All Forum Posts by: Brian Schmelzlen

Most of the conventional lenders will want to sell their loans to Fannie which means they need the loans to fit into a box. However, if you are willing to put in the work there are ways around it. There is the hard money route as you mentioned, but I doubt that makes too much sense for your situation. The other route that I can think of is trying to establish a relationship with a number of small community banks to see if there is one that would be willing to give you a portfolio loan at 80% LTV.

You can do it either through a business entity or individually.  There are pros and cons of each (there are a number of posts on this topic so if you do a search you will find lots of good information); the weight you should give to each pro and con depends upon your personal situation.

I strongly suggest talking to a CPA and possibly an attorney before getting started so that you can make sure that you are set up correctly.

The issue with an FHA is that it needs to be owner occupied for at least the 1st year. You can house hack (either with a SFR or a multi), but you need to live in one of the units.

I think a personal relationship with a realtor is extremely important.  It is still a business relationship first, but having a personal relationship with the investor should generally help you.

I think it makes it more likely that your realtor will be willing to do more to help you out as you get started (might show you great investment opportunities that might otherwise go to more experienced investors your realtor also works with, might be more willing to make a number of low-ball offers for you, etc.).

This is an excerpt from https://www.franchisedirect.com/travelfranchises/days-inn-franchise-07032/ufoc/.  Wyndham Hotel Group owns Days Inn.

Training and Assistance: Wyndham Hotel Group's Global Training Department offers a variety of mandatory and optional training programs, seminars, online training and other training resources. The initial and any replacement general manager or an owner/operator or other representative who exercises day to day operational authority of the Facility must attend the Strategic Training for Exceptional Performance or Advanced Strategic Training for Exceptional Performance training program as well as any supplemental Internet-based training the franchisor may require.

Days Inn is in the franchising business, so you may want to consider reaching out to them directly to see what kind of training they provide to their franchisees.

Hi James,

Thank you for your service.

Congratulations on your first purchase.  Even if in hindsight mistakes were made, it is better to do something than just think "what if".  Good luck on making the numbers work better for you.

My wife is definitely similar to yours.

Your wife is correct in that bigger properties do inherently contain bigger risk.  There is a larger price tag attached to them, which means you have more to lose.  There are also more tenants which means that it is more likely that you will deal with a "professional tenant" or other nightmare.

However, bigger properties also have qualities that mitigate the risk.  As you mentioned, there are more economies of scale leading it to be more cost effective, and the impact of any single vacancy is greatly mitigated by having more tenants overall.

Ultimately, bigger risk (as long as it is smart risk) generally means bigger rewards.

My advice would be to use the first deal or two to create a track record with your wife.  As she sees that the two of you are able to handle it without too many issues, hopefully her risk tolerance will grow somewhat so that she is comfortable with a bigger purchase.  This will probably be an incremental process, but ultimately it is probably a good thing to have a spouse that has a foot on the brakes so that you don't grow faster than you can handle (or at least that is what I tell myself).

I think you will be overwhelmed if you do not have a solid grasp of what you are looking for.

It sounds like you are looking for a B or C class building so that you would have the opportunity to do some value-add.

Are you looking for office buildings, retail, etc?

How many tenants do you want (1 big one, or a number of small tenants)?

What type of tenants do you want?  If you want primarily medical profession tenants, it will dramatically narrow down the number of buildings that would work for you.  Certain buildings will tend to appeal to other types of tenants; professionals would be interested in different things that retail businesses, etc.

What amenities are important to you?  Do you care if the building has a parking lot?

What location appeals to you?  Are you really willing to invest anywhere in the country, or do you want to invest in Florida?  If you want to invest in a specific state, are you really just interested in a certain city (or even certain areas of that city)?

Finally, what price range are you looking at?

I wouldn't waste a commercial broker's time until you have thought about all of that.

It depends.

If this is a rental property, then yes you can deduct all of your rental expenses including interest (regardless of whether it is a hard money or conventional loan, or whether it is an amortizing or interest-only loan).

If you are flipping, then different rules apply.  You are required to capitalize all of the costs associated with the property (including property taxes and loan interest- during the production period).  The costs would reduce your taxable gain on sale.