All Forum Posts by: Benjamin Aaker

Hi James,

Refi benefits:

You get a large chunk of tax-free money to use as you wish.

Refi Pitfalls:

Your interest rate will undoubtedly go up. Your principal will increase as well, so your monthly payments will increase.

You get a large chunk of money, but you don't immediately have a deal to spend it on, so it sits in the bank, making 0.1% while you pay 5% for the privilege of the bank sitting on it.

I'd like to suggest the HELOC. I'm a huge fan of this product. The rate will be higher than a new mortgage, but it is basically an account that is ready when you need it. You aren't paying interest on it until you use it. Talk to your banker about this possibility. There's a small annual fee and you will have to do an appraisal (just like you would for a refi).

Laws vary state to state, but if the contract is month to month, state law will have a minimum timeframe for you to give notice. I know you want to get the rehab done as quickly as possible, but be sure to be respectful of the tenant, who may have lived there for a while, and now is being asked (told) to leave. Though it is not required, a kind landlord will help them find a new place and give extra time for this.

Could you rent somewhere else while giving your tenants time to move out? Another option is to (gradually) raise the rent on your month to month tenants. If they are willing to pay market rents though the place is unrehabbed, you will have a net gain. I understand you will still need a place to live. 

Hi Nick, Congrats on getting started and asking the right questions. First, read up and ask questions to educate yourself. Second, develop a narrow criteria (#units, location, price, etc). Third, find an agent you trust, as well as a banker, property manager, and accountant. During all these, save money. Take at least 10% of each bit of income you have and save for a down payment. Finally, make a bunch of offers where the price is right. Good luck!

Worst part - Wanting to do more deals when they are tough to find!

Congratulations on your first investment! And nice work finding another bedroom and 100 sqft of area. Sounds like a big win.

Hi Stephen,

I syndicate medium multifamily, the ones that could be managed without an onsite manager or handyman, but are at least 5 units. I agree with many of the commenters. These types are largely overlooked, though the cap rates are still depressed to a degree right now. Investors are easy to find right now, but good deals are elusive. 

I'm in a mastermind group that meets weekly on Zoom. We are in the upper Midwest from SD to IL. Having a group like this is invaluable in keeping each of us on track in our investing goals. Send me a DM if you'd like to talk more about our group.

Consider a different investment strategy. Medium multifamily is very competitive but not nearly as much as single family and small multifamily. Think about retail and office space. Those are down right now. Office is experiencing a big contraction due to online work. Repurposing an office might be something you could do. I think trying to think outside the box in a location you like will serve you better than trying to find and move to a location that looks good on paper.

Happy to tell you I lost $8k on my first flip. Not happy to lose it but happy I'm still investing. If I did it over again, I would make sure I got accurate estimates of the rehab needed prior to purchasing it. I made some assumptions that didn't turn out to be true. I would also realize that losing 8k on your first deal is a very inexpensive way to get a great education.

Great insight @Drew Sygit. The buyer pool is much smaller for this house.

Is there any rehab that the place needs to get to $900 rents? That could tank the deal for you. If it is as easy as raising the rent, you might wonder why the seller hasn't done it yet. Can you afford to be in the hole for the next 6 months plus rehab time? If so, you might have a deal, even at somewhere near 79k. 

It'll be tough to find a property meeting your criteria unless you do some driving for dollars and make connections with potential sellers who haven't listed. This strategy is very competitive right now and will require a lot of education and work. It can still be done. You've come to a great place!