All Forum Posts by: Jaysen Medhurst

@Madhu Kumar, don't see a lot of honest-to-goodness 2%-rule deals. Where are you investing?

I thing the HELOC route is a good one as it allows you to continue acquiring properties.

Have you taken the time to sit down with some local/regional banks/credit unions and talk through your plans? If you you're a good risk and have shown success with REI they may be willing to extend a line of credit or have other options to expand your portfolio. Perhaps they're willing to roll a bunch of properties under one loan.

@Shawn McKee, sure. Why do an FHA if you have 20% DP? You're only extending your timeline since you will have to live there for a year. Not sure exactly what your question is.

@Jennifer McPherson, can you give us some more info? How may units? Rent for each? 

I assume this is a house-hack of a multi-family since you're only planning to put 3% down. Is your GSR inclusive or exclusive of your "rent?"

From an expenses POV: I would add 10% for management. Something for utilities. Your total expenses (not including debt service) is coming in at 30% of GSR, that's really low, like REALLY low. Something is amiss.

With only 3% down you'll have to pay PMI, which will be around $360/month.

@Isidoro Commisso, all investments have risk. RE can appear more risky to some because it isn't liquid like stocks and frankly, most people don't know the 1st thing about RE. Their only exposure is a personal home, the appreciation of which seems like "magic." Most people don't understand finances or how any investments work, but that's for another thread...

Don't listen to your anxious relatives. They don't understand BRRRR or the fundamentals of REI.

Find another agent. Today. Right now. Stop reading this post and find someone new. Family friend or not, the vast majority of agents only know what retail buyers want, they wouldn't know a good investment if it fell in their lap. You need someone who knows what you're looking for as an investor and why. 

Trust yourself. Run the numbers. Run them again. Do all your due diligence. Run the numbers a third time. Take action. Sure you're going to make mistakes, that's inevitable, but before long I bet a few family members are pulling you aside after Thanksgiving dinner to quietly ask about your "risky" investments and how they can get involved.

Hi, @Anthia Rymer, unless you partner with an experienced RE investor/manager, you're not going to be able to get a commercial loan your first time out. Lenders want to see experience, especially since the loans are usually non-recourse. This is one reason why most investors start with a 1-4 unit property.

Stay focused on finding a 3 or 4-unit property to gain experience and make your mistakes small.

When you have the experience, the LLC thing won't impact your ability to get a commercial loan. Most large investment properties are owned by single-purpose LLCs.

@Account Closed, we'll need more info (i.e. full numbers) to offer any real help. Have you tried running these deals through the BP calculators?

Not sure what you mean by "I can’t seem to understand the 50% rule if I decided to put only 5% down..." The 50% rule is related to expenses, which does not include debt service, so your down payment won't affect that.

If you're not planning to live in the property, you will have to put down at least 20-25%. You can get an FHA loan with 5% down, assuming you're going to live in the property (for at least 1 year).

Deal 1: My back-of-the-envelope math (assuming 25% down) says you may be able to cashflow ~$180/month. That's $90/door and less than a 6% cash-on-cash return. Not nearly good enough for me. Tough thing about a duplex is that you lose efficiencies of scale since there are only 2 units to spread the expenses across.

Deal 2: First thing, you need to confirm that it's legal to rent out rooms in the town you're considering. It isn't legal in a lot of places. This can be a good strategy in college towns. You may be able to clear $300/month here, which is good, but still only a 6% return.

@Peter Kim, use an FHA loan to house hack a multi-family property.

@Blaine Watson, I think you should start smaller--a 4-plex maybe. You're going to make some mistakes and a smaller property will be easier to handle as you learn the ropes.

Additionally, you will have a very hard (read, near impossible) time getting commercial financing for a 24-unit property if you have no experience. That's the determining factor (beyond the deal fundamentals) for lenders. Why would they lend a couple of million bucks to someone with no experience?

@Chris Roche, that does not sound right to me and your mortgage broker is not a neutral party here. Look through your mortgage documents, do some further research on line, talk directly to the bank. Don’t keep paying that PMI!

@Adam L., don't get too caught up on the 10 loans thing. This is only an issue if you work with larger banks and they sell off the debt to Fannie / Freddie. If you work with a local/regional bank/credit union, and they don't sell off their mortgages, then it won't be a problem. Be upfront with the bank and tell them what you're trying to achieve. If you being successful as an investor, it's in their interest to work with you.

I would also recommend selling that condo and putting your money to work better. As @John Warren, said you're getting a pretty terrible ROE. You could afford a multi-family property in the $1MM dollar range. I bet you could double or triple your cashflow (assuming an 8 Cap) and your appreciation, depreciation, and mortgage payoff will also be much, much higher.