All Forum Posts by: Jesse Waters

Derek,

Sounds like you are on the right track.  I am at 10 doors and looking to double my holdings in the next year or two.  My only caution, and something that I tell myself all the time, be very careful with debt, it's like dynamite, it can move mountains, or ruin your day real quick.

Best of luck.

JW

Cash flow.  If the property doesn't cash flow, then I couldn't hold it for very long.  Cash flow & mortgage pay off are my ultimate plan, appreciation is good, but you can only really benefit from it when a property is sold or refinanced.

I try to get by once a week, just to make sure things look ok, but I don't like bothering my tenants if I don't have to.

The down side as I see it, with new properties you have very little room for upside, short of spending lots of money for upgrades, if-then your problem will be comp's, particularly if you are buying in a new development.  In my local area properties are selling for less than replacement, or the cost to build new.  The only way I really see this working is if a builder is distressed and needs to move inventory and can't afford to hold the property until he can sell it at market.

You may want to look at fix-n-flip properties or  buy and hold rentals for cash flow.

Really depends on how fast you need to sell.  Most of the folks that put up those signs are wholesalers who link distressed sellers with cash buyers.

If your house is in good shape & you have some time I would either contact a few realtors or do a FSBO.

The biggest frustration for us has been on the money side, either cash for down payments or lenders.  We have plenty of lenders willing to lend to us on quads with 25-30% down, which gets expensive, then moving to commercial lending, we are battling with the minimum amount financed requirements.  

I haven't had trouble finding properties, although, I do get frustrated because I have become more picky than I used to be.

I have been in the position for some time where I am looking to move to bigger properties & use commercial lending.  Each property that I purchase using residential lending requires 25-30% down payment, which is high, but in line with what commercial lenders ask for.  From my discussions with commercial lenders here is what I have found out:

LTV: They require 70-80%, however, this is usually based on appraisal using CAP rate, NOI & gross rent multipliers. They seem to be more flexible with the down payments & require it based on the appraised value not on the purchase price, unlike residential lenders.

As far as the down payment goes, the commercial lenders don't seem to mind as much where the funds come from, to a certain extent. I had a commercial mortgage broker tell me that I can use my business LOC (as long as I season the funds), personal/business cash, seller carry back, gift funds & crowdsourcing, or a combination of those for the down payments.

The problem that I have run into is that a lot of lenders have minimum loan amounts, anywhere between $300k to $1mil.  So the problem is fund raising the down payment & finding the right property.  Speaking of which, each lender has their own standards for class of property.  Generally, it take just as much work for a lender to process a loan on a $250k 5 plex as it would for a $2.5mil 80 unit property, which is why the lean towards the higher minimums.

DCR: Debt Coverage Ratio. Obviously you want your property to cover the mortgage and then some. Most lenders have told me that they want 1.5-2.2. Which is fine with me, since a 2.2 would mean that I am cash flowing pretty well.

The down sides, as I see it are that a lot of lenders will give you 20-30 years but require either a balloon, or re-fi every 3-5 years.

Resale: There is a limited amount of buyers, which hinders your ability to easily resell a property.

Hope my ramblings help.  I have been snooping around looking for a larger multi-family property with a loan to go with it.

I went to realtor.com, put in Elverson, PA, on the "advanced tab" selected only multi family & under surrounding area's selected 5 miles.  Came up with alot in Pottstown?  I don't know your area, just wanted to give you an idea.

@Andrey Y. 

I have read through this thread and it is rather entertaining.  I'll try to give you my two cents and answer your original question rather jump into the other discussions & opinions offered.

First and foremost, it all depends on your market & your goals.  If you have money equal to the full purchase price of a property then you are in a good position.  I would analyze the property and see how it looks fully financed, free & clear and a few spots in between, ie 20%, 30% & 50%.  See how it looks and how it fits with your goals.  As much as I hate large down payments, I have had the best luck between 20-30% down.  I recently looked at a property & had the opportunity to purchase it with only 10% down, unfortunately, this would have represented a -5% cash flow deal.  I think it would have broke even around 15%.  I would have only hit my cash flow target at 40-45% down which meant that cash on cash just didn't work out on it, so I passed.

If you can put 30% down, make decent cash flow, the go for it.  Then move on to your next deal.  Like I mentioned, it has a lot to do with your individual goals and your market.

@Korrine Rudderow 

Welcome to BP.  Sounds like you are on the right track.  Get educated, discover your niche & which ever direction you decide to go learn that area.  Also, always make sure that the numbers work out before you pull the trigger.