All Forum Posts by: Bryan Lyde

@Kenny Oliver, convert your existing liability into an asset by renting it after buying your next property via fha with 3-5% down. even better would be a duplex up to a quad and live in 1 unit for 2 years. then rinse and repeat.

just maintain the 3 core principles: buy for cashflow, use long term debt, and have plenty of reserves

You can add value with sweat equity, your existing relationships, soft skills,and perhaps just pay for it. Sounds like you're good at finding and qualifying deals. You may have a relationship with someone who is interested in real estate and has money but no time or vice versa. Pair them up with someone experienced you network with at a meetup or REA meeting. That's a win-win-win that will get you more opportunities. You can use your day job skills to fill a need on someone else's team, just be clear what your goals are with them. Or good ol cash to hire a mentor, cpa, realtor consulting fee, etc can go a long way to make you stand out in a sea of people expecting something for nothing. 

best example i can give you is I wanted to learn from a multifamily syndicator. I chose to passively invest in their deal and explained my goals. This led to other opportunities to grow.

@Renee Yarbrough I suggest you build a good team first. this would have been avoided with an experienced partner. take solace that you took action which is better than 95% of everyone else. dust yourself off and climb back on the horse. definitely document the timeline of events and ask what should have happened at each point and who was responsible for it getting done.

@Brian Boyd I think you should look in your backyard. hearing lots of activity there.

for indy, I like hrre for turnkey, wilmoth group for PM, hocker title and Lazar insurance

@Rene Doyle a cursory look at wiki shows stagnant population since the 80s, 70k people which is quite small for the msa, no meaningful job growth, 3 primary employers in 2 segments, and a median income in the 30k range which suggests rents no more than 750mo. not favorable my standards but that doesn't mean there aren't good deals. a remote investor will have issues typically finding a great team in small tertiary markets like this.

if you have inside knowledge that it's about to pop with a big employer then perhaps.

@Dustin Batchler, great question. When I started research on Indy, I came across Sterling White's excellent article on BP outlining the various sub markets in Indy based on class. When I met with Max the first time he pulls out a folder with a property management agreement and Sterlings article printed! I knew at that point we were on the same page.

I indicated my no-go zones for property on the map, C/B properties with a price point of 50-80k (lenders like 50k+ for loans fyi but will make exceptions), ideally slab based 3/2 and larger, 1978+ or recently renovated (<=5yrs), low deferred maintenance, 5-10yrs left on the majors (hvac,roof,water heater). 

For the larger audience, I can't reinforce enough that the inspection is a must! If nothing else you can use it for negotiations as I did. Expect $300-450 per property in Indy (some quote by sqft). I paid an average of $340 per house and it returned $15,000 in concessions.  Money well spent...

Investment Info:

Single-family residence buy & hold investment in Indianapolis.

Purchase price: $335,000
Cash invested: $80,000

Contributors:
Joel Wilmoth

Closed on a portfolio of five single family home in the North East part of town near fishers. Great off market find of a set of turkey properties from a previous investor looking to liquidate and focus on Florida. Average price $67K per property. Expected returns are near 10% COC using a very conservative approach to expenses: 10% vacancy, 9% management, 7% repairs, 5% capex.
Average of 1.3% for rent to price ratio, DSCR of 1.4 in yr1, and a capex budget of $10k over 2 years.

What made you interested in investing in this type of deal?

I have been focusing on my home market of DFW and it is currently too competitive and pricing too high to be profitable for my criteria. I had chosen Indianapolis a year ago as a backup market and had made a visit to interview property management companies and turnkey providers. The job growth, local economy, and sub market were deciding factors in choosing this area.

How did you find this deal and how did you negotiate it?

When visiting the Wilmoth Group in market and sharing my criteria, they shared knowledge of an off market deal for one of their clients looking to liquidate and focus on another market, but they didn't want to sell them individually. I offered 95% of my researched valuation which was countered and we settled on $350k. After inspections there was another $15k in concessions instead of completing the repairs.

How did you finance this deal?

I researched 6 different lender of varying size such as local lenders, portfolio lenders, and large national lenders. I settled on Cardinal Financial with a 5.5% 30yr fixed note for each property with a 80% LTV. Closings costs all-in were ~4% (I did buy down the rate).

How did you add value to the deal?

I plan to make repairs and capex improvements, then bump rents to just below market rates to keep occupancy high and hopefully turnover low.

What was the outcome?

I successfully closed in 45 days with a conservative underwriting model and a good expected cashflow.

Lessons learned? Challenges?

I learned that I needed to document better my conversations with the lender to remove ambiguity and assumptions. We definitely had challenges with ongoing repairs of the previous owner, re-inspections of some of the properties because of poor detail, and the typical last minute day of closing hang ups with getting updated closing disclosures and ALTA summaries. Given it was 5 properties I am surprised we got it done in one day. I suspect my attention to detail and thorough planning helped.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

I highly recommend Max at the Wilmoth Group for your property management and realtor services. I was able to coordinate PSA creation, contract negotiations, inspections, appraisals, insurance, closing and property management services all with 1 person. Invaluable time saver!!! The local folks at Lazar Insurance (Deb) were very helpful as well and I was able to secure policies of better coverage for $1k less than the previous owner. Hocker title managed the closing process well and the LLC txfr.

I'm not affiliated with them but can recommend Memphis Invest if you are looking for turnkey companies as a remote investor. They deal in Dallas among others.

Thank you justin for peeking my interest. For the benefit of this thread, found the following:

Not a definitive source but a good write-up...https://www.irafinancialgroup.com/learn-more/rules-solo-401k/am-i-subject-to-ubti-tax-on-unrelated-debt-financed-income-in-a-solo-401k-plan/

Actual Internal Revenue Code Section 514(c)(9)...

https://irc.bloombergtax.com/public/uscode/doc/irc/514

Summary: too much legalize here for me but it seems to confirm that with limited exceptions (sub section B), the solo401k as a qualified organization is exempt.

Always open to learn Justin. Can you point us to IRS guidelines on the matter?