All Forum Posts by: Michael Rutkowski

I'm always buying. We are going to build out 2 properties this year or next after picking up some land. My market is so hot right now, a multi family built out is too hot to touch! So you just need to build your own. Labor is still expensive, lumber is expensive, but rents more than justify a new build. 

Buy land. I'll tell you why. Right now, many many markets are pretty pricey and hot. So you would have some trouble breaking into them anyway. But if you do find a multi-family in a decent market, chances are the CAPs are pretty low, so it would take you years upon years to generate a decent cashflow.

So if you have the cash for a 20-25% down payment on a construction loan @ 7-9% for up to 1 year, build from the ground up. Get your permits in order, make sure you bought the right high density residential land. Get a modular, multi-family home kit (keep it under 4 units to avoid commercial financing) on order from a local company. Get your general contractor onto the foundation and stubbing your utilities. Then when your home is delivered (in a few pieces), make sure you have a crane onsite, and you can be in business in as quick as 2-4 months. Modular companies are pretty backed up right now, so it might take a bit longer...

Want to do some commercial? Even better, many markets have been slammed by Covid. Look for some cheap commercial land in an established subdivision, which may have some lots the developer is trying to unload in these trying times. Order a steel building kit. Go as big as you can on these, maximizing your footprints, and minimizing your setbacks. Repeat the steps above with your permits, contractor etc. Section some shops off in 20-40' widths, and build to suit. If you can swing it with zoning, make them live-work, and you are making some nice rental income, as people will pay a premium to live where they work these days. Keep them under 3 stories, so the building inspector doesn't get crazy on you.

The bottom line is this: You buy at the top of the market, you won't be building equity in your rentals for a while. If you are patient, diligent, and understand the building process, you can pay your general contractor to do the work, and make some huge equity right off the bat. Then, once you're done building, convert that loan into a traditional mortgage, and maybe even cash some out at the same time to save finance costs, and buy more property to repeat this process with. $500K is more than enough to get this done.

Oh yes... So I get this question ALL the time: How high will prices go? I can't say for certain, but I'm in a unique position in where I deal with many of my guests, face to face, from out of state, staying t my rentals, who are looking for property. Since Covid hit about a year ago, we've had probably 600-700 guests, and many of them are this type of individual. They all want to work online, at their high paying tech or finance jobs, and look at Bozeman because it is a beautiful small town with amenities that can't be beat. So if we were to calculate a high range market cap, then let's use a California tech job as an example. If a couple is pulling in an average of $130k each year working online, they can easily qualify for an $800k mortgage after debt to income ratios are figured. Also, everything is appraising right now, no worries there. If we look at median home prices, and mix up the County and Town, then we're sitting at $615k. So that leaves a lot of room to hit the ceiling.

And on a side note, I have been working with a nice couple since November, to find them a home under $1M with nice outdoor features on an acreage. We just got one under contract, and it was tough... There just isn't much out there right now. If you're talking multi-families, you might as well forget it. The name of the game right now here in town is equity building, and that's why many investors are confused when they look at prices vs rents in town. Even with rents in the thousands of dollars per month, it still doesn't pencil out well. Unless of course, you've got money or financing for an apartment complex.

You've got to be creative, flexible, and open to "new ideas". I'm full of those, but I also don't force property on a buyer. They either want it or not. And sometimes, it takes a little bit of video footage, and some market explaining, but more often than not, people just sign up for an MLS feed, and that's where they stay in these conditions.

With so many markets in Montana just exploding in prices these days, investing outside of these cities and areas, is becoming more and more attractive. What are your strategies, ideas, or thoughts on investing in rural Montana? What do you think would be an advantage to investing outside of the biggest cities in Montana would be? What about the detractors?

I can name a few pros and cons but I would love to hear your thoughts on this. 

As for pros, besides a lower price point, the lack of zoning and regulations in many areas of Montana, are a huge benefit to real estate investors, in my opinion. A residential property, can more easily become a business, or multi-family for example. Septic regulations are usually more lax as well. A well can be sunk, as no COSA or plat is stripping away water right. Also with a lower price point, an investor could focus more on a land purchase + new construction, building a ton of equity in their portfolio, which can be leveraged for more property, and then there is always some rental income of some kind with any new unit. Also, the idea of starting and running a business from a property may be a turn off to some, but why not take advantage of that if it can be a highest and best use of the land? STR's, storage units, and even something like a coffee hut can be easy to run, and not far outside the box for a REI. You just cannot do this very cheaply and easily in a city, with many more regulations and fees, than you would have in a small town or county land.

