All Forum Posts by: Jeff Schemmel

@Jamil Khan 

SF365 & HF685 both directly state: family LLCs are excluded provided the following is true.  

(f) "Family limited liability company" means a limited liability company meeting the
following standards:

(1) it has no more than five members;

(2) all its members are natural persons or family trusts;

(3) all of its members who are natural persons or spouses of natural persons are related

Really hard for me to believe that "MOST investors" now won't be able to buy properties and turn them into rentals. Most investors I know are small LLCs. Also...preventing large investment firms or development firms from buying up perfectly good owner-occupiable SFHs and sMFHs is probably a good thing... We should be paving the way for more owner-occupants and knocking down that high barrier to entry to allow more people the opportunity to build wealth and own a home. It's a primary driver behind high sale & rent prices in MSP. It also probably helps sustain the quality/condition of properties in the metro if more owner-occupants buy them. People who live in their SFH, duplex, etc take much better care of the property and are more respectful and mindful of tenants in my experience.

1.) no, not in Minneapolis.  The average duplex is about 350k, 100 yrs old, and needs at least some short term repairs.  Don’t forget you also need to pay closing costs of 3-5% on top of your 20-25% down payment for a non owner occupant investment property.  You could buy a single family rental in Saint Paul with 50k and rent it via section 8 for a reasonable return.

2.) @Jordan Moorhead how far can 50k go for a non owner occupant investment property in Louisville?

@Account Closed While I do enjoy Fishtown like most millenials, I feel like the triplex is better long-term and probably supports a better cost of living reduction for you (hard to say without details). The big question I have is, does it meet FHA's self-sufficiency rule? 75% of the rents must pay the mortgage or you can't use an FHA loan to buy it. perhaps that will decide for you :) I haven't seen many 3 or 4 unit properties that meet this requirement in my market Minneapolis/Saint Paul, but I haven't kept up with Philly prices since I left there.

@Emily Capozzi I bought my first house hack with $5,000 in. I was broke when I bought it, and I got a bit of an unconventional property for househacking (SFH condo) but I was able to rent half to a friend and slash my cost of living by $750/m. That's the goal. Do what you need to do to get this part accomplished and learn from there. When buying your first deal, worry less about finding the perfect deal and waiting for the "BEST" opportunity and worry more about reducing your cost of living as much as you can. Don't be silly about where you buy, but don't wait a year or two to find a perfect deal and miss-out on the wealth building that househacking brings you. If you've got enough of a down payment, speak with a lender who demonstrates a track-record with investment property lending (bonus points if they're also an investor), and then partner up with a realtor who also knows investment properties (best if they are also an investor).

From there, just go see a few places and make it real for yourself.  Practice your deal analysis daily and develop a sense for what a deal looks like in areas you like and just be decisive.  

@Sophie Grizzle glad to hear this. Do you qualify for any low-down conventional options? Here in Saint Paul, I often recommend clients take advantage of a 5% down conventional option that's only available to first time buyers so they can keep that FHA in their back pocket for deal #2. Then you have two low-down options available instead of going FHA, then immediately to 15+% down payment on deal 2.

I found that who you partner with in lending is so critical.  they can seriously make or break your deal, and I would make sure you are working with someone that is also an investor, who knows the local multi-family market, and can give you some real advice on lending options and even creative solutions to get competitive in your local market.

I looked for value-add because I wanted to house hack, force equity, improve revenue, and capture both equity and cash flow as soon as I could.  This is the way if you can hack it and you're willing to get your hands dirty.  take good notes on capital expenditures when you're touring a property you're serious about and practice your deal analysis daily to train your mind to spot a deal.

Good luck!

 Did you hold rentals in Saint Paul?  

 care to elaborate on that?  I'm curious what your reasons are! :)

 yeah i'm not seeing this at all @Johnny Kane. Do you have a source for this information?  

To address the actual question, you can't just walk up to a shelf and pick out a cash-flowing property.  It's never really worked that way (maybe in '08/'09)?  You have a set of skills/experience (or money) you bring to the table as an investor and you match those skills/experience/ideas with a property and you add value to create a deal.  You add laundry where there wasn't any, you add a bedroom/bathroom, you rehab the property, you add storage or increase rents or whatever you need to do to improve the deal.  You seek cash flow to maintain your asset, but the real money is the long-term equity gain.  People are literally fighting with their money over property right now, especially multi-family because there is such a shortage of multi-family listings in MSP.  Use rentometer to take a quick sample of the rents over time; you'll see they've surged in the last 2 years.  Places like saint paul have put rent "stabilization" in place.  That has a negative effect on supply of affordable housing, and it immediately pushed rents up in saint paul; despite what that was meant to do in the first place.  

You make money in this investing game while you wait, hold, improve, add value.  Not when you buy or sell (in my opinion).  

@David B. my point of view on this is that your ROE (return on equity) of 1.3% is not very good at all on this property - I can immediately recommend a high-yield savings account that could double that return. 

Have you lived in it for at least 2 years? I would get multiple opinions of market value, and which comps (recent sales) are useful - really get a dialed CMA to make sure your valuation is on target. I would even go so far as to get a "net sheet" from a realtor. That net sheet would lay out your actual estimated proceeds to ensure you have a real idea of your actual ROE. $150/m cash flow ($1,800/yr) (in my opinion) is just not enough to be worth holding, especially when you're that far away. I am also of the opinion that now is not a good time to be over-leveraged with a heloc; the only way I'd recommend using one now is if you're doing a 3-6 month project that will return the cash needed to pay it off in that time frame and your return on that venture would be worth that effort.  The buyers in this market are going nuts for a great house, that's also worth mentioning.  I lost count of how many multiple-offer negotiating circumstances I've been in in the last month - we're back to multiple offers and appraisal gap covers and pre-inspecting.

If you care to share your neighborhood, or if you want to chat more about anything I shared please feel free to DM but based on what you shared I would lean towards selling.  Appreciation is speculative, and if your ROE was over 10% I might change my opinion here but I'm pretty firm.

 This.  The first thing your realtor should have done is check the appraisal for mistakes, speak with the lender about it and see what can be done, and take another look at comps.  If the appraisal stands as delivered and the lender will not re-order it, then this is exactly what should be done.  The seller has to deal with the appraised price, and you shouldn't pay more for it just because it's convenient to do it now.  Another buyer may come along with a different lender a month from now and get a slightly better-appraised value, but I would be shocked if they were 25% above the prior one.  Is it a weird property with no good comps?