All Forum Posts by: Jody Sperling

Everything that Nathan G. said, and I'd add, if you know where to target a market in your area that has numerous rundown houses but good upside, you can often find reasonably priced inventory that has some upside in repair. 

I'm in Omaha, and in my market there are a few neighborhood south of North Omaha that tend to be neglected, but fit inside the B class. You can rarely do a perfect BRRRR, but you can get a great value out of the deal and move directly into hacking. The way you'd do it could closely resemble a live-in-flip-hack-BRRRR. A beautiful combination of three strategies.

For a project like this, you could use hard money, and know that a tenant would help you afford the absurd interest rates for several months. before refinancing. Best of luck!

Investment Info:

Single-family residence private money loan investment.

Purchase price: $70,000
Cash invested: $20,000

This deal came to us word-of-mouth. Once we got past the variety of potent odors, we recognized a steal of a deal. The house rented out for $1,400 a month, and we took a small $30,000 loan to repay a private loan we borrowed from a business acquaintance.

What made you interested in investing in this type of deal?

I was interested in this deal because I had never seen such a cheap property in such a nice area of town. Discussing the different ways it could go, I figured the very worst case scenario was breaking even (if there were more problems that I could ever anticipate).

How did you find this deal and how did you negotiate it?

My big mouth got me this deal. I tell everyone I meet that I buy investment homes. A friend of my aunt's friend inherited this house and wanted to get rid of it fast, for cash.

How did you finance this deal?

We had $46,000 in liquid cash. We borrowed $25,000 from a business acquaintance. The rehab went mostly on credit cards.

How did you add value to the deal?

We rented 3 20-yard dumpsters to dispose of all the trash in the house. Once stripped to the walls, we painted every surface, with Kilz to seal the odor, which was potent. We completed total rehabs of the kitchen and bathroom, repainted and refinished the remaining flooring, and completed a light finish in the basement. We also replace about 75% of the plumbing as well as a water heater and A/C.

What was the outcome?

We are holding the house and have it rented to tenants who will move in March 15th. We pulled a small $30,000 loan from our local bank to repay the private loan. The rest we're floating on our HELOC and credit cards (ccs at 0% for 18 months).

Lessons learned? Challenges?

Beware dishonest contractors. We took a bath early on from Solid Roofing & Exteriors, a GC who charged for work they never completed. Thankfully, we were able to DIY the rotted siding and facia that they bid to repair but disappeared without fixing. Also, celebrate great contractors. All Star Plumbing, Eloy Jimenez, and Benji Molkzyk all helped with elements of the rehab and their work was beyond amazing. I'd recommend any of them to anyone needing work in Omaha.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

I have an agent, but didn't work with him on this deal other than a brief phone call to explain why I went it alone. His name is Jay Stahlecker, and he's not on BP, but he is a phenomenal agent.

On my recent BRRRR, I chose not to pull 100% out of my investment. Instead, I went to the bank I have a good relationship with, and I requested only enough to pay off the lender plus interest. I floated the rest to improve my cash flow.

If you can't do that by using your own money, you could refinance another property to access cash for the remaining, outstanding loan. As a last resort, you could seek a private loan with higher but not hard money interest rates.

Best of luck!

Thank you for your service to our country! 

A few questions that popped out to me were (1) Are you currently house hacking—i.e. do you have tenants living in your current house? (2) Why sell when you move? (3) Will you be able to use the VA loan when you go to Dallas?

IF you aren't renting rooms in your current house, you should. It will create great cash flow. When you move, fill your bedroom with another tenant and create more cash flow. With one house you can easily manage from afar. Even if you have the house, you can get a VA loan for as low as 0%, I've heard, so take advantage of the benefits of service.

Maybe there are reasons you can't do any or all of these things, but they seem the lowest barrier to entry, from what I see. Best of luck!

The only downside to house hacking a 4-plex is if the property is not a true 4-plex. Here in Omaha we have a large number of midtown properties that were converted at some point into three- and 4-plexes. These tend to be a bit awkward, like when your cousin shows up to the party uninvited.

If you're looking at a true 4-unit property, jump on it as the lion jumps on the gazelle. Regardless of the challenge, more cashflow is better, and the worst mistake you can make with a single family home or duplex you get the benefit of escaping with better tenants in two of the other properties.

The RE agent is giving you bad advice this time. Won't be the last time either. Ask her/him if s/he's ever owned a 4-plex. I'm guessing not. Best of luck!

Start setting aside money now. Real estate is great in that you can find creative ways to invest with low or no money down, and you'll be so tremendously limited in the beginning if you only have the mindset of max leverage.

We bought our first property as a primary residence, lived in it for five years, rehabbed it, and rented it when we bought a new primary this past June. All I did was save a little and pay debt, but in December, we bought our second rental and next week our tenants are moving in. From June of 2020 to March of 2021 my net worth jumped from about 60k to 253k. I went from holding 120k in assets to now about 592k in assets. In total debt, we have only about 20k more than I did the day I bought my second primary.

I say all this to illustrate that its okay to start slow. Maybe your first purchase is a house hack and you build resources from there. But get started as soon as possible and study voraciously. Listen to every BP episode. Check out the BP Money channel too. It's amazing. Read Rich Dad Poor Dad, and Landlording on AutoPilot. Read whatever you hear recommended. Most of the titles can be found for free at your local library, on their digital apps as audiobooks or e-books.

Best of luck!

Finding a partner would be the easiest.

If you won't partner with another investor, build a network of private investors. You'll pay a higher rate of interest, but you can generate enough cash to transact without a bank, then once you own title, a bank will often refinance some portion, putting cash back in your hand for the next deal.

Your last option, as I see it would be to eliminate some of your cash reserves to reduce current debt load. I would never choose to lock money in a loan if I could avoid it, but the calculation banks run is Debt-to-Income not debt-to-total-cash. Best of luck, however you move forward!

Consider transitioning to commercial investing. Banks lending commercial funds for mutlifamily acquisitions have fewer restrictions on the situation with your W-2.

Otherwise stretch your money by marketing for distressed sellers. You might be able to buy a house on the cheap, rehab it and have cash left after renting it. OR you could flip.

If you know how to invest in real estate, a W-2 may ultimately be a hindrance to growing the business you were meant to have. Best of luck!

You can apply for multiple loans at the same time. What you may encounter if you do is an issue with debt-to-income ratio. Your success in obtaining both loans would depend on the bank underwriting. Chances of getting both loans would increase if you worked with local banks that can approach underwriting from a creative point of view.

If you need to find good local banks to work with, find investor communities in your target cities and ask a forum who the best banks are. That has worked well for me. Best of luck as you move forward!

You don't have to break a lease to buy a property. You could, instead, buy now, and move in at the end of your lease. Rent the property by the room, leave yourself one room to move into. Then you can start building cashflow and equity sooner.