All Forum Posts by: John Casmon

To be over-leveraged is to be in a position where you can't cover the bills or can't refinance into a new loan. So consider the breakeven occupancy as @Danny Randazzo mentioned, the rest of the loan terms, business plan, and the hold period. 

Say you are getting a 2-year bridge loan with 80% LTV and interest-only payments. You should be very cautious about the amount of leverage that is used as you HAVE to refinance at the end of 2 years. However, say you are getting a 35-year HUD loan with 85% LTV and no interest-only period. You don't need to refinance and will be paying the principal down right away. As long as you can cover your bills you should be fine. Now, the exit may be more of a challenge, but you may not be as concerned with the amount of leverage.

Are you getting a lot of traffic, but struggling to convert it into leases? If so, you should ask them why they didn’t lease with you. Sometimes the pics look great, but if they see a construction site they may not be willing to pay a premium. If the traffic is not strong, you need to lower the rents.

The tactics you are employing work great for retention. Also, do you allow pets? If so, make them truly pet friendly and offer amenities that cater to the four-legged family members.

The "do it myself" mentality will you have stuck in the same spot. You know your obstacles, now is the time to find some solutions. If you feel burnt out, it's a sign you are doing too much and need to find a simpler path.

As others mentioned, consider building out a team and partnering with a wholesaler if you want to stay in control. Explore turnkey or a renovated property if you want to get something that is stable. You can also just invest passively through partnerships or syndications. Consider how long you plan on being overseas and see if that impacts the path you want to take. 

 Absolutely. Not that important on small jobs, but critical on a large project. 

I would go with the one with better PM options and/or higher quality residents. I'd focus on what can go wrong with those deals and determine which one has less risk. If both have value-add potential, the 30-unit may be the easy choice. 

As @Evan Polaski pointed out, the cap rates are a measure of demand and you ultimately want options on the backend. There is a reason the other property has much better cashflow, which you should read as a higher cap rate and less demand. 

From many discussions with other owners, my own experience, and this thread, there seems to be a few takeaways:

1. A prospect asking to pay a year's worth of rent upfront is a huge red flag. Red flags tell us to proceed with caution and investigate further as something is abnormal. It doesn't mean you are about to rent to a drug cartel. 
2. Find out why they want to pay in advance and how they got a year's worth of rent
3. If their credit and/or income is shaky, assume they will not be able to make payments beyond the upfront payment and plan accordingly.

I'll go a step further and say make sure they are BONDED. Especially if it's a big project. The difference between simply being insured and bonded is crucial as you can get compensated through the bond if anything happens or a contractor steals your money. Insurance has limitations and is harder to prove guilt on the contractor. 

@Michael Plactere Inbound leads are going to be more efficient as they've pre-qualified themselves. You will need to give them tremendous value and build trust prior to them reaching out so your content needs to extend beyond a simple "we buy houses" message. I would suggest a combination of outbound marketing and inbound. That way you control the initial outreach, but let them raise their hand to declare interest instead of making cold calls. 

 Well, in case anyone reading this actually does find money, discretion might be a good first choice. 

Perfect time to house-hack. You can even borrow from your 401k and pay it back over 3 years. Demand for rentals increases when the economy is down and COVID-19 may Mae smaller rentals more attractive than a huge complex.