All Forum Posts by: Dave DeMarinis

My definition of Private is the loan is made primarily on the merits of your relationship with the lender. Hard money is the loan is made primarily on the merits of the collateral and your ability to repay the loan. You can absolutely get a loan as a new investor. Every experienced investor started out getting their first loan before they had experience.

You might look for a loan and find a partner to bring in to compensate for your inexperience. Then, you will have your first experience and deal under your belt. You got this!

Sorry - I don't lend in Wisconsin. I'm in Ohio, Alabama, South Carolina and Virginia currently for lending.

@Ryan Hampton it really depends on your specific goals and what role you want to play. I'm kind of a contrarian on BP in small multifamily specifically. If you are going to self manage with local knowledge and very hands on, I think it works really well. If you will be less involved in the day to day, small multifamily doesn't really give the scale that Multifamily needs to make up for the higher turnover compared to Single Family Homes. There is a reason the hedge funds buy SFH and other hedge funds invest in huge complexes (at least 100 units and often 250+).

I think a really good first filter is the rent levels. They vary from market to market obviously, but I think $800 is a pretty good threshold in most markets. Below $800, it is very hard to be profitable because there isn't enough $ to pay for higher vacancies, repairs, maintenance, capX, taxes and insurance and get decent property management. For example, a 4 plex with $600 per unit rents is a big red flag for me. 

@Brian Garlington I have a number of section 8 properties and in some markets, I agree with you about the red tape not being bad. In Ohio (not Cleveland market) though, the inspections are fine but it is the timing. It takes about 3 weeks (pre-COVID) to get an inspection scheduled once the tenant selects. We pass on the first inspection about 10% of the time (we still haven’t gotten the inspectors to agree on location of the smoke detectors) so we have to plan for a second one which takes another 2 weeks to get scheduled. It then takes about 3 weeks to schedule a lease signing once we pass. This means the unit is vacant for about two months if we don’t have other delays. Is your Cleveland experience different or have you been able to speed it up at all. I’ve spoken to the local leadership who really likes our product but haven’t found any way to accelerate the timeline.

I totally agree on remaining focused and diligent on screening tenants, even if they are Section 8 - it is still critical.

@Ryan Hampton Student rentals is definitely a niche but it is more business and less real estate. In real estate, turnover is a costly enemy. The lower your turnover, the better your cash flow.

In student housing, you have turnover every year in every unit pretty much. The second big difference is if you miss the lease up window for fall move in’s - it is COSTLY.

There are people who specialize in student housing so I’m not saying it isn’t viable. It is just more complicated than it looks and there aren’t as many resources to help you as traditional landlording. I had casual interest in it for years and finally did a deep dive and decided it wasn’t for me as an operator.

@Brant Jones what market is the duplex? 

@Bradey Peavy you got some great advice here. Build reserves is critical and help another investor in the meantime so you can get both experience and connections. What part of Alabama are you?

@Sovat C. @Terrance Hall I’m a heavy value add investor and lender and added Richmond as a focus market earlier this year. DM if you would like to discuss lending on a project.

@Account Closed I would definitely add Huntsville, Al to your list. The real estate opportunity, quality of life and overall population and income growth are amazing with a still reasonably low cost of living. 

I grew up in Ohio, also live in Northern California and I invest in a number of markets in the Midwest and Southeast. Relationships or circumstances brought me to each of my markets with the exception of Huntsville. That is the one I chose purely from the factors mentioned above and it has been amazing. 

I can't think of a legal problem with the structure. However, it doesn't make sense. Cash on Cash is good for selling and marketing notes but generally terrible for the buyer. With a property purchase, CoC is intuitively aligned because it presumably is returned at liquidation (hopefully with appreciation and principal paydown!) However, in a note - it is generally disappearing. This means at the end, you have nothing because your principal was part of the 75000.

Scenario 1 - It is fully amortized. Simple math, if it was a 75 month note, your "investor" got 0% return. If you did a 30 year note, it would be nearly a 16% return.

Scenario 2 - It is interest only, in that case - it is a 16% return. However, that means you just took out an interest only loan at 16%. If you are interested in that, secured by real estate - please DM as I'm a Hard/Private/Bridge lender.

If you think about it, a well executed BRRRR is infinite return and basically what you are talking about. There are a host of questions about term, security and equity. Here is my recommended structure but I do have a big question about the underlying value of the property and the current debt on it.

Structure a partnership where you get 1/3 ownership and the "money" gets 2/3rd. If you are responsible for all the actions including long term financing that is a reasonable starting spot. Return of their capital would have 1st priority. Does that make sense?