All Forum Posts by: Chadd Naugle

@Erin South  I'd go shopping for a new property manager.  Vacation rentals are different and they like you to abide by the rules as everyone else, that is the only thing that seems reasonable to me.  I seems like they are robbing you and telling you not to worry about it.  

@Denny Robert  Cool story....smart move on your tenants part though....He was probably afraid you raise it $100, so he's trying to lock in at $50 ;)

@Daniel Dadzie Don't listen to the naysayers... There are plenty of things you can do with no money and no credit.  The problem in your post is this.... "I have no idea what to do".  

I agree with @Account Closed invest in an education, and focus on strategy that incorporates no money, no credit techniques to start your business.  Two that come to mind are wholesaling, and syndicating or sponsoring.... Both will require an investment in your time. There is plenty of free or cheap information to get you started.   There are many deals that are brought to the table by people that do not use their own money or credit...they simply match the deal to the dollars, and get paid to make it happen either on a one time fee, or monthly cash flow as a part equity owner of the corporation of a deal they put together, or both (my favorite).

Time is of the essence, so I don't suggest you wait or try and save up money, learn a few techniques and then TAKE ACTION (most important part).

@David Swygert Not sure how you feel about investing in PA, but I find deals for sure...Mostly apartment buildings, Cash on cash returns of 10 to 13% and total returns of 25 to 35%....Most of my investors are investing from 50 to 200k....The beauty is they don't have to do anything other than approve the deal, and sign the partnership agreement.  They don't have to worry about tenants, property managers, service calls, etc.

The beauty of apartment buildings is that the value is purely calculated on how well the business does.  Let me know if you are interested and we can chat some more.

@Ryan York Hey Ryan...Here's the deal if it is 5 units or more it commercial and commercial evaluation applies.  4 units or less, is considered residential, and comps apply. This is why most states sales agreements for multifamily state they are for 1 to 4 units.  Also check out mortgages. 1-2 units 20% down residential, 3-4 units, 25% down residential, and 5+ commercial loan only....terms very widely.  Prices are higher in 2, 3 and 4 units, because of what you mentioned in your first post...people feel "comfortable" with it....ie, more competition, and higher prices.  Get out of your comfort zone a go bigger ;).  If you don't have the cash, find a partner and arrange a split. 

I apply my own formula, which is based on appartments to anything I buy. Including 2, 3 and 4 units....I know I said to go bigger, but I just found a REO 2 unit, I can buy for 16k.... Cash on cash return is to good to pass up so I am buying it, but the point is I treat it the same way I do on 50 unit.

@Joe Rodriguez I would have an partnership agreement drawn up that specifies what you are doing....Yes it will cost a little money, BUT it will save you a tremendous amount of headaches, and potentially money in the long run.... I would identify in the agreement profit splits, exit strategies, and management of the project to say the least.

It depends on your strategy really...if you are doing fix and flips, then there are so many different opinions on little things like even what color to paint the walls, so as you can see, this form of investing has a lot more details that would need to be hashed out with partners.

To keep it simple, I would suggest buy and hold, with profit splits, and predefined exit strategy, and maintenance.  So for example you put 60% of the money, and your partner puts up 40% of the money, and you do a 60/40 profit split, and sell the asset at the end of 10 years, unless both parties agree to continue with investment....if either party does not want to continue, you sell, or the partner buys the other one out., but you should determine how you would calculate the value if one partner is trying to buy the other out.  With it being predetermined, when it comes time to either cash out refi, or sell, it has already been established, before purchase, and it is a legal document.

Even if you part ways in your personal life, the investment could still be good, and you both could continue to be business partners.

@Account Closed Actually the bigger the property and the higher the loan amount the less likely the lender will require the net worth to secure the deal.... My suggestion is get on loopnet...start calling brokers, tell them exactly what you are looking for in terms of price, cap rate, how you do your underwriting, then let them bring deals to you, before they go to market....That is how it really works...The deals have already been shopped before they even get on loopnet.  So many investors already turned downed those deals, and the good deals never end up on loopnet....your goal is to get the pocket deals.

@Ryan York Sorry Ryan I don't follow all the posts unless I am tagged, then I will read responses.  I would not fool with any education....Most of it is all right here, and free....I am not saying you don't need an education, I would read as much as you can from the free resources, webinars, podcasts,  then buy as many books as care to read.  And keep asking questions on here.

As far as the # of units go, I would try and buy as many units I as could afford.  I found a 6 unit building for the same price as a 2 or 3 unit, so keep your options open.  

There are other advantages to owning 5+ unit versus a 3 or 4 unit building. Most of it has to do with the fact that the value is calculated differently, and you don't have to rely on comps for values.... you can increase the value of a 5+ unit building by raising rents and cutting expenses. Value (CAP RATE) is calculated by NOI/Price...The market condition is basically what CAP rate people are paying in your market.

Also think about this?  6 unit building has 1 roof, 2 furnaces, and 1 hot water heater.  6 single family homes have 6 roofs, 6 furnaces, 6 hot water heaters....So from a repair perspective, which would you rather have to deal with?

Should have specified...Commercial Loan - Thanks

Here are the brief details of the deal.  Purchase price 148,000 6 unit building.

Income 41100

NOI 20,023 - Being extremely conservative

As you can see the DSCR is over 2, and it is a 13.5% cap rate.

This deal should support itself. I have a 780 credit score.

If anyone can help me please let me know....and I will send you all my financials for the deal, and myself personally.

Regards,

Chadd