All Forum Posts by: Jesse Waters

Glad to help, also good to know that someone else came up with the same approximate numbers that I do.  If the units are all under one roof, I might not rent them out until its all done, or offer reduced rent during construction.  Offer it at $550 with a $100-150 monthly discount during construction...  

I would take a little longer seller note, maybe 20 year loan on a 3 year balloon.  That way you don't have to deal with getting your bank financing setup while you are in the middle of the rehab.  You will also be able to get everything stabilized before you go to the bank.  Just my opinion.

@Hattie Dizmond Great answer.

The answer for each of us is different. Personally I am going for financial independence. I don't like working for anyone else, I don't like trading my time for a pay check. I enjoy the majority of what I do with my REI.

To me net worth isn't really worth a whole lot.  If I have a primary residence worth $500k and $2mil in stocks, that's great, but to me that's just paper worth.  I want more passive income coming in than going out.  It doesn't matter what my paper worth is, I would say that I want to be "infinitely wealthy."  Meaning that I can live indefinitely with out working or running past the end of my cash. 

Jason,

If I were in your shoes here's how I would look at the deal. For offer price I would figure out your NOI & Cap rate you would accept should the building be occupied & renovated. Then, I would deduct your expect renovation cost, then deduct a little off of that.

Numbers just for fun-

Rent  $550 x 20 units x 12 months=$132,000

Expenses 50%

NOI $66k,

call the CAP 10%

value=$660,000.  (think I did that right)

Less $300k for reno = $360,000.

Then I would offer lower than that just 'cuz.

Secondly, as units are repaired I would start renting them out, I would go by building, (just guessing that the complex is 5 4-unit buildings.)  This does a few things for you, first, you will not stack all your lease expiration's  at the same time.  Also, you would go ahead and start slowing down your negative cash flow & start working towards positive cash flow.

Hope this helps some.

If I had to do it all over again, what would I do differently?- I would have started by house hacking.  I am going for cash flow & don't really have the time to deal with flipping/wholesaling.  Also, when we bought our first intentional rental I didn't do a good job with the numbers, I listened to our agent, fortunately she was spot on with her numbers & we got lucky.  Given the chance, I would have done the numbers over again.

Andres,

Here's what I did. My business partner and I set up a LLC to operate our properties. We had to apply for the loans using our personal credit & take the properties in our names at closing. After closing we transferred (grant deed) the properties over to the LLC. We still have the loans in our name but the money runs through the LLC & we have been generating corporate tax returns that will help us when we go for financing on larger commercial loans.

Hope that helps.

My business partner and I started our LLC prior to purchasing our first property. I know some on here might disagree with me, but the LLC helps us keep things separate (business & personal.)

There are some states such as Nevada that offer better LLC benefits than others. From what I have experienced you can use a LLC from any state to do business in any other state, you usually have to register with that state's Secretary of State as a foreign company. I do most of my work in SC & have a SC LLC.

Since you seem to have some time & are starting out, I would give Garrett Sutton's book "Loopholes of Real Estate" a read. He covers most the basics of LLC's, how to structure your partnership & how to protect you assets.

Best of Luck!

JW

Matt,

Starting by house hacking can be a good way to buildup your inventory and gain experience.  I feel like I recommend it to just about everyone that is starting out.  Quick run down on the concept, buy a 4-plex, live in one, rent the rest out.  That way you will at least be living for free.  Hold it for a few years and repeat.  Since you will be buying the properties as owner occupied you will have an easier time with the bank.

Welcome & Good Luck.

Chance,

I don't do my own property management, my current work schedule is a bit too hectic to allow me to take that on.  I have 10 units and working on getting another 12.  I honestly put about 2-3 hours a week into dealing with my rentals, at most.  I have gone 2-3 months with out having to field a call from one of my property managers, or deal with any general hassle.  I have also had months where I can't seem to get off the phone with property managers, contractors, inspecting work etc.  

It comes down to if you are going to manage the properties directly, or manage your managers & dealing with contractors as you will have to from time to time.

I am curious to hear from others who directly manage their own rentals.

JW

Joseph,

I haven't tried my hand and wholesaling, but from what I have heard, it can be a lot of work.  Not trying to discourage you, just a note of caution.  I have heard that it has lots of upsides, just doesn't produce reoccurring cash flow.

You may want to look into house hacking as well.  Basically, you buy a duplex or quad and live in one unit and rent out the others.  The lending requirements are a little lower since it will be owner occupied.  After a year or two you can repeat the process and not have to re-fi the first property.  Do a search on BP for some info on how to do it.  I think there is also a pod cast on the subject.  

Before you buy, learn as much as you can, especially on  how to analyze the deal, property management & dealing with tenants. 

Hey @Nick B. I'm not sure what your market is like, but my big concern would be the fact that all these units are single bedroom units.  Seems to me that you will have higher tenant turn over and a smaller target market than a building with a mix of 1, 2 & 3 bed rooms.  Not trying to rain on your parade, just something that you might want to give some thought to.