All Forum Posts by: Jesse Aiken

Interesting  options that I hadn't considered @Jimmy Murray

I'm curious about the seller holding a second position in lieu of my down payment...how would that work?

 For example: 

Seller holds a second note for say 30k in effect lowering the purchase price on paper for the bank to 100k allowing me to afford closing the deal?

Or would the bank accept the second note with the seller as down payment in lieu of cash from me? That would be a great way to do it if possible but I know that the bank want's my skin in the deal, so I don't know if they would be agreeable to that. Do you know of this being done before?

Thank you for the great ideas! I'm going to stash those gems in my toolbox and look into it.

Thanks @Andrew Beauchemin

I do have some equity  in one of my duplexes but not enough to justify a heloc just yet. I would consider selling my single family but own that with a partner so I'm stuck there for now.

I honestly don't know if it's a great deal yet. I'm meeting with the seller for a walkthrough on Monday. I agree that if it isn't I should be patient and wait for the right one. Thanks for the reminder. I think I made a bit of a mistake with my last purchase because there really isn't any equity in the deal. I was getting frustrated with how difficult it is to find equity in my market (real estate sells cheap here) and enticed by the 250/door cash flow. ROI is around 20% so it wasnt a bad deal but I see now how no equity can really hinder growth. I need to learn from that and stick to my guns.

Wholesaling could be an option. Honestly though, it would be a last option for me because if the deal is good enough to wholesale, it's all the more motivation to find a way to buy it myself.

Thanks for the thoughts and the reminder to be patient!

Hello BP members! I could use some advice, info, anything I can get my hands on...

Here's my situation:

I just closed on my second duplex in August and have been planning to work on systems and build capital before marketing to 4 units toward spring. I made it known that I will be looking for 4 units and got an off market lead through my network for just what I'm looking for and it could be a good deal. 

Problem is, I only have 30k in capital and would be looking at 25% down plus closing costs on a purchase price of between 130-150k. I haven't looked very closely at it yet but if I want it or I'm in this situation again, I need to figure out how I would finance the deal.

Here's what I'm thinking:

1) Ask for the seller to finance if possible. I don't know if that's an option especially since he bought it in 2008, but you never know and I'll definitely ask. This would be the best option with the right terms.

2) Borrow the difference needed to close from a private lender and refinance them out after seasoning. I'm not sure how I would do that with bank financing since the PML would have to be a second...not sure if anyone would be willing.

3) I had an idea today that I might be able to get a personal loan for the difference. Has anyone done or had experience doing this?

4) Bring in a partner. I'm not thrilled about that idea on this particular deal because I plan to hold long term and don't want to be tied up with another investor for a long time.

5) Get an FHA loan and move into the thing. I'm not sure if I would want to but might be willing if it's a great deal. I know I would have to pay PMI but would refinance into a conventional or commercial product after a year and pull equity at the same time. As long as the cash flow is still acceptable during the first year I could live with it.

I'm wary of over leveraging but I do have an unsecured LOC for 10k for emergency reserve and would want to keep that out of the deal for 2 reasons: Its high interest and without it I would be tapped out and in trouble if bad things happened. It's a bit of a safety net at least.

Any ideas, experience, suggestions? I would really appreciate any input

@Andrew Johnson That's a great point. I didn't consider the taxes on earned interest. I wasn't aware of the 5% pullback you mentioned either. I've been busy plowing my money into real estate and haven't kept an eye on market conditions. I know that my 401k and Roth returns have been pretty high lately so it makes sense.

I have read that index returns average 7% over time. It would still be risky if I need to cash in quickly to put skin on a deal within a short time frame. If it is in a dip when I need it, I could lose some too. I'm guessing that the best I could hope for is around 1k more capital overall in that timeframe.

Probably not worth going that route. Maybe I'm just trying to squeeze milk from a turnup and need to be patient while I get my ducks in a row. If a great deal comes along in the meantime, I'll just have to grind it out working on systems,  delegate what makes sense, and get creative with financing.

I Just got an off market lead on a 4 unit earlier today and I'm looking into it. I shouldn't let small details hold up progess.

Thanks for your input;  it was helpful and I appreciate it.

Thanks for the replies!

That's definitely an option I have considered @Antoine Martel. The only issue I have is that dependimg on the deal, it usually ties up the capital  for a minimum of 6  months and I wouldnt have it available if a good deal comes along...then I'd be looking for a PML for the same interest I'm making, so it's a wash. Short term loans are a good option if the right deal can be found; such as a short term bridge loan.

