All Forum Posts by: Alecia Loveless

I'm currently finding myself answering this very same question myself although not quite on the scale that you are on. My mortgages are much smaller because I live in a lower cost area of the country but by comparison my salary obviously is smaller too. I want to continue buying property as I'm able to amass further debt once my reserves are built up and my debt to income ratio improves with time.

I personally feel that if you have enough reserves built up to cover what you consider to be a safe amount of bills and mortgage payments than you should be safe. I'm having this argument with my mother right now who is non-supportive of my real estate investments despite that she and my father successfully invested for years, made a ton of money in rents and sold and made more money than they could need in their lifetime. She is concerned about my use of leverage and doesn't think it is a good idea.

I'm working on two deals currently, one will have a mortgage and the other will be cash because of the nature and scope of the project. I'll decide once the second project is done whether to refinance it to get some cash out and do another deal or use the excellent cash flow I'm projecting to simply help pay off the other mortgages. Either way I don't think I can go wrong.

I think your strategy is a sound one. If the buildings cash flow nicely and you eventually want to get into larger apartment buildings then I agree with trying to pay down the mortgages using the rest of the money. It will take you a few years to accomplish this strategy but you will get there. Having a down payment of close to $5 million or more after mortgage paydown and appreciation will help you get into a nice building with more units. 

While I can't speak for everyone else, I've got such a good relationship with my contractor that I take him along on my first walkthrough on the properties I go see to get an idea of rehab costs and if the building is even worth a purchase. Now I don't tire-kick every single building I see and generally have a good idea of what I want and am serious about them ahead of time so I don't totally waste his time. He knows he'll be getting the business out of it eventually to do the work and doesn't mind taking an hour to go look at his next project.

If I've got something specific in mind then I usually already have a really good idea of where my financing is going to come from. For instance right now, tomorrow, I'm offering on a 3 unit. My realtor had told me about it over the winter but wouldn't give me details. Then about 4 weeks ago he started saying in 2 weeks you can go see it, you're first. So I contacted my bank and lined up the amount of financing I needed. Now I'm ready.

I've also looked at a real fixer that will be a total project from the ground up. It will be a long term project. My contractor and I are bidding out the pieces of that which he can't do like foundation work. That price for the building will be so ridiculously low and the project so involved it will have to be a cash offer.

As you find yourself getting more and more involved and more seasoned as an investor you will find your plans will change and your needs will too. My best recommendation to you if your market is as hot as mine is would be to try to figure out what your goal is. Do you want a BRRRR that is between $50,000-$75,000 with a $25,000 repair budget? Or are you looking at something larger? If you want traditional financing you will need your down payment and most likely your rehab budget unless you get the rehab loan which I forget the number of it. Then once you are pre-qualified I would narrow down your market and look for properties, then make your offer once you find the right property for your goals and budget making it contingent on inspection and financing for your way out of the deal, and get your estimates and your inspections done during this time which is usually a 14-21 day window after the offer is accepted. Then if you don't like the estimates you can disagree with the inspection or use the financing as an out.

Just my opinion. Others may disagree with me.

I am still quite small so I use Venmo for now for tenants wishing to pay electronically. The totally free service takes 2-3 days to get to my account, and the expediated one costs $10 for a 1 day transaction. Some like electronic payments to get cash rebates, or miles or other perks, and others prefer to send certified bank checks each month which is fine too. As I'm adding more properties right now I may look to some of these recommended platforms soon. Thanks for the information everyone!

@Lucas Gibson hi. I just read The Wealthy Gardner which had a little bit of a different take on finance and thought process and planning your goals and your vision for the future. I downloaded it onto my kindle for $8.99 I think but the print version was about the same. My advice would be to continue with your education through reading the books here on BP and the ones people will recommend when someone asks for book recommendations.

@Avery Rustad When I attended the University of North Texas in the late 90s they did offer a Real Estate degree with different specializations. Not sure if they still do but the professors I had were excellent and very motivating. If I had not transferred out of the school to move to New York I would have gotten my degree in Real Estate!

