All Forum Posts by: Austin Fruechting

Hey @Joe Koppel , glad to hear you found your next property! 

Your CPA would definitely be the best to know exactly, but here's a nutshell: 

• $320/month cash flow 
• For ease I'll say $180/month average paid to principle means 
• $500 before other expenses. 
• I'll assume a nice round $200 a month for depreciation (that would be building value $66,000).  
• So you're at $300/month, $3,600/year per property taxable base.  
• But you still get to back out other costs you incurred (closing, travel, research, etc).  Back those out and you'll have a pretty good idea of what income you'll have to claim. You'll pay your income rate but subtract out social security/medicare (7.65% for W2)

I would think that's going to be on the higher/safe side of additional taxes paid. I pay very little to no taxes after everything.  A great CPA is worth every penny! 

**I am not a CPA. This is not tax advise**

 It varies place to place. It won't be the best terms possible, but comparable. Usually a little higher interest rate by ~0.25% for same amortization (many don't like to go beyond a 20 year amortization). 

You don't have to get creative. The answer is find a different bank. I use a smaller local portfolio lender and they don't even ask for required reserves from me. 

Experience: currently at 141 rental units across 58 properties in under 7 years with several BRRRR's.

I see it a little different than that. If you have high dollar rentals it's really easy... However, with many lower to mid tier rentals, I found the relationships much easier to say I'm the property manager instead of the owner. And it was easier and smoother from both directions; me to tenants and tenants to me. 

I don't feel it was being dishonest or claiming a fictitious title. Tenants never asked who owned the property, if they did I wouldn't lie. I managed properties for other people as well, had a separate LLC for the property management management business, and was working in the property management business in that exact role. Often with the lower end tenants it's a much cleaner and healthier relationship both ways when they're dealing with a property manager. In dealing with the higher end properties there was no difference. There's nothing unethical about saying you are the property manager when you are managing the property.

If you have other qualified applicants = don't rent to him.

If you are in a tenant friendly state = don't rent to him and wait for a qualified applicant.

If you are in a landlord friendly state = you could. If you do rent to him; I would do a month to month lease and let him know that's why, but if he pays on time and keeps up the property you have every intention of letting him stay as long as he wants.  

Since this is your first one, definitely talk to lenders before. You don't want to get stuck not being able to refinance based on those things. A local bank that's a portfolio lender will have a much higher probability of working with you on that. Since they service their loans in house, they don't have check every single box to have the underwriting just right to sell it off. They will be much more likely to look at the situation, understand it, and lend not really counting negatives of the currently high credit balance DTI since they know that will be paid off with the proceeds.

Safeguard; make sure your worst case is that you finish at a price that you could sell it to another investor and make a little. Then you could build up some cash flipping and not need credit cards the next go around. 

As far as fully leased up: that depends on the property. If it's a single family house being leased isn't going to change the appraisal/valuation, however it will change you DTI situation. If it's a smaller multi-family the value will be , you'll want to fill at least 1/2 the units and show you're advertising the other unit(s) at the same prices. That will usually satisfy banks on the 2-4 unit buildings, and sometimes even the smaller commercial of 6+/- units

I have done two deals with another investor. A 4-plex & a SFR that were foreclosures we needed to purchase and rehab in cash. We refinanced, got all our cash out plus some, and cash flow pretty well. I have a few large portfolio packages I bought with non-REI cash partners. We are making very good money on those too. So...

1. My experience has been good

2. Yes we make money

3. Be VERY selective in who you partner with. Yes 50% (or some percentage) of a deal is better than 0% of no deal. But there's not a deal out there that would be worth doing if the partnership were miserable to deal with. 

 That's just what's on the page! Blame the programmer. It cracked me up. 

If there's room for it; Do things to force appreciation in the triplex and add value and increase the rents and add 15%-20% value to the property. Put ~$10k in each unit that adds $15-20k in value. Then refinance the balance and it'll be under the threshold for PMI, and you'll have higher rents.

My recommendation would be to go live wherever YOU want to live.  Then figure out the local investing opportunities.  People have been successful in all markets.  It make take an extra couple years to reach your goals in some locations, but who cares. Say TOWN A would get you to your goals in 10 years, but it takes 13 years in TOWN B.... But if you are much happier living in TOWN B for those 13 years versus just eeking out an existence in TOWN A, that's an easy trade off and go where you're happier.