Advice on working two deals simultaneously

12 Replies

I've come across a deal for an 8 x 1 BR 1 BA unit apartment complex at 100% occupancy with rents currently under market value.  It's near a hospital that employs a lot of travel RNs and a small university so I'm confident that it can stay rented.  By the numbers, it will cash flow $1,700 per month as is even after factoring in vacancy, cap ex.  A ton of rehab potential as well.  

The problem is that I am a physician getting ready to finish residency training (low cash on hand currently but will make $500K+ in my first year out) and I am in the process of building my own family home, something my wife has anticipated since I was in med school.  It's nothing extravagant and well below our means, but the issue is timing.  The property has only been listed 24 hrs and I know it will go fast.  Any advice on how I can make both of these deals work simultaneously?  Estimated completion for my home build is June 2022.  I'm concerned that if I get a loan for this deal now, it will affect my ability to get a mortgage for my house when it's completed.   

@Roland Glenister

Hi Roland! 

So you've got some pretty exciting items on the horizon here as far as your 1 year timeline goes it seems and I'll try to help answer this for you if I can!

Not to get too personal (or make assumptions from the gate) but most physicians finishing residency have vast amounts in student loan debt to take into consideration. If you've deferred any of those loans, you're time in not making payments will be ending soon as well it seems. 

May not be an issue for you, but if so- fist step might be to evaluate those loans and factor in those payments as well that are to come. 

Having said that while your projected earnings are great they won't be able to count towards financing now to some degree- there's not an established work history at this salary etc. as 'potential earnings' are just that, potential.

With that in mind your best option might be to work with a lender that is geared for working with new physicians and apply for a 'physician's loan', which in some cases will allow you to have minimal amount in down payment and may not have the PMI cavate that usually comes with putting less than 20% down.

Some of these lenders will work with very minimal down, knowing you're about to have a substantial  salary, and will 'factor' it in more than any other lender might. 

TD Bank, First National Bank, Flagstar Bank, Simmons Bank, Lake Michigan Credit Union, University Federal Credit Union, KeyBank- even a stop by LeverageRx would offer you some comparisons  (shop around) on these lenders. 

With that in mind if it's not right now that's in your timing, going with a conventional loan then getting a HELOC (usually very 'cheap money' to borrow at 1-2% interest) would probably work to acquire an investment property.

So let's say of this first year in making $500K, you would be using the bulk of that to pay down student loans (these are probably at highest rate of interest), then mortgage loan, then using HELOC (lowest rate) to acquire transaction funding.

In order of operations, you'd be going highest interest rate to lowest and paying down in descending order, keeping most cash flowing out in year one to (hopefully) in year two to year four at most be free from all loans. 

Not impossible to do now at all, depending on cash reserves at the moment, but what seems like the best plan of actin for proceeding if cash reserves are at a minimum- factoring in earnings yet to come. 

Deals will always be there, and I would advise making sure right now is your best timing before proceeding - if it's now, that's great, but I would not consider this a 'unicorn deal' to the tune of jump in without full consideration of a year timeline in mind personally if that makes sense. 

Hope that helps!   

There are a few of things that stand out for me:  

1 - As said @Anna Laud above , the deals will always be there.  Maybe not this one, but others will follow. 
2 - You haven't mentioned the cost, specifically how much cash will come out of your pocket for DP and for rehab, at the start
3 - If you will have 8 doors, and only $1700 total CF (that's just over $200/door), this sounds like it could be a pretty weak rental property...depending on the answer for #2 above.

Apparently @Anna Laud and I are wandering the same forums....

I'm pushing Brandon Turner's book on investing with little or no money down. There are several options you can use to purchase these properties that won't require you to spend all you have and may not even touch your credit. A lease option is one such method. Seller financing is another. The creative stuff may not work in a competitive market where speed is a factor, especially for properties that are listed on the MLS.

That being said, don't dive into investing at the expense of your personal life.  Seems to me your wife is pretty excited about the house you're building.  Don't mess that up!  There will be other properties!  I just bought one from a doctor.  He owns several places including a 27 unit apartment complex!  He's not even 40 yet, but didn't start investing until he was established in his practice.

Good luck!

@Anna Laud thank you for your thoughtful reply! You’re absolutely right... the cash isn’t here now but will be, and this deal is here now but a deal will be there later. Be patient, build my house and cash reserve, and make a well positioned move. 🙏 🙏 Thank you!

Originally posted by @Roland Glenister :

@Anna Laud thank you for your thoughtful reply! You’re absolutely right... the cash isn’t here now but will be, and this deal is here now but a deal will be there later. Be patient, build my house and cash reserve, and make a well positioned move. 🙏 🙏 Thank you!

You want to do what Anna suggested first and foremost get with a local bank and Banker that U create a relationship with and who will expect to bank you for many years to come.. They will set up your personal resi loans for you and many other facilities others simply cant.

So all your hard work will pay off in the way of preferential treatment at your bank..  Also as Joe mentioned Deals are like Street cars there is one on every corner.  Although that was a line my Dad's RE attorney would use on me 40 years ago when i would get excited on a deal.. Today there is an uber or Lyft on every corner is more appropriate..

Good luck. !!!   

 

You’re going to be making 500k a year and you’re going to pick up 8 tenants to make another 20k a year?  

Let’s guesstimate after taxes you’re bringing in 23k a month for MD job. Is the extra $1,700 a month worth it for the hours, liability, risk? and to irritate your wife?

Most people in your position just passively invest at syndication, looking at the number I'll skip this, two hundred back per month is basically zero after you count the repair cost.

Wow, thank you BP community for all of the valuable advice.  You’ve all given me a lot to think about and I feel confident now about passing this one up.  The point on syndications is well taken.  Definitely something I’m doing my research on!

Originally posted by @Roland Glenister :

Wow, thank you BP community for all of the valuable advice.  You’ve all given me a lot to think about and I feel confident now about passing this one up.  The point on syndications is well taken.  Definitely something I’m doing my research on!

You may also want to ask yourself why you are investing in real estate - what are your goals and expectations, etc. Dribbles of cash flow from a dozen or so rentals will have negligible impact on your income and lifestyle, while it will definitely suck up your valuable time in low value activities. Syndication is quite passive though you will still need to put time for due diligence. If you are ok with lower returns then REITs will be the most passive.

@Roland Glenister I don’t have too much advice in regards to your post but for you I’d recommend looking into The White Coat Investor which is a newsletter and blog I believe geared primarily at doctors but also helpful to other high earning individuals which I am not but I have gotten good advice from it as well.

They often have advice on just these sorts of situations and physician loans and paying down high amounts of student loan debt and how to structure retirement funds when you make $500,000 a year and to plan for multiple income streams!

Best of luck!

@Roland Glenister I totally agree that your best plan to grow real estate wealth is through investing in syndications. I’ve talk to countless doctors, dentists, IT professionals, and others who have tried to chase a side business like this and been miserable.


That said, if you were going to do a deal just like this in the future, I would consider furnishing the units and offering them as long-term corporate rentals to those nurses and others. Good luck!