I keep some funds available to me as a back up but could easily get a line of credit if needed. In my area I keep 10% for maintenance, 5% for vacancy, and 8% for capex. Of course I really only put it all in one bank account that I use to pay bills and the mortgage from. Right now I'm building up my reserves some from many properties so I'm not taking a draw from about half of my accounts but I know how much I would be taking!

@Megan Wakefield From the time I was 20 till I was about 44 I owned two bed and breakfasts. Beginning when I was 35 I took a W-2 job to offset our health insurance which was costing $1000 a month. By working it only cost $300 a month and I was earning money to boot and my partner continued to run the bed and breakfast.

I wouldn’t change much about those early years and all the people we met and the good times, but my goal for wanting to obtain financial freedom through real estate is to once again become my own boss and be able to spend my time doing things I want to do when I want to do them. For instance there’s something magical about being able to take a month or two of vacation time. Or to be able to enjoy holidays with family instead of only getting one day off and having to go back to the office the next day.

The profit from selling those beautiful bed and breakfasts Is helping finance some of my investments so in a way a piece of the original dream lives on in each new building reminding me of my goals to travel, be with family more, be my own boss, and recapture the freedoms I had before becoming a W-2 employee.

@Courtney M. I’ve been working with my agent off and on for 20 years. I’ve only stopped working with him if I’ve been out of the game. Over the last two years I bought two properties with him then listed and sold a property with him prior to starting my multi family journey.

He knew I was looking for investment property but nothing was available in the immediate area. One night I found a 4-plex about 30 minutes away. I asked him to set up a showing. We closed 45 days later. In this instance he co-broked.

Now he is bringing me a pocket listing that he’s been working on all winter long with a client he’s known for years. It’s a 3-plex and I’ll probably only have a couple hours to write up my offer after analyzing the deal as it will go live the next day if I pass on it.

I've come across a property that is dirt cheap. My contractor and I looked at it today and its down to the studs but some large projects have to be done. It needs a new roof, and to be jacked up and have a new foundation put in which is common where I am. There are holes in a wall where a chimney was ripped out and no one replaced the wood. The yard has to be regraded but contractor  felt while the foundation was being done the excavator could do this too for a few more hours work. After we parted ways with the realtor my contractor gave me a couple of figures for things  and since I have been working with him frequently I know what his subcontractors charge an hour. He gave me an all in figure to turn the building into a virtually new 2 family. I expect to pay $100,000 more for a 3 family in a few weeks that one unit has to be rehabbed in. 

I went home and using the BP calculator ran my own estimation of what I thought the rehab would cost based on the other projects we've been working on and came up with the same figure he had. Some of this is dependent on the foundation estimate. 

After all was said and done it would be a grand slam on cash flow and then depending on how much it was refinanced for it would still be a nice cash flowing deal.

The realtor didn't think we'd see the massive appreciation that's been going on in the area due to it's location, its on a somewhat busy road, but he felt that with the area's lack of nice clean new apartments there would be no problem renting it or selling it to another investor in the future. 

To those who Have tackled such a project would you do it again? Or would you recommend waiting for something that just needs mostly cosmetics in the future?

@Sam J. I have formed a great relationship with my plow guy who is also my handyman/general contractor. He coordinates all my projects for me and has electricians, plumbers, spray foam insulation people, foundation experts, everybody you could need for a project cheap.

When I go look at a property I call him up and either go pick him up or he meets me at the property and we do a walk through with the realtors and he immediately tells me yes or no and how much it’s going to cost to get it rent ready or flip ready. Then if I pursue it he comes on the building inspection because he’ll be the one getting the work on the inspection done.

After that I handle the business end and after closing we jump in together and get the work done.

If you can build your team you will create relationships like this with people who will want to see you succeed and will help you out every step of the way. Start networking. Talk with people you know ask who they use. Your accountant might know a good handyman. Ask the person who cuts your hair. You never know who will give you the best recommendation.

At the end of the day my contractors moonlight for me. I pay them 1/3 of what I’d pay them if I went through their day job companies and the work is just as good. Network, network, network.