All Forum Posts by: Andrew Weiner

I think that the current responses have provided similar insight to what I would recommend. I would add that even though you have an aggressive but attainable income goal that REI is a marathon, not a sprint. Picking up one property and getting comfortable with the REI process and your industry relationships might take a few months and you will learn some lessons that will help you on your next property. For long term buy and hold cash producing properties I like C+ and better areas, your up front COC return will be a bit lower but over the long term the properties and neighborhoods tend to be more stable and you have a better chance at appreciation. We see properties in lower end areas get neglected and turn over between owners frequently because they end up costing a lot more than was projected. If you can get a single family in a B area your COC will be lower on paper but my thought is that appreciation is much better which helps lower your downside risk over time and has longer term renters which reduces expenses (less turn and vacancy cost). I get some long term leases with great tenants in the nicer areas, in many cases I see professional students who have families (law, medical, dental, etc.) and want to be in the better school districts.

1.With long distance investing for a first investment (my area is basically impossible to make numbers work for rental investments) would it be worth the extra effort to buy and rehab foreclosures to rent or would it be wise to start simple and go with a ready to rent property for less returns? I would advise getting turn key or near turn key.  If you buy a property with tenants in place then you have immediate cash flow and can build some relationships and gain experience before taking on a project with more risk.  

2.When paying for a property management company will they have in-house maintenance cover small repairs and just send the owner a bill or do they typically have the owner (me) find handymen/contractors and deal with repairs myself?  Some management companies require that you use their maintenance while others will provide maintenance but not require that use them.  You don't want to be in a position to find people remotely, you might hit on a gem or you might have something that is less than stellar.  

3.I have funds enough to buy a few properties outright and not have interest to pay, but would it make more sense to take a loan and reap the benefits of having less capital into the investment?  In general your COC returns are better when you finance, that being said you are reaping less total dollars in monthly return.  If you have capital to do a few at a time then you can buy properties, season them (wait usually 6 months), refi and repeat.  This will get you more properties, just make sure that you keep capital reserves to handle any unexpected events that come up.  Also buying in cash will allow you to make more aggressive offers.  

3a.Is it too risky to dive in with 3+ properties immediately; should I start with 1 and see if real estate investing suits me?  Its not necessarily risky to buy three properties but if REI is not for you then its just more work to back out.  Selling houses isn't like selling a stock, it takes time and costs money so if you haven't held them for long or had much appreciation you could lose money.  

4.What are your strategies for finding desirable neighborhoods for renters while not living in the city you're investing in?  I invest locally so I have to pass on this question.  

5.How many properties warrants an LLC being formed instead of just owning them personally?  I would encourage buying in an LLC for even one property if you are a cash buyer.  If you plan to take out a mortgage you will not qualify for all mortgages if the house is in the name of an LLC, and that applies to cash out refi's as well.  

6.Even with the large amounts of "competition" in Cleveland and Milwaukee there seem to be quite a few properties with numbers that still work for me. Do you still think these markets are good places to start or could a beginner do better elsewhere?  You can still find a good deal, you might just need to wait a bit longer to identify and get an offer accepted in current market conditions.  I will caution you that many times numbers work on paper based on what you can see online but don't work out in reality.  For example East Cleveland numbers always look great but the reality never lives up to the hype.  You will hear lots of real estate professionals say that you make your money when you buy properties.  Every market can make money and every market can do the opposite.  Deferred maintenance can be very costly, getting a great property inspector and being willing to walk away from a property because there are too many items noted can save you from making more costly mistakes.  I also would encourage you to call the inspector and ask them for their opinion, they usually won't put it in their report but they see so many properties and usually have a valuable gut feeling on whether its a good buy or not.  

Is it just one property?  Dollar bank does portfolio loans but the terms aren’t as good and you need to be over 100k in cash out I think.  

Hi Mike,

I would recommend coming out and looking at the market in person when you can.  Once you are in the 50k and less range it’s a very slim line between a money pit and a value.  There are some areas that are difficult to get a rehab completed due to constant vandalism.  If you want to focus on lower cost properties I would try to find SFHs, they rent reasonably well on section 8 and the turn over is pretty low in my experience.  Check out north Collinwood, or Lee-Harvard, you might be able to find some properties in Brooklyn also.

I’ll send a couple names in a DM

I have a few lenders that I have worked with that I can send you the contact information for.  I believe that the 6 month seasoning has to do with Fannie/Freddie requirements and will be part of any conforming loan.  If you want to go to non conforming then you can get money fast but the rates and fees are generally higher.  

Just sent you a message.  It’s a guy I have used for my own properties.

I’m very sorry to hear that this happened to you and I hope it comes to a quick resolution.  Here are two reputable firms in the area, if they can’t directly help they will be able to direct you to someone who can.

Lieberman, Dvorin, & Dowd.
Powers, Friedman, linn.

I know a few smaller independents but for larger know firms this should be a start.  You can DM me for me details on them.

This is something you should discuss make sure to touch base with your CPA or Legal advisor about, personal circumstances and change how to best set things up. Also if you need financing you should make sure you have a lender that will lend on a property owned by an LLC, many banks need properties to be in personal names for financing. Some lenders also will not care if you quit claim the deed into an LLC's name after closing. However if/when you want to refi you may need to move the title back into your name.

@Michael Orlando I only invest in Cleveland so I don’t want to speak to the other cities since I don’t have first had knowledge.  Even if a market is a “good market”, selecting the right neighborhood and property is more important.  I know I’m a broken record but you can buy a money pit in the best market and hit a home run in a less hyped area.  Your local team will need to be experienced investors who can tell you about the immediate area and give you a good idea what kind of deferred maintenance is there.