Looking for seasoned investor thoughts in my next step.
Handyman · Member since 2019 · 6 posts · 6 votes
Looking for seasoned investor thoughts in my next step.
Most Popular Reply
Alecia LovelessPro Member
Member since 2019 · 3k+ posts · 2k+ votes@Colin Brown Simply get an umbrella policy to cover the liability of holding the property in your own name.
19 Replies
- Lender · Playa del Carmen, México · Member since 2014 · 2k+ posts · 1k+ votes1y
Quote from @Daniel Tywater:
Purchased a rental property approximately 3 years ago out of nowhere with no experience what so ever. I did a cash out refi on my primary residence and paid all cash. Original purchase price was $135k and put $10k to bring it to date. Home is now valued at approximately $375k. Fast foward to today, I want to start investing more. I found a duplex for $359k that checks all the boxes for me. Just wondering what are some of the ways you would structure this next purchase. Also I have not formed an LLC, but not opposed to creating one either.
Daniel, assuming your underwriting is sound, the next steps are pretty straightforward:
1. find yourself a great private lender
2. purchase for cash
3. complete your rehab
4. secure a tenant
5. refi with a DSCR loan.
- Handyman · Member since 2019 · 6 posts · 6 votes1y
Quote from @Mitch Messer:
Quote from @Daniel Tywater:
Purchased a rental property approximately 3 years ago out of nowhere with no experience what so ever. I did a cash out refi on my primary residence and paid all cash. Original purchase price was $135k and put $10k to bring it to date. Home is now valued at approximately $375k. Fast foward to today, I want to start investing more. I found a duplex for $359k that checks all the boxes for me. Just wondering what are some of the ways you would structure this next purchase. Also I have not formed an LLC, but not opposed to creating one either.
Daniel, assuming your underwriting is sound, the next steps are pretty straightforward:
1. find yourself a great private lender
2. purchase for cash
3. complete your rehab
4. secure a tenant
5. refi with a DSCR loan.
Why not go straight to DSCR? Duplex is already rented on both sides with long term tenants. Would you avoid conventional all together?
- Lender · Playa del Carmen, México · Member since 2014 · 2k+ posts · 1k+ votes1y
Quote from @Daniel Tywater:
Quote from @Mitch Messer:
Quote from @Daniel Tywater:
Purchased a rental property approximately 3 years ago out of nowhere with no experience what so ever. I did a cash out refi on my primary residence and paid all cash. Original purchase price was $135k and put $10k to bring it to date. Home is now valued at approximately $375k. Fast foward to today, I want to start investing more. I found a duplex for $359k that checks all the boxes for me. Just wondering what are some of the ways you would structure this next purchase. Also I have not formed an LLC, but not opposed to creating one either.
Daniel, assuming your underwriting is sound, the next steps are pretty straightforward:
1. find yourself a great private lender
2. purchase for cash
3. complete your rehab
4. secure a tenant
5. refi with a DSCR loan.
Why not go straight to DSCR? Duplex is already rented on both sides with long term tenants. Would you avoid conventional all together?
If the duplex is already fully rented with long-term tenants, my first question would be "Why is the seller selling it?"
If there's no rehab to be done to increase value and I can't raise rents, odds are very good that this investment is going to yield mediocre returns at best. (I'm betting the seller is asking for top dollar.)
What do you estimate your cash-on-cash return to be?
- Handyman · Member since 2019 · 6 posts · 6 votes1ySeller has 2 on the same road and purchased at the same time 4 years ago. He listed both at the same time. I am unaware of reasoning at the moment. Estimated CoC is 11% self managed.
Quote from @Mitch Messer:
Quote from @Daniel Tywater:
Quote from @Mitch Messer:
Quote from @Daniel Tywater:
Purchased a rental property approximately 3 years ago out of nowhere with no experience what so ever. I did a cash out refi on my primary residence and paid all cash. Original purchase price was $135k and put $10k to bring it to date. Home is now valued at approximately $375k. Fast foward to today, I want to start investing more. I found a duplex for $359k that checks all the boxes for me. Just wondering what are some of the ways you would structure this next purchase. Also I have not formed an LLC, but not opposed to creating one either.
Daniel, assuming your underwriting is sound, the next steps are pretty straightforward:
1. find yourself a great private lender
2. purchase for cash
3. complete your rehab
4. secure a tenant
5. refi with a DSCR loan.
Why not go straight to DSCR? Duplex is already rented on both sides with long term tenants. Would you avoid conventional all together?
If the duplex is already fully rented with long-term tenants, my first question would be "Why is the seller selling it?"
If there's no rehab to be done to increase value and I can't raise rents, odds are very good that this investment is going to yield mediocre returns at best. (I'm betting the seller is asking for top dollar.)
What do you estimate your cash-on-cash return to be?
