All Forum Posts by: Jeremy Zindel

I can understand you not wanting to live in a multi-unit with your family (or not being able to convince your wife that it's a good idea financially). One way you could modify this strategy a little bit would be to buy a SFR that would make a good rental property and move into it yourself for a year or so. Then buy another house and convert the first one to a rental instead of selling it. That way you could take advantage of the great financing with a low down payment that is available for owner occupants like @Aaron Montague referenced. You aren't going to get those low down payment options on an investment property.

You obviously aren't going to get the benefit of having some else pay for your housing during that first year but if living in a multi-unit is out of the question then this type of approach might be a good fit for you. 

Hey @Chris Shipman !  Glad to see another fellow civil engineer on the site.  Sounds like you have the same thought process I did a few years ago when I graduated.

I would definitely recommend getting a full time job if you are interested in building a buy-and-hold portfolio as you will make your life much easier when it comes to getting financing. 

You're right, it is typically harder to find private money that is willing to loan on a long term basis, especially if you don't have a track record.  My first property was a seller financed deal since I was somewhat lacking in the capital department.  I think seller financing is a good strategy to pursue if capital is a constraint.

Good luck and welcome to BP!

I started off buying and fixing up with a combination of cash, private money and credit cards, never conventional financing. After I did a couple deals like that and proved I knew what I was doing, one of the lenders I use actually started fronting me the purchase funds to take to closing on a signature loan and also set me up with a line of credit that I could use for the rehab. Then when we do the refi, he just zeros out that loan and line of credit with the new mortgage and we start again (as long as I'm below 80% of ARV). Not sure most lenders are going to be that generous but if you find the right one, build a relationship, and prove yourself, you never now.

Staying away from conventional financing keeps me from having to worry about how long I need to hold a property. The two local banks I use do not have any seasoning requirements for a cash-out refis. As long as the LTV ratio works, they don't care. I'm sure some portfolio lenders do have seasoning requirements but just ask around and see what's available in your area.

Those LTV and seasoning requirements your lender has sound like what I've been told for a conventional loan product. I'm sure some local banks have those types of requirements for their portfolio loan products but if so, I'd call around to different banks and see if you can find better terms if this is a strategy you want to pursue.

By using small local banks I am able to do it right away which is one of the main reasons I've chosen to go that route. I could get slightly better terms by going the conventional fannie/freddie route but I would have to hold title for 1 year (I believe, not positive) before I could do a cash-out refi. Plus I would have to hold title in my personal name vs being able to buy in the name of my LLC.

It's a trade off but the ability to continually turn my capital and get into other properties much faster without having to come up with an additional down payment every time is well worth it in my opinion.

I do consider the ability to cash-out refi with every property I buy, but that's because it is a critical part of my strategy.  As @Rodney Kuhl  stated, it just depends on your goals.

My model is to buy a distressed property at a discount, rehab the property, put a tenant in place, and then cash-out refi to pull all my money back out so I can do it again. I'm working local banks (portfolio lenders) which is also crucial to this strategy. I can refi for up to 80% of the appraised value after renovations with virtually no hassle (no seasoning requirements, no rehab documentation, quick and less expensive closing vs conventional, etc.). I just make sure I'm all in for less than the 80% of ARV and I can continue to build my portfolio with no money in a deal after the refi. Infinite ROI is great!

@Brandon Sturgill , I use this strategy with SFRs but I would think you could do something similar in the multifamily space.  If you want to build a portfolio quickly, I think setting yourself up to be able to take advantage of cash-out refis to continually put your equity to use is a great plan.

You may reconsider the hassle factor after you get a few months in.  Don't be surprised if your tenants start running their sprinklers year-round and washing their cars in the driveway every weekend.  You'd better be sitting down when you open that bill... Yikes!

One option that may work would be to go ahead and include water/sewer/sanitation in the lease but only up to a certain reasonable limit.  You would probably vary this by the number of bedrooms in each house/unit (i.e. $25 for a 1-bed, $35 for a two-bed, etc.).  I've heard of this approach being successful in college rentals where water being included is the expected norm but not necessarily required the municipality.  It should accomplish the same goal though.

If you established limits, you wouldn't have to bill every tenant every month, just the ones who exceeded the limit. Plus you still protect yourself from ridiculously high bills and your tenants will remain conscious of their usage to avoid having to come out of pocket.

Bloomington/Normal is a good market.  I've been studying it a lot in the last 6 months or so and I'd really like my next investment to be a 3 or 4 unit property there.

Hey @Philip Adeleye 

First off, welcome to BP

Second, what market central Illinois market are you considering for you condo investment?  Just curious because I'm in Decatur.

As far as HOAs and condos go, the first thing you should check is to see if the there are any rental use restrictions at the complex you are considering, if you haven't already.

The other big thing that comes to mind is still regarding the HOA. Just be prepared for assessments for improvements/maintenance to the building exterior or the complex in general as these would be lump sum amounts due on top of your monthly HOA fee.

@Brandon Sturgill  Also, I don't know if you were just throwing a number out there or not but I would think 2% vacancy would be extremely difficult to achieve.  Maybe your market supports that but my gut says that's too low.

If you are lucky enough to find an agent that really has their finger on the pulse of the multifamily market in your area they may be able to provide some insight on a few of the items like vacancy and market rents.  I would just take these at face value and try to verify them yourself.  As far as market rents go, I would call nearby apartments and ask questions as if you were looking for a place to rent yourself.  More than just what the rent is, you need to find out what utilities (if any) are included and what amenities may be included like covered parking, garage space, storage space, etc.

Another resource could be a commercial lending officer from a local bank, especially if they happen to also invest themselves. These guys are use to building NOI statements to evaluate how sound a deal is in order to justify lending on these types of properties. I've learned a lot about vacancy rates, market rents, cap rate, etc. from a commercial lender I've used who is also does a little investing on the side.

One other potential resource would be if there is an apartment owners association in your area.  I don't have any experience with this type of organization but it's possible you could find someone willing to help you or provide you with guidelines for the information you're looking for.