM and pulling $150k. Had I left all the equity, I would've owed cap gains on $300k at final sale vs what amounted to ~$15k.

Just food for thought in the future or a way to adjust now, if you haven't sold already, and eat a higher mortgage for a couple of months. 

In the same vein as @Scott E., we recently did the same, from WA to WI. 

Make sure to account for any professional work done on the property and/or all receipts you have from upgrades. Any work done, even without receipts but with spreadsheet tracking/accounting can be used by a good CPA to markdown those Cap gains. 

Another good reason to refi out mass cap gains and invest into other properties in the future as well :). 

I hold both MTR and LTR and have converted units from LTR to MTR. The biggest component to answer IMO is how good is your location? If you're close to hospitals, a University, or large development areas, converting to an MTR, marketing and getting tenants is as simple as signing LTR tenants. 

If your location or the property aren't going to be super marketable to a family or someone that needs to be close to their work, then it might not be the right option. 

An alternative approach could be getting a good PM when you move and continuing to do what you're doing while you live there, Rent by Room. Convert each of the rooms that are furnished with a separate solid core and locked door. Add some organization to the kitchen, bathroom areas, and look for single tenants that are simply looking for LTR rooms. 

LTR is always a stable and solid route if neither of those options sound worthwhile. I have no concerns with maintaining high-quality tenants and properties on LTR, but the cash flow and returns on a stable and marketable MTR are certainly greater, to @Charlie Tunstall's callout 1.3 to 1.4x rents may be average but I see closer to 2x in my market. 

The methods you listed are all good, I'd avoid Air BnB due to the % take on their end. 

I don't manage any of my own units but have 4 MTR units in my portfolio that my PM has listed through AppFolio on ~60 traditional platforms (apartments.com, trulia, etc.) but we also have it listed on FF. We've had more hits/leads and just as much success renting via traditional apartment search platforms vs FF, so I think it's really just a matter of getting it onto as many platforms as feasible for yourself and making sure it's a great place to live that is super marketable. Once we have a tenant in, we make sure to get reviews from each and find ways to incorporate into the marketing, and consistently make sure that our MTR tenants are satisfied and any reasonable needs are met. The reviews have just led to referrals and the referrals to friends of former tenants keeping us 100% occupied. 

Rather than focusing on the STR laws, consider moving to mid-term/furnished lease for MtM/3 - 6 month terms. Check into FurnishedFinder.com. You may not make the same level of income you can in an STR but you're still looking at 2-2.5x market rent vs annual lease.

Very few STR laws can impact the mid-term market because they'd have to restrict MtM lease scenarios which offer protection/benefits for tenants, and in large markets the laws are also typically tenant friendly/protective.

Think inside the law, just pivot :). 

Agreed, with @Scott E.. Also, aside from the situation of the owners, depending on the size of the bank right now, especially regional, they're highly unlikely to approve the transfer of a 3% mortgage in the current environment. 

Bank is far more likely to make a call on the loan and/or force a transfer to higher interest rate. 

Creative idea, potentially worth a shot still, worst that happens is a no and you withdraw the offer. Odds just aren't in your favor on this one. 

Hey Caleb, super similar story here, started with a single duplex 2.5 years ago with a dream to get out of the 9 - 5 grind, up to 22 units in that timeframe and continuing to scale. I use many of the methods I've learned through the BP podcasts and connection I've made on here. 

Happy to connect and share some of what I did through the first 2.5 years to grow, as you're probably not far off from where I was. 

Best,

Zach