- Lender · Playa del Carmen, México · Member since 2014 · 2k+ posts · 1k+ votes1y
Quote from @Daniel Tywater:
Seller has 2 on the same road and purchased at the same time 4 years ago. He listed both at the same time. I am unaware of reasoning at the moment. Estimated CoC is 11% self managed.Quote from @Mitch Messer:
Quote from @Daniel Tywater:
Quote from @Mitch Messer:
Quote from @Daniel Tywater:
Purchased a rental property approximately 3 years ago out of nowhere with no experience what so ever. I did a cash out refi on my primary residence and paid all cash. Original purchase price was $135k and put $10k to bring it to date. Home is now valued at approximately $375k. Fast foward to today, I want to start investing more. I found a duplex for $359k that checks all the boxes for me. Just wondering what are some of the ways you would structure this next purchase. Also I have not formed an LLC, but not opposed to creating one either.
Daniel, assuming your underwriting is sound, the next steps are pretty straightforward:
1. find yourself a great private lender
2. purchase for cash
3. complete your rehab
4. secure a tenant
5. refi with a DSCR loan.
Why not go straight to DSCR? Duplex is already rented on both sides with long term tenants. Would you avoid conventional all together?
If the duplex is already fully rented with long-term tenants, my first question would be "Why is the seller selling it?"
If there's no rehab to be done to increase value and I can't raise rents, odds are very good that this investment is going to yield mediocre returns at best. (I'm betting the seller is asking for top dollar.)
What do you estimate your cash-on-cash return to be?
As someone who made this mistake repeatedly in my real estate career, I would beg you not to exclude professional management costs from your operating expenses.
Management is not an optional expense. You're gonna pay for it, whether you do it yourself or hire a PM. (In fact, if you're not experienced, you'll likely pay more doing it yourself!)
So, considering market-rate management fees, realistic vacancy loss, property taxes, insurance, capital expenses, and any other real-world expense you'll encounter, what's your TRUE cash-on-cash return?
I can guarantee you: It's not 11%.
- Lender · Member since 2021 · 495 posts · 130 votes1y
Quote from @Mitch Messer:
Quote from @Daniel Tywater:
Seller has 2 on the same road and purchased at the same time 4 years ago. He listed both at the same time. I am unaware of reasoning at the moment. Estimated CoC is 11% self managed.Quote from @Mitch Messer:
Quote from @Daniel Tywater:
Quote from @Mitch Messer:
Quote from @Daniel Tywater:
Purchased a rental property approximately 3 years ago out of nowhere with no experience what so ever. I did a cash out refi on my primary residence and paid all cash. Original purchase price was $135k and put $10k to bring it to date. Home is now valued at approximately $375k. Fast foward to today, I want to start investing more. I found a duplex for $359k that checks all the boxes for me. Just wondering what are some of the ways you would structure this next purchase. Also I have not formed an LLC, but not opposed to creating one either.
Daniel, assuming your underwriting is sound, the next steps are pretty straightforward:
1. find yourself a great private lender
2. purchase for cash
3. complete your rehab
4. secure a tenant
5. refi with a DSCR loan.
Why not go straight to DSCR? Duplex is already rented on both sides with long term tenants. Would you avoid conventional all together?
If the duplex is already fully rented with long-term tenants, my first question would be "Why is the seller selling it?"
If there's no rehab to be done to increase value and I can't raise rents, odds are very good that this investment is going to yield mediocre returns at best. (I'm betting the seller is asking for top dollar.)
What do you estimate your cash-on-cash return to be?
As someone who made this mistake repeatedly in my real estate career, I would beg you not to exclude professional management costs from your operating expenses.
Management is not an optional expense. You're gonna pay for it, whether you do it yourself or hire a PM. (In fact, if you're not experienced, you'll likely pay more doing it yourself!)
So, considering market-rate management fees, realistic vacancy loss, property taxes, insurance, capital expenses, and any other real-world expense you'll encounter, what's your TRUE cash-on-cash return?
I can guarantee you: It's not 11%.
You could tackle with a conventional loan for an investment property at 75% ltv (being a duplex) or 80% ltv with a DSCR loan. The conventional loan will have lower costs and no prepay, where a DSCR loan could be the opposite, while affording other benefits (entity ownership, higher ltv, underwriting ease, etc). You could also househack and have a lower downpayment as something as a worthwhile consideration.
- Lender · Nationwide · Member since 2023 · 362 posts · 237 votes1y
There are few ways you can go about it. DSCR, another cash out refi, etc. Happy to chat through the pros and cons of the different scenarios.
- 1ySeth McGatheyBusiness MemberReal Estate Agent · Milwaukee WI · Member since 2024 · 318 posts · 252 votes
I feel like we need more info. What is your goal with this purchase? What are the boxes it checks? Is this a cashflow, appreciation, tax benefit or some other play? For each of these options, how much do you expect to get from each of those plays?