The most obvious drawback is isolation. That brings a whole slew of other problems. Lack of labor and trades. Lack of business. Lack of renters. Lack of utilities in the most extreme cases... To some extent, a lack of an economy. These are some pretty tough problems, but not insurmountable. If your choice of property is still in a decent area, with at least half the year drawing tourism, or having some sort of basic economy, you should be able to fill it. I have often found myself looking at some of the most isolated properties on the MLS, just thinking... How can I make that thing cashflow???

I'd love to hear about some of your most hare-brained and crazy schemes... One time, I saw a property, literally at the top of the Tobacco Root Mountains in SW Montana, out of Sheridan. Hike-in only access, not even horseback! It was basically a 20 acre scree field at a 30 degree angle at 10,000 feet in elevation. Patented mining claim. If you know anything about those, then you know that just about anything goes when it comes to utilizing them. So I figured, at that price, I could helicopter some mortar up to the top of the mountain, and build a rock and timber shelter, and rent it to outfitters on goat hunts with clients, put it on solar and wind, and make it a pack in, pack out type situation. I noticed an outcropping of Earth's crust sticking out of the scree, ideal for attaching something to, and an endless supply of beautiful flat rock for stacking... So then a few years later, I'm looking at local businesses, and I find a similar property in the Tobacco Roots that was actually up and running, although at a much lower elevation, but only a few mountains over... It was called Bell Lake Yurt, and did ski touring in the winter. I still fantasize about building a stone house on top of those mountains, but would it be worth the effort? I doubt it!

My property management company manages ABB's (and VRBO's) in Gallatin and Park Counties in Montana. We haven't had any slowdown at all. I manage a few of my own in Bozeman, and others for clients in the surrounding areas. At first, when Covid hit, we lost 95% of our bookings. Then out of nowhere, after a few weeks, we started getting inquiries for full price, for like 6 -8 weeks at a time. Over and over again, our guests would tell us the same story: they wanted to be in a place they could work online, and enjoy the outdoors, while staying away from the crowds. And so long story short, we increased pricing, and had the best year yet. In fact, I was recently shopping around for SBA loans, and one of the questions the underwriter stressed was "How has your business handled Covid, and have you recovered yet?" They asked me this like our industry was hit hard or something. Anyways, I think Covid has entirely bypassed real estate, at least in my area. 

Hi Cody, this is right up my alley, and I'm always shopping around for land deals in rural Montana. Shoot me a DM if you want to chat. I am currently looking in a town of just over 100 residents, and am confident that it will be a cash cow. It's all about what amenities are around. Montanans are outdoorsy. Hunting, fishing, hot springin', stay-cationing peoples. If you find a spot in SW Montana, and there is a dot on the map there, you will be getting RV traffic during the summer, occasional out of state tourists, and then hunters, snowmobilers, and especially fly fishermen/women coming through during the off season. 

So if you can figure a way to take a bite out of that market, then you should be able to cashflow. Make sure the county you are looking in has some relaxed rules, and no zoning. If you're looking for speed in a build, why not consider a pole barn, and make it a multi-unit? There are a lot of pole builders in our state, and you get some great bang for your buck. Mix up the use to hedge your bets. Why not do a cabin on your property, with maybe a small shop, or internet cafe? If there are no services in the area, like food, or shops, integrate that into your plan. Obviously, this goes outside the bounds of strict real estate investing, but you may need to do that to be successful way out in the country.

I have met and helped a few BPers buy and hold in Montana. I own here... Investments are good, but unless you have a million or more to invest, you'll need to get creative. Most investors stick to the big cities, Bozeman, Missoula, Kalispell, Billings, Helena, Butte, and Great Falls. And bedroom communities around those cities. Many many investors are looking hard at Montana right now, so it is pretty played out, which I bet will be your first thought if you hop on Zillow for 5 minutes. Multi-families in Bozeman are like $800k for a duplex, and the cheapest 4+ unit I have seen in the past year was like $1.1M. Most are $2M+. I like the country. Lots and lots of stuff going on there, lots of up and coming areas, but most investors wouldn't look more than 30 minutes to an hour outside of a big city. Right now I think buy and hold is the way to go if you know a good spot. Bonus if you can generate an income that cash flows even a little. Things are turning around for many small communities in this great state.

Welcome Neil, if you ever need anything in the Gallatin Valley, shoot me a DM!

I've purchased land with 0% down, 20 year note, 5%, with a balloon in 5. 15 years amortization wouldn't be so bad! Just do it, build it, and refi it. It really depends on what terms you are buying on. Is this an investment? Intent to build and use as a primary residence? How much down?

A seller down in the Gallatin Valley these days wouldn't really offer seller financing, unless the lot was hard to sell, as people from out of state are just buying up everything with cash right now. I don't know about the Flathead though, sorry.

Yes, you are right, I didn't see where he wrote cash flow, and thought it was the rental income. That should make it a little easier to qualify!