That's a good option as well @Lucky Tiderman and one I have used in the past. I lent someone a bridge loan that was paid back within a week and made a couple hundred bucks for just making a trip to the bank. Seems like those situations are few and far between though and might be difficult to find. Also, I wouldn't lend to someone unless I have total trust and complete legal coverage. I guess I could put an ad up advertising short term bridge loans to get interest from potential investors. I would be extremely careful with these types of loans though.

That's interesting @Ben Barelman, I haven't heard of these liquid CD's. It would definitely still be better than letting it sit in a checking account. Unfortunately I dont have enough capital to make that type of investment worth while in the short term.

Hello BP community, I could use some advice. I am a new real estate investor with one year and 3 buy and hold deals under my belt. I'm at the point now that I have learned enough to know how much I don't know and I'm in a bit of a holding pattern as far as purchasing more rentals.

I have done things somewhat backward by buying rentals and now need to build my buisiness around it. I have learned the importance of working on my buisiness structure and systems before moving forward with more acquisitions. I plan to spend several months getting my buisiness in order and systems in place before hitting the bricks for more deals. 

During this time, It seems that I could take the capital I have currently and put it into a semi-liquid type investment in order to earn a better return than just letting it mold in the bank. I would be investing 25-30k. I know the returns from a semi-liquid investment in the short term will be minimal, but it would be better than nothing and every little bit helps. 

I'm thinking maybe an index fund or something similar? Are there any ideal short term products available? Is it even worth It for say a 6 month term? Would the risk outweigh the reward? I appreciate any suggestions or info anyone can share with their own experience!

I don't know your market, but I find that it can be difficult to get good student tenants this close to the start of the school year. 

I think timing is important with student rentals and you could end up with a mish mash of procrastinators or transfers that might not cohabitate well and/or take care of your property. Its a good idea to plan on higher maintenance and turnover costs with student rentals. Another consideration is that many students look for a shorter lease term, so you could have some extra vacancy if you plan to continue leasing to students.

I have one student house with 3 grad students who were looking for a place together and that is doing well (priced per bed). I also have 3 roommates in one of my apartments who were looking for a place together and that is going well also (they split rent).

All that being said, if I were in your shoes, I would still market to students because cash flow goes up when leasing per bed and there's a chance you could still find good tenants. Just screen, do your checks, and trust your gut. It's not worth doing anything too risky for that extra profit as long as your cash flow is still acceptable at market rate. As far as pricing goes, I would adjust the per bed price so the tenants can afford utilities and you still get the added cash flow you're looking for. That way you don't have those extra expenses, are more competetive in the market, and still increase your ROI.

At the same time, I would advertise at market rate for the whole house with the tenant responsible for all utilities, lawn care etc. Sometimes a good long term tenant can be better than a short term bump.

It all depends on who your applicants are and the direction  you're trying to go with your buisiness.

I should also mention that I'm currently hacking one of my duplexes and have 2 roommates. So far so good and my ROI is very healthy :)

I wish you the best of luck!

I'm currently hacking a duplex in west Erie. Large brick with a garage and paved driveway across from a park. Two big 3/1 flats. Downstairs leased for $836 (I pay WST and provide washer/dryer). I also lease the 2 other beds in my unit upstairs for $350 each unfirnished, utilities included. I have done 90% of the renovations myself (I don't recommend, but doing what I need to do). I also maintain and manage. I'm living for free and cash flowing nicely. Also, just finished a brrrr single family deal. Used private money to buy and renovate a 3/1.5 cape cod. Three weeks after closing, tenants moved in and now just waiting to season and refi. $0 out of pocket but plenty of sweat equity. Had more outside help to renovate that one but it was over 2 weeks of 14 hour days on average including a full time job. Should end up with 20k in equity, cash flow around $200/month with PMI in place, and about the same with 15 year commercial loan to our LLC after refi. My partner and I are looking for more and making offers. I'm also looking for another multifamily for my portfolio. Trying to find a good 4 unit. I know a great realtor, she is an investor/agent. Dorothy Butala with Agresti. She is an investor/agent and also a board member for the Erie Apartment Association (fun fact: its the largest in the country and i recommend you join). She has a lot of resources and specializes in working with investors.

I'm new to the real estate investment community and still in the early stages. I've been diligently doing my homework and familiarizing myself with the business. Even though my overall understanding is coming along, I'm quickly realizing that I really need to talk to some more experienced investors and professionals working in my area in Erie Pennsylvania. I look forward to talking with you!