Seth McGathey - Shorewest Realtor4.913 Reviews- Handyman · Member since 2019 · 6 posts · 6 votes1yMainly looking for appreciation. Cash flow would be an added bonus. This one will cash flow approximately $400/monthly. My biggest draw to this one, is it is local and allows me to be more hands on as I continue to grow and learn this business. I do have a good w2 job that pays well with minimal debt that allows me to have a cushion.
Quote from @Seth McGathey:
I feel like we need more info. What is your goal with this purchase? What are the boxes it checks? Is this a cashflow, appreciation, tax benefit or some other play? For each of these options, how much do you expect to get from each of those plays?
- 1ySeth McGatheyBusiness MemberReal Estate Agent · Milwaukee WI · Member since 2024 · 318 posts · 252 votes
@Daniel Tywater what is that $400 cashflow based on? Because from what your question seems to ask, is how to structure the deal. The way you structure it could drastically change that number.
Seth McGathey - Shorewest Realtor4.913 Reviews - Handyman · Member since 2019 · 6 posts · 6 votes1y
Quote from @Seth McGathey:
@Daniel Tywater what is that $400 cashflow based on? Because from what your question seems to ask, is how to structure the deal. The way you structure it could drastically change that number.
That would be conventional with 20% down.
- 1ySeth McGatheyBusiness MemberReal Estate Agent · Milwaukee WI · Member since 2024 · 318 posts · 252 votes
@Daniel Tywater seems like if you can afford the down payment doing conventional and still get $400 cashflow and are expecting decent appreciation, what else would be your goal here? Seems like a great deal as is? Is there something additional you want out of it that makes you consider going another route?
Seth McGathey - Shorewest Realtor4.913 Reviews - Handyman · Member since 2019 · 6 posts · 6 votes1yNo, really just wanting feedback how seasoned investors would structure it with the many different ways it could be structured. Information overload can be paralyzing at times. I tend to 2nd guess myself, so hearing from people who have been actively in the business gives me some reassurance. I appreciate any and all inputs and thoughts.
Quote from @Seth McGathey:
@Daniel Tywater seems like if you can afford the down payment doing conventional and still get $400 cashflow and are expecting decent appreciation, what else would be your goal here? Seems like a great deal as is? Is there something additional you want out of it that makes you consider going another route?
- 1ySeth McGatheyBusiness MemberReal Estate Agent · Milwaukee WI · Member since 2024 · 318 posts · 252 votes
@Daniel Tywater yea, I say don't make things complicated, if you have a deal that works with conventional loan, no need to get complicated by getting greedy. Complication adds risk, risk can cause losses. Instead, take the simple route unless there is reason not to. That's just my opinion though and how I try to invest.
Seth McGathey - Shorewest Realtor4.913 Reviews
- 1yEmily ValenzuelaPro MemberSpecialist · Georgetown, TX · Member since 2018 · 48 posts · 24 votes
Hey Daniel,
Welcome, and congratulations on getting off to a strong start. If you have enough money to put 20-30% down, a decent credit score, and steady income, I see no reason why you can't qualify for a conventional loan as they tend to have the best rates and will not require an LLC to qualify.
I recommend playing with the Bigger Pockets Rent Estimator Calculator while you are considering your various finance options (and offer amount) to make sure that whatever financing option you go with the property will still cash flow for you after all expenses are covered. If not, walk away and consider working with an agent who is experienced at working with investors to help you grow your portfolio. Either way, best of luck to you my friend!
- 1yColin BrownPro MemberMember since 2025 · 2 posts · 0 votes
@Emily Valenzuela I'm curious, as a new investor myself, why use a conventional? Wouldn't that be risky if the home is linked to a name, which could allow for tenants to sue?
- 1yAlecia LovelessPro MemberMember since 2019 · 3k+ posts · 2k+ votes
@Colin Brown Simply get an umbrella policy to cover the liability of holding the property in your own name.
- 1yColin BrownPro MemberMember since 2025 · 2 posts · 0 votes
@Alecia Loveless this helps, thank you! It makes sense because from what I've heard, it's better to max out the number of conventional loans that one can get before utilizing DSCR loans
- Tulsa ok · Member since 2025 · 84 posts · 60 votes1y
@Daniel Tywater it sounds like you are moving in the right direction. Dont get extravagant on finacing if the deal works with easy conventional financing you can build a relationship with local bankers that will help build your rentals up. Its what ive done for 20+ years and was getting loans during 2008 and 09 when it was impossible to get financing. Also if you can go hands on and learn management and repairs you will be light years ahead of other investors in 5 to 10 years paying for management fees and contractor costs. It will be a learning experience with headaches and hard at times but anything worth while is. Its how I started and I still manage and rehab my own properties and my margins the last 11 years average at 68% before debt service which blows national averages out of the water. Its impossible to run those margins without doing rehab and management myself. We save 40 to 60% on contractor fees a year doing it our self. I just turned over a rental that was outdated and needed to have a complete bathroom remodel, all new windows (11) all new exterior siding and interior exterior paint new garage door motor for under $12k. I saved myself 18k to 25k if a sub contractors would have done it.
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