All Forum Posts by: Benjamin Aaker

That sounds like a nice investment you have made in terms of appreciation. Though maybe you aren't thinking so in terms of cash flow. I think you've answered your question - you are not finding benefit in renting it out and you think it's too large for a retirement home. Selling now seems like a good idea given that information. 

You can get a home warranty from a third party and don't have to warrant it yourself. You can negotiate on the sale price to factor in this cost as well. 

I'm a big fan of mixed-use. Probably I'm less excited about a medical business on the ground floor. Don't get me wrong - I love those tenants, but you don't have the synergy for your residential tenants. Mixed use can have big returns if you find some retail that suits your residential tenants (restaurant, retail, coffee shop...). They will use the dentist but probably only every 6 months.

If you can finance it yourself,that's almost always better than taking on a partner. 
If you can have 10-12 units on the second floor, then it seems like you would have the footprint for multiple commercial units below. Wife takes one, and get the others synergies listed in the above paragraph. 

Keep in mind that you'll have a negative cash flow for a year or more as you do the lease-ups, though pre-leasing for the commercial level is a good idea.

Quote from @Vincent Pflieger:

Quote from @Benjamin Aaker:

I'd suspect that Prime is also doing bookkeeping services. No reason it should cost that much otherwise. The other one is pretty high, but I see you are in Brooklyn so might be reasonable.

When I started, I interviewed local CPAs who had other similar clients. I asked for and interviewed references. I owned my first property in my name, then quit-claim deeded it over to an LLC. Now, I have multiple LLCs which each do a tax return.

Thank you for your response, Benjamin.

Prime does handle bookkeeping throughout the year, this is why it is expensive, but it may not be particularly useful for me at this time.

Would you say the $1,500 option (Taxtra) for tax preparation and ongoing support throughout the year (including answering questions and responding to IRS letters) is within a reasonable range?

I appreciate your time—thanks again!

Seems reasonable, do your due diligence in determining if they are right for you, though. 

It's going to be difficult to find a hard money lender with a term over 2 years. They make money on the quick turnaround loans. Why do you want hard money if you are happy with a much longer term? Why not just finance? If you have no money for down payment, you may need to rethink your plan and start saving now. 

Sorry to hear about this problem. It's even more difficult living so far away. I think you should start by getting the financials and condo docs together. There must be some mechanism for selecting a president or for making decisions. I don't know if $600 a month in HOA budget is typical for your area or not. Look for what is being spent from this fund.

The issue is that the HOA is running out of funds? If there is mismanagement you probably can withhold payments to the HOA until it is straightened out. This could have a lot of down-stream complications and I'm not an attorney - so maybe ask your 2 lawyers.

Welcome to BP, Angelyn! 
My first bet of advise to you is to read Gary Keller's The Millionaire Real Estate Investor. This book has great information on how to evaluate deals and will tell you about the metrics you are asking. House hacking is a great way to get started. Can you buy a 4 plex instead? You get the same FHA benefit and have a better economy of scale renting 3 units instead of 1. You should be finding a good RE agent and banker right now. Save money for the down payment. 

Congratulations on reading the #1 best real estate book. The cap rate is one tool among many and this one is really only able to give an apples-to-apples comparison about the sale price across multiple commercial properties. To use it, you have to make a lot of assumptions. A deal may have a good cap rate, but when you factor in repairs, acquisition costs, and debt service, you could still be under water. 
You should do much more underwriting before taking the time to walk the property. You'll waste too much time viewing duds. Use the information in the book to help with this and do it before contacting the seller. This will rule out 90-99% of deals right away. 
Best to use your own numbers to calculate rehab costs, but I understand it is difficult starting out. Get a trusted contractor to go through the walkthrough with you. 
I'm not following your last sentence regarding NOI. NOI is the line item left when ordinary expenses are taken out of income. Now is the time to subtract the debt service and calculate your cash on cash return. I'm not saying that these things are all you need to do, just the typical order. After the walkthrough, calculations of rehab costs, and underwriting the deal again, you are ready to make your offer. Good luck.

1. Unless the loan is a much better rate than the HELOC, which it probably won't be, then keep the HELOC and don't pay the origination fee on a second mortgage. Do you think interest rates will rise in the near-future? If the HELOC rate gets out of hand, then go to the bank at that time. I don't see you getting a huge amount of cash out of this property with a new loan, anyway. The bank will only finance 80% of the value (272k). Minus the mortgage of 187k leaves 85k. Minus the HELOC leaves you with 9k.

2. Seems like your only option is to save up cash. I don't think now is a bad time to buy, just maybe for your situation it is.

3. Alternatives would be to look for a partner or sell one of the properties. 

I'd suspect that Prime is also doing bookkeeping services. No reason it should cost that much otherwise. The other one is pretty high, but I see you are in Brooklyn so might be reasonable.

When I started, I interviewed local CPAs who had other similar clients. I asked for and interviewed references. I owned my first property in my name, then quit-claim deeded it over to an LLC. Now, I have multiple LLCs which each do a tax return.