All Forum Posts by: Jeff Copeland

I would suggest better defining your goals, and then breaking them down into smaller, achievable steps with a deadline. (A common mnemonic is that your goals need to be SMART: Specific, Measurable, Achievable, Relevant, and Time-Bound).

Is $15k/mo in cash flow your goal, or is owning several multifamily properties your goal? Either one is okay. Just decide and define. 

If $15k/mo is your goal, you need an additional $13,200 cash flow per month. But by when? Let's say for argument's sake you want to achieve this goal within 10 years. That means you'd need to add about $1300/mo in cash flow to your real estate portfolio each year for the next decade. 

Now break that down and define how you are going to do it. This of course will depend on your financial situation (if you have a ton of cash and great credit to begin with, it's obviously much easier). 

In year one, for example, you might plan to refinance your existing properties at a relatively safe 60% LTV, which would give you $192k to either buy a $192k property free and clear, or buy a $480k property with 40% down. You can adjust the LTV to suit your risk tolerance, then figure out how these options would impact your cash flow.

From there, come up with a strategy for year two, three, and so on. 

Congratulations and welcome. 

It may be a unicorn, as you suggested. But $1000/mo in cash flow sounds too good to be true. I would encourage you to take a careful look at your operating expenses (which normally eat up around 50% of your rental income) and make sure you aren't leaving anything out:

Property Taxes

Homeowners Insurance

Liability Insurance (landlords often need a separate umbrella policy)

Management Fees

Utilities

Landscaping/Snow Removal (depending on where you are of course)

Repairs

Reserves for Capex

Vacancy

And then take a careful look at your debt service payments (if any) and understand exactly what you'll be paying. Is your funding partner lending you the money, or are they an equity partner?

Even if you don't have any debt service initially, you might want to project out a few years when maybe you do need to refinance and cover debt service. 

HELOC

Of course floor plan is important. It isn't talked about a lot because it goes without saying. 

But different business models work for different people in different situations with different needs and goals. 

Calling people "dummies" because they chose to implement a long-term rental strategy is narrow minded. 

Co-living is a sound business model that is taking off in many markets across the country where it makes sense. But it is limited by obvious things like zoning and parking restrictions, as well as not-so-obvious things like management intensity. 

There's no getting around the fact that having 4, 5, or 8 tenants living in a single family home with shared common space is going to take a lot of work for the landlord and/or property manager. 

By contrast, I have LTR single family homes where the same tenants have been in place for 6 years. It's a much more passive model. 

The cheapest option in the long run is actually a high quality kitchen with solid wood cabinets and granite countertops. 

Cheap materials will not last long in a rental property. A $10k kitchen that lasts 20 years costs you half as much as a $5k kitchen that lasts 5 years. 

In addition, the kitchen is the #1 amenity that will get you higher rent and lower vacancy. 

Just keep in mind the aggressive sales person is not your loan processor or your underwriter. 

They often make promises (on things like rates and timelines) that they can't keep. Sometime these things are not as crucial on a refi, but they have derailed many a closing on the buyer's side. 

Why is he even still living there? What are the terms of his lease/tenancy? 

Get rid of him at the earliest possibility, or the whole place will end up either vacant, or with a bunch of other non-paying tenants (why should they pay when he doesn't, when clearly there are no repercussions?). 

In the scenario you described, no one is absorbing or taking over his $164k loan. It would get paid off at closing out of the seller's proceeds. Your lender would have a new mortgage in your name in place in first position for $200k. 

From your $45k down payment and the lenders $200k, the seller would walk away with $81k (before closing and settlement costs) after paying off his $164k mortgage. Plus he would be the owner of a mortgage note in second position for the seller financed portion. 

See https://www.biggerpockets.com/... for some of the possible benefits to the seller and to help explain the process to the seller and/or your agent. 

You can't file a homeowners insurance claim every time you need something repaired, for a couple of reasons:

1. Homeowner's insurance is for casualty damage caused by an accident or act of god. 

     5 year old roof damaged extensively by a tornado? Yes, insurance claim. 

     25 year old roof starting to leak? No. That's a normal wear and tear and a capital expense for you as the landlord.

2. Deductibles. You are likely to have a $2500 or $5000 deductible on any homeowners claim, meaning you pay this first, and your insurance only kicks in after you exceed your deductible. So even in the tornado damage example above, it's its a $2000 repair, you're still paying for it yourself. 

3. Claims history. If you keep filing repeated homeowner's claims, your insurance carrier will raise your rates or drop you, leaving you scrambling to find a new insurance company (often at a much higher price). And the other carriers can often find out about your claims history, making it doubly hard. 

As for home warranty policies, while you may get some conflicting advice (you'll always have the 10% of people who had a good experience and love them), the other 90%, which includes most experienced investors and property managers, generally despise home warranties. See http://www.evicttv.com/episode...

Quickbooks Online.