All Forum Posts by: Jarrod Ochsenbein
Jarrod Ochsenbein has started 21 posts and replied 119 times.
Post: Depreciation Works!!! - Thanks Jeff Nash - CPA
- Rental Property Investor
- Oregon/Arizona
- Posts 124
- Votes 78
I got sick and tired of paying outrageous taxes so I did some research and found Tax Free Wealth by Tom Wheelwright. That lead me to real estate investing in April of '23. After starting out private money lending for a few months I realized I needed to own property. I am still a PML but now have 25 Units and reaping the benefits of the TAX code. For '23 Taxes I had a return of $45K after buying one house and running it as a STR. In '24 I bought 2 more houses and will most likely be banking depreciation! Real Estate is the "Do Do"! :) Thanks Tom and Robert K!
Jarrod
Post: Jarrod’s Co-living “Padsplit” strategies
- Rental Property Investor
- Oregon/Arizona
- Posts 124
- Votes 78
We haven't even had a 100% vacancy month yet. :)
Post: Jarrod’s Co-living “Padsplit” strategies
- Rental Property Investor
- Oregon/Arizona
- Posts 124
- Votes 78
Our Glendale property performance so far for those that are interested.
Post: Jarrod’s Co-living “Padsplit” strategies
- Rental Property Investor
- Oregon/Arizona
- Posts 124
- Votes 78
Yes
they are required to clean up immediately after use
Post: Jarrod’s Co-living “Padsplit” strategies
- Rental Property Investor
- Oregon/Arizona
- Posts 124
- Votes 78
Quote from @Karen Chow:
That sounds like an interesting strategy. I currently live in Portland and have my primary residence here, and trying to figure out my first step. Padsplit seems really interesting.
It is lucrative, but you have to be able to deal with the mess. People can be messy! :)
Post: Who is excited for BPCON2024!
- Rental Property Investor
- Oregon/Arizona
- Posts 124
- Votes 78
I am excited, but have never been to one. I will read up on the agenda.
Post: Jarrod’s Co-living “Padsplit” strategies
- Rental Property Investor
- Oregon/Arizona
- Posts 124
- Votes 78
I keep getting asked, so I figured I would post this up so I could simply refer people to this post.
The rough guidelines/strategy that is working for me so far is below.
Assumptions - You are leveraging debt. You don't like wasting money. You want less hassle managing the property. You are using Padsplit.
#1) Contractors - Notice I am putting this first above the deal/property. :)
You must find a a good contractor. They can make or break a deal. I have 2 of them I like and trust and looking for a 3rd.
#2) The property
Determine a buy box that fits your return goals. If you are self managing find the BB that fits your personality. If you know you can't or don't want to deal with people then factor in a property manager for expenses. For me I am looking at turning larger homes into 8 bedrooms. No more no less. I also want 2.5 baths or better. That extra .5 bath does matter believe it or not. For me the numbers have to work and the harmony in the house has to work. This brings me to the 3rd step.
#3) Capital planning/strategy
For maximum efficiency you should have at least a rough idea of the phases of deploying capital. It will take time for construction, time for appliances, time for hiccups along the way etc. A strategy I try and use is to push closing dates or pull them in to the beginning of the month to give you that extra time up front before the 1st payment is due. Yes it is factored into the loan and you are paying for it so you might as well use it. My construction is done in 5-6 weeks. During this time I am working in parallel to order appliances, furniture and trying to time deliveries. This is to avoid things disappearing during construction, getting damaged and arriving just in time to be installed by contractors if need be. It is also because I am an out of state investor and need to fly in several times during the process. :) Then you launch the property and the next phase happens.
#4) Vetting potential members
Padsplit present potential members. I feel it is up to the host to do a little bit more vetting. You will need time to get the right people in the house. This means your holding costs and your funds for vacancy have to be accounted for. You could do what most people I see do and let whoever Padsplit presents move in. That doesn't work for me. I choose to vet the potentials. Not only that, I remove the bottom 15% of those potentials. I schedule calls with them and make sure they know what they are getting into. Truth is most people don't read the agreement. If you skip this step your harmony in the house will be lower resulting in unhappy members. This will lead to higher turn over and your vacancy will be higher.
