All Forum Posts by: Ben Fernandez

Great post! These are common mistakes when you don't buy right!

The "buck gets passed" a lot in rental properties. Where landlords make big mistakes buying rental property well above it's actual market value. Quite often these tend to be slum lords properties, and they make no upgrades - just bandaids. Then they sell the property on the MLS for well above what it's worth.

The hidden bandaids and low sticker price makes suckers of new buyers not recognizing all the deferred maintenance and high potential money pit...Appearing to be "good numbers" based upon the rent it's getting.

This cycle happens frequently and when you don't know how to assess repairs, and you buy wrong, you end up holding the bag. Then the owner anticipates a safe exit without encountering too much of a loss, but making an effort to pass as much of the pain off on another sucker because they got duped. 

These properties appear as if they were only worth $40k to begin with. But the $80k looked so good...

Regardless of where you buy, know what your buying. Properly assess expenses, upgrades, and asset class, so you're prepared for the character type of that asset.

Good deal. Your plan sounds well thought out. Keep setting your goals in doubles and you'll be more likely to meet them. 

Make sure the numbers in each project align with long-term goals. I recommend getting with a local rea estate professional to understand the historic appreciation over the last 5, 10 and 20 years. That'll help your projections and forecasting. I just did mine for the central PA region by zip code.

Nice work. Keep it up. 

Keep up the good work Daniel! Your focus and dedication is evident.

Portland looks more affordable and looks to also have a better price-to-rent ratio than Vancouver... If you are looking to invest in your backyard.

However, in both Vancouver and Portland, with price points showing a median home price of ~$480k and MF showing about $200k+ per unit, cash flow will be a challenging task. A market like yours is prone for little-to-no cash flow, but favorable appreciation.

If you are putting a substantial down payment up (likely 30%+), you could accomplish both. However you need to also consider your COC return and where the best use of your cash is. Comparing ROR to potential appreciation on your cash. Unless you can get 8%+ on appreciation, you're better off putting the cash into the stock market. But, let's stick to real estate...

When determining where to put your money to work, you always have strategies that provide returns in short-term periods of time and those that provide returns in long-term periods of time. Of which, some being unrealized gains.

Here are some options:

Tax liens - provides potential for interest income and the potential to gain ownership. Can take anywhere from 60 days to 4 years - depending on the redemption period.

Tax deeds - provides potential for interest income and to gain ownership. Can take anywhere from 60 days to 4 years - depending on the redemption period.

With these two strategies, you can either fix and flip after - renovate, rent and hold or wholetail. This leads into the next short-term strategies.

Fix and Flip - provides potential to invest lumps sums and earn a multiple back in a short period of time.

BRRRR - provides potential to invest lumps sums and earn a multiple back in a short period of time on the cash out refinance. However, this is a buy and hold strategy for cash flow, equity paydown and (hopefully) appreciation. This strategy provides incentives for (potentially) both short and long-term investment strategies simultaneously.

Buy and Hold - provides either; little-to-no cash flow and high appreciation, high cash flow and little-to-no appreciation, or a little of both. This is a long-term strategy that does not return your lump sum investment for a long period of time (if at all).

Bank auctions is another option to entertain.

Being that you have partners, I realize you all are not considering house hacking. But for a personal strategy, I recommend this for if you do buy where you are residing. The rent rates look good and if you get a multifamily, you should get the majority of your mortgage covered if not the entire amount (if you put down 25%+). This would be a long term strategy.

Depending on your access to deal flow, you can conduct these options in your market or outside of your market. I do not recommend flipping or BRRRR'ing remotely to start. You can manage buy and holds, but not value add until you get more experience and can manage people effectively. For the cash flow models, you'll likely need to seek remote opportunities. If you're considering PA or assistance with tax auction consulting, give me a buzz.

Feel free to connect for further dialog. Hope this helps.

No stats...But, I would guess residential assisted living would make this list. Especially with the amount of baby boomers retiring in addition to the subsidies. 

Section 8 housing as well...

There is no need to entertain opinions on the ARV unless you feel uncertain to begin with.

Two things make or break a deal when it comes to numbers; the ARV and the repair costs.

Although its rather odd, I've seen realtors and wholesalers use comparables they shouldn't have been using at all. Also, when you see someone with 8, 9, 10 comps...they don't know what they are doing. (Three is ideal, two will suffice and four is one extra for good measure.)

I'd lean more toward your repair costs being off then your ARV. But, that's just me speaking from where I've seen people display inaccuracies most frequently. I've had wholesalers tell me a reno was $10k and it turns out to be $60k...(I never believed $10k to begin with, but creditability must be measured and confirmed.)

If you aren't confident in your skills, anyone can talk you down. Confidence comes from knowledge and then experience (on repeat). Keep in mind some investors will outright lie about what they feel is a comp or not just to see if you know your stuff and/or to back you down.

Real estate has many manipulative tactics. So be prepared.

If its helpful, DM me and I'll send you a checklist.

Penciling this...Deal looks tight unless you can keep your operating expenses below 40%.

At 60% average occupancy and $250 average daily rate you're at $54,750 gross income.

If you can manage to keep operating expenses below 40%, which I doubt because most PM's are charging at least 20% alone before taxes, insurance, turnover/maintenance, utilities, internet, accounting etc... But that brings your NOI to $32,850.

Your debt service is $29,820.

So, at these figures, your cash flow is $252/month.

You also have the expense of rehabbing/furnishing it that you need to determine the break even point for, based upon the monthly cash flow. So, you'd definitely be negative starting out. For example if your expense was $20,000, it would take you 80 months to break even.

If you like Central PA (Lancaster, Gettysburg, Hershey, Harrisburg, etc), I have other optional STR's as well.

BRRRR is a value add buy and hold strategy. So instead of selling, you'd refinance and hold the property as a rental property.

This means you must make sure the property cash flows in it's completed state.

But if you intend to flip, that's fine. Just make sure you account for all costs. As you indicated, your profit is accurate.

However, with $24k of your $60k being selling costs, I doubt $36k would carry front end closing costs, holding costs and renovations. You aren't taking a $100k property to $240k with ~$25k in renovation funds. If you do, more power to you. You found a back-to-back grand slam deal.

To answer the other portion of the inquiry, you could partner with 5 people you know, form an LLC and make it happen. If you are soliciting to find investors to seek these investors out, now you're trending into the capital raising realm where you have SEC compliance. For that you want to speak with an attorney to make sure you don't cross any lines you shouldn't be crossing.

Certainly. You're on track. You just need to troubleshoot your arrival time based upon how you're investing now. Forward projections essentially...

Pretty much figuring out what your ideal multifamily property costs and when you'd be prepared to purchase it based upon your investment strategy. (This includes debt pay down unless you prefer otherwise.)

The appreciation plays can be a tricky due to the waiting time and no real guarantee the appreciation continues its historic trend. I doubt most of everything will follow its 5 year appreciation trend. We've just experienced a huge incline these last 5 years that'll likely be unmatched (in most areas).

Real estate is a strategy based game of combining fast and slow returns (or investment strategies) in order to reach your goal. It's ideal you know and can perform the strategies that grant you either. 

Why not hire a cleaning and maintenance person for a flat fee per booking? You'll likely need paint touch ups and other handyman things. Maybe $100-$150 per turnover depending on how big the place is.