All Forum Posts by: Jeff Schemmel

This is super interesting @Joseph White.  What made you decide to go after land deals?  This is Duluth MN?

if the deal hits your numbers I don't see a reason to wait.  most of the money I've made in real estate has been through waiting.  I estimate my appreciation gains on my duplex to be in the ballpark of $3,500-4,000/m in the last 20 months.  That's super aggressive and also involves some cosmetic interior rehab projects over that time, but most of it is just market appreciation we've had.  I don't expect that to continue, but I think it's still fair to expect a few % per year conservatively if you're buying and holding.  

if the deal works, do it.  Just try to get renters in there to avoid vacancy as much as possible.  I know that area gets nuts in the spring/summer and I personally know people who rented there over the summer religiously and paid extra because they were getting paid so much through the summer.  Probably a decent spot assuming the pandemic doesn't slap us in the face again :)

good luck.

The only times I've seen no PMI is with Three scenarios, and all three were requiring owner to occupy:
1.) VA loan
2.) Physician's loan
3.) a 5% down owner-occupant conventional loan for first time buyers only (income limited) that allowed a "PMI Buyout" option for 1.5ish percent extra down.

The 3rd option is called the "home possible" loan, and it can be tough to make work even as a first timer - it's use is pretty limited.

@Michael Storch why not do both?

aside from that, estimating rehab costs and timelines is one of the hardest things in the business and it's not a question that should be asked with a general scope.  There are a few ways to go about tackling this situation, and I'll do my best to guide you as I would if we were sitting and having coffee and discussing this.  Feel free to reach out and chat...

First, if it's your first time, I recommend asking yourself AND your partner a couple of key questions:
1.) do I want to be a landlord?
2.) do I want to share a living space with other people outside of myself and my partner?

If you answered a hard "NO" to #1, buy the most cosmetic entry-level flip you can get your hands on.  something out of the 80s that's got good bones with more modern construction materials that you can replace flooring, paint, trim, windows, etc and do it as you have time for.

If you answered "yes" or "potentially, yes" to #1, I suggest networking with other investors and learning what landlord life is like and if it makes sense for you in the short-term with the eventual goal of hiring property management later on.  This is pretty important, especially if your partner is already concerned about how much time is involved in this.

If you answered "NO" to #2, then a duplex is a good fit.  Keep separate units in order to gain income via house hacking.

If you answered "YES" to #2, then consider buying a single-family or duplex that is more "turn-key" and renting rooms in your half of the duplex, or in a single-family with more rooms to gain a higher return in a more aggressive house hack.  You may only need to do this once to get closer to the comfort side of the house hacking spectrum (as Craig Curelop describes in his book The Househacking Strategy).

Regarding what rehabs are less urgent and time-consuming, here are some questions you could ask yourself about a given property:
1.) what large capex items are outstanding?  (think roof, foundation, siding, HVAC, windows, etc) these are usually permit-requiring items that are intensive and require more time/investment.
2.) what interior/cosmetic things could be done? (paint, trim, flooring, appliances, countertops, cabinets, closet spaces, shelving)  all these things are non-urgent that you can do at your own pace and can even make excellent projects to do with your partner and get creative.
3.) Things like taking out walls and changing floor plan are the kind of projects that will get you in over your head as a beginner and/or someone with a hesitant partner.

all that aside, there's another important element to what you said that I want to call out... It's obvious that your partner has some hesitations and I can't stress enough how important it is to be on the same page with what they want.  It's more important than you getting a higher return by forcing equity.

You briefly mentioned not finding deals. Are working with a realtor? IF so, is that person an investor? If you are, try to work with someone who's got a track record working with investors in small-multi-family or one who is doing these deals for themselves (preferably the latter). They can provide so much guidance, connections, and deals you may not normally have access to. That's not always the case, but do enough interviewing and you'll find these people. Otherwise, there are always deals on the MLS, just keep looking and letting everyone know what you would like to do.

LLCs are stupid cheap and very easy to start - anyone can do it for any reason and you shouldn't let this be a barrier.  If you think you'll get sued and you have a lot of personal assets to protect it might make sense to talk to a CPA or attorney about the best way to go about this and what you need to keep in mind when you have one; co-mingling personal/llc funds is a no-no, for example.  if you don't have anything to lose maybe just see if you can get a deal done and go from there.

Why not start local?  I couldn't imagine trying to do a deal where I haven't ever step foot as a brand new investor/wholesaler.  A lot of people invest out of state, but wholesaling is just totally different and often wholesalers rely on local contacts like realtors, lenders, and contractors to offload an assignment quickly.  MUCH easier for you to build that network locally.

A mentor is always a good idea.  you have a MUCH higher chance of success following someone's guidance in any business, hobby, or line of work.  It's also more fun and energizing to work with someone who demonstrates a passion for what they do.  Just make sure you're doing it for the right reasons and you really believe in it as a path forward for yourself and/or your family.

@Tiffany Revis congrats!  what's your plan of attack?  If I'm reading this correctly you already have the first property and you're planning to get it filled with tenants.  What strategy are you using, and what type of property is it?