These are just my experiences and strategy so far. I am sure things are left out and others will have their opinions, so am saying this now, "your mileage will vary! :)
Post: DIY Cost segregation options for a 12 unit apartment
- Rental Property Investor
- Oregon/Arizona
- Posts 124
- Votes 78
Quote from @Prasad J.:
Im looking for a DIY cost segregation option for a small 12 unit apartment. The size doesnt justify going with a manual cost seg study with a vendor like ETS or so which would cost us over 5k. I came across this software that seems to do it for just $650. It's called Cost seg EZ. Any body have experience using it or any other diy cost seg software? https://costsegez.com/
kbkg doesnt provide software reports for anything more than 6 units. Any other cost seg software recommendations which doesnt cost thousands of dollars and provide audit guarantees?
Prasad, did you find out anything about Cost Seg EZ? NOTE: Cost Seg states they only do under $2 million dollar properties, so your 12 plex is most likely over that. See the 1,2,3,4 notes I posted below on my only cost seg guestimate.
I networked with several other investors, including Sam Wegert. Sam has 200 units of SFH in NC and he has been using Cost Seg EZ. I just have one SFH that I am using for Co-living (Rent by Room). My Cost Seg EZ @ 80% bonus depreciation below. Show $78k deduction on $452k house. Not sure if that is accurate, but that is what it showed with the data I entered.
Post: Arizona Market Alternative
- Rental Property Investor
- Oregon/Arizona
- Posts 124
- Votes 78
For those that are interested in the rent by room model you may have heard the news. Padsplit started up in Arizona at the beginning of 2023.
Co-living or rent by room is not new to Arizona. Several investors have houses there and rent by the room, but I decided to try it out. I have one property there and so far it is great. I am looking for a few more to add rooms to and get them up and running. I have enough capital to do 3 or maybe 4 more and then I am out of funds. In the future I would love to network with those interested and show my books to see what they think.
As of this post AZ Padsplit states they have:
294 active units
77 upcoming units
Demand 12,104 searches in the past 30 days
Happy investing - Jarrod
Note: I live in Oregon, house with actual real green grass, but invest in Arizona. :)
Post: Private lending in 2nd position
- Rental Property Investor
- Oregon/Arizona
- Posts 124
- Votes 78
Quote from @Beth Johnson:
I've built my private lending business around 2nd lien position loans - it accounts for roughly 45-50% of my loan volume. Here's some thoughts:
- Don't lend in 2nd position behind hard money or any short-term loan like construction loans. Even if you aren't gap funding, you could lose any equity stake with punitive default interest and also risk the HML calling the note due because they disallow 2nds without an intercreditor subordination agreement.
- On the subject of gap funding, just don't. There isn't any equity stake to protect your principal capital investment. So unless you add additional collateral from their SoRE, then don't do it. Period.
- Request and verify their schedule of real estate (SoRE). You need to understand how much their network is if you are going to request a Personal Guaranty. These PGs mean NOTHING without a high net worth and are only meant to be used in cases of deficiency - meaning the collateralized subject property doesn't have enough equity to make the creditor whole. It's what you would do AFTER a foreclosure proceeding, in most cases, not prior.
- Be sure you vet out the borrower's multiple exit strategies beyond resale. Do they have cash position to come to close in case they can't sell for what they owe? Do they have the ability to refinance or is the CLTV too high or their credit not great? Do they qualify for a DSCR loan with estimated market rents (use long term average rents, not suped up STR or MTR rental income to be safe). Can the property repay with cashflow (not typically looked at for SFR but for 2nds we do on properties like mobile home parks with super low LTV, we have to know they can pay off with property income and not a refi since most bank loans I've seen on these asset classes is closer to the 50-55% LTV mark.)
Just a few thoughts off the top of my head. There's a lot of ways to lose on 2nds but there is also a lot of ways to generate solid returns and higher interest yields with this strategy. In nearly 10 years of doing PML, we have a sub 3% default ratio with a near zero principal loss (lost 2K on 9-figures funded in my tenure, which isn't too shabby given our stance on junior liens.)
Thank you Beth
This is fantastic. I appreciate you taking the time to enlighten a newbie. I have done a few loans now and so far so good. I vet borrowers through a company, which the borrower pays for @ $2500 a pop. :) I am currently in a 2nd position loan where the borrower did use a HML in 1st position. I didn't realize they could have a stipulation that wouldn't allow 2nd pos loans. Moving forward I will add this to my list. This particular deal was acquired for $215k with hard money and I came in for $45k. The ARV per the borrower was $360k and I estimated it @ $340k. The borrower is sound and has 10 properties in his portfolio with half of them with decent equity. He has done about 15 flips in the past 7 years. It looked like a pretty solid deal, so I went for it. The reno is just about done and it looks marvelous. The should be going to market soon and we are all interested in it selling well.