All Forum Posts by: Dave DeMarinis

I invest and lend in Huntsville. Your financing is really hurting you. DM me the address and I can give you some more thoughts on vacancy, rental rates, etc. I also should be able to point you in some directions to improve the financing but I have a few specific questions there. I love Huntsville but I think small MF is the only investment I don't like there. However, new construction if you can beat the 1% rule, which you are suggesting, you might have something.

BTW - the whole equation changes if you can live in one of the units. Any chance for that?

@Damian Ramirez I think for a first deal in the Midwest, you should definitely connect with @Account Closed on their small MF offerings. I’m also a big believer that team is way more important than market. Neighborhood/block/specific property is also much more important than market. Congrats on starting early!

Very thorough and well written @Don Konipol @Christian Rivas Plata If you have the money but don't want to tie it up, there is a pretty good option if you have a plan to force appreciation. That would free up your down payment with a refinance in somewhere between 2 and 12 months. It takes some work to get long term financing based off of only the ARV but it can be done. Key point - assuming you can force appreciation through property improvement, rent increase, expense reduction or and/or other revenue increase.

According to my Urban Dictionary, there are a few definitions. :-)

1. Hard Money is the reality and Private Money is a euphemism. 
2. An engineer would call it Hard Money a marketer would call it Private Money and a sales person would call it an incredible enabler, landing an investment you otherwise could not.
3. A pragmatist would call it more expensive than traditional financing but faster and cheaper than giving up equity.

For me, Hard Money is when the loan is the foundation for the relationship. If the relationship is the foundation for the loan, then it might be Private Money but not necessarily. 

First, @Paul Moore and @Michael Ealy are both legitimately trying to help you. I don't think you will get much by criticizing them. Your OP was easy to interpret that you need investors. In your follow up, i think you are saying you have plenty of people who are interested. Your two questions are as follows.

1. How do get the money to go 50/50 with your partner? In short, don't. Think of the deal as components.

A. Finding deal and convincing seller on price
B. Providing Equity
C. Securing Debt (and "guaranteeing it)
D. Adding Value (renovation, repositioning, stabilization, etc.)
E. Asset management (operating the stabilized asset/property management)
F. Selling the asset

You allocate a % of the deal to each component and the provider of each element gets that portion of the deal. You are saying you can't do (B) cash down and (D) secure loan. However, the other 4 parts are still worthwhile, probably not worth 50% but 25% is reasonable. As an exercise, assign a percentage to each component and I think it will get easier.

2. How to structure it? If the above was useful, I'll take a shot at this one. If I missed the mark above, the structure doesn't matter.

Hopefully that helps.

Hopefully that helps.

@Shonari Wynter What @Jan Davidson and @Kathy Henley said. I don't think the current bank will be happy about a 2nd lender providing the $22.5K nor do I think any lender (outside of a friend or family member) will loan you the $22.5K since it would be Jr debt and be 100% LTV.

Think of the $22.5K as equity. It needs to come from you or an Equity Partner, not more debt. Then you can force the appreciation to create the equity you'll leave in the deal at the ReFi.

Unfortunately, the Small MF in Huntsville proper is the only thing I don't like in Huntsville investing. The rents tend to be in the $400 to $650 range and that doesn't give enough head room to cover expenses (real expenses, not % of rent expenses which don't hold up at those low rents). Also, the small MF are clustered together and create neighborhoods/pockets of people paying $500 in rent which makes it really hard for the areas to improve and get better. There is good quality SFH for rent in the $850 range so you don't really have a spread to push up the small MF. There is significant rent appreciation in the last couple years and it looks like the SFH will be over $1K in rent. As that happens, it might create some more opportunity in small MF but the small MF prices might still be too high.

I would look in the suburbs of Huntsville for Small MF. I don't know the suburbs for investing but I'm guessing there is much better opportunity for small MF than Huntsville proper.

I think your odds are much better to find a partner to put up the equity and leave the debt to the HML/PML or even better, traditional financing. You are also correct, your loan will be less attractive to the lender if the equity is coming from a HML/PML so you will want to check that.

I'm a HML/PML and if you can use traditional financing, you should always do it. If you can't, HML/PML is a great option and can help you get a deal done. More expensive than HML/PML is an equity partner. However, if the deal is good - not doing the deal is the MOST EXPENSIVE option.

There are plenty of people who make money in these areas. Check out the thread for a number of the players. It isn't letting me tag @michael ealy, @dennis m, @john hickey, @jim k, etc.

Investing in these areas with a focus on specifically managing them to cash flow well is a winner. If they gentrify, it will be amazing obviously. Investing in these areas with the hope that they gentrify and not wanting to be in the area as it is today isn't investing - it is hoping. 

If the main reason driving your investment decision is something largely out of your control and with out strong data to say market/world forces are going to do your job for you, you should tap the breaks and find an investment or partner with more passion and strategy for the investment.

https://www.biggerpockets.com/forums/12/topics/765019-my-case-for-c-and-d-properties

@Rudy Manna I'm curious, did you and your group evaluate Huntsville or just focus in on Birmingham vs. Montgomery? I invest in Huntsville and am partial to it. However, I think it is difficult to start there and it is getting very competitive. However, I know I'm biased so I'm curious how others are looking at it.