I think Fannie/Freddie requires a 25% down minimum on non-owner-occupied multi-family, but you can still get 20% for non-owner-occupied single-family.  That's a lot of hyphenations in one sentence.

Anyhow, I'm looking for this too and I don't think I'm going to find it.

@Tanya Potts I recommend a couple things to start...

1.) you need to understand if money is owed on the property and if so, how much?
2.) you need to understand what the property is currently worth on the open market, and how much it may be worth if you did the rehab.
3.) once you have an estimate of these numbers, connect with lenders who can offer a HELOC (home equity line of credit).
4.) this part gets tricky because it has to make sense at this point... but... if the amount you can get on a HELOC allows you to do enough repairs/renovation to warrant a high-enough ARV (after-repair value) it may make sense to take the HELOC to pay for the repairs and then get the property appraised after. Based on that new appraised value, you may be able to cash out refinance with a lender and pay off the HELOC. It makes a lot of sense to draft a plan and run it by experienced investors and lenders before commiting to this. You really want a lender to agree to your plan and refinancing when you get it fixed up before committing.

All of this is super speculative, and it may not be a realistic option for you, but this is a potential path to look into.

Hey @Orlando Goodon, 

Did you get an estoppel agreement done during your inspection period when you purchased your 4-plex?  This and having a copy of the leases before you agreed to purchase are extremely important parts of buying multi-family to avoid confusion like this.  From the questions you are asking it sounds to me like you didn't get this, or maybe your realtor did not advise it?  In MN it is the case that if you purchase a property with existing tenants in place, you inherit them and the current lease as if you signed it - i'm guessing this is the case for you, although I don't know where you are or the laws there.

That said, what's in your lease; do you have copies?  if your lease clearly states "no smoking allowed on the property" then that's pretty cut and dry and you can more easily enforce that.  If it doesn't, you really don't have a good way to enforce that, and if it's important you enforce it you need to start getting the tenants on your own lease by non-renewing and/or drafting new leases as of the expiration of the old one.  that's the clearest path (from the outside looking in).  

The same goes for the rest of the questions you asked.  These are all standard inclusions in my lease, and it clearly states all of them and the consequences for breaking the rules.  If tenants are not abiding by the lease rules then I issue a written warning according to my lease.  When that has been issued and the problem still occurs you could pursue other more extreme measures related to removing them from the property (per your local regulations for eviction/non-renewal/etc) or charging a fee if it's allowed.

Finally, have you read through your local landlord/tenant laws? You can take legal advice from people here (which is never really advisable) but it's best to get it from someone local and pay a real estate attorney for an hour of their time to get all your legal questions answered at once.

Hey @Ben Meracle!  I can offer a few pointers to get you headed in the right direction.

1.) the most important thing if you've got little cash is to get consistent employment.  No bank will give you a mortgage loan if you can't demonstrate about 2 years of consistent employment.  That goes for hourly, part-time, full-time, salary, whatever.  Be consistent, stick with it, get paid.

2.) unless you're a veteran or some kind of doctor/physician, no-money-down options are pretty much off the table.  To owner-occupy, there are often down payment options ranging between 3-5% that make a lot of sense to get started.  I recommend getting a sense of what down payment you need to get a property and start there.

3.) try not to get too stuck on a 4-plex.  sure, that'd be great, but getting A property is your single biggest hurdle ahead and 4plexes are more expensive and you have more to bite off and chew on as a new landlord than owner-occupying a duplex, for example.  I'm not saying forget it, i'm just saying in your position getting a duplex in 2023 vs. getting a 4-plex sometime in 2024 is much better.

4.) you make your money in this business while you wait.  take a close look at where the majority of gains come from in the long-haul.  You might cash flow 200/door  once you move out of your first house hack, but you'll make WAYYY more in appreciation during that first year.  it's equity you can't immediately tap, but that's why I say you make money while you wait here.  That's where the real wealth is.  the cash flow will most-often get much better as time goes on.

5.) once you get consistent employment and you have a reasonable sum for a down payment, start connecting with lenders who are also investors.  they can offer insight into how to creatively finance your first, 2nd, 3rd property so you buy right the first time and you can start to develop partnerships with these people.  They can provide great insight into different types of investing, connect you with other investors, contractors, realtors, etc who can help you along the way.

in my experience, cash flow is a little over-hyped.  Yes you want it, and I don't think you should buy a property that doesn't - but I do know that people miss-out on otherwise great deals or they wait too long to find something that hits a certain high number.  The best thing you can do is work out your own deal analysis and know the numbers intimately.  you will realize quickly where the money is made and the best way to get it.  I find a lot of new investors who just want to punch into a calculator someone else made and I think this is a mistake.  They go in not realizing the math behind the return indicators and they are upset when it didn't turn out as they wanted or when the deal doesn't pencil in as they expect.  Making your own calculator can help you simplify everything and build muscle-memory so you can spot a deal when you see one.  I spent months analyzing a dozen or more properties per day until I got it in my head without checking.  

I could go on forever about this.  this is probably more than you need to hear right now, but hope it helps a lot and good luck out there!