All Forum Posts by: Jon Kelly

@Joseph Burger you have many options. With the connections you have I would target distressed properties. You can either just go the BRRRR method. Or, you can househack and BRRRR. Depending on your market you may have enough capital for the househack down payment (3-5%) and rehab costs, AND the funds to purchase a BRRRR type property.

With the BRRRR method your capital is tied up until you complete the renovations and refinance. You can often find lenders with no or low "seasoning period," which means you can refinance after 0-6 months after purchasing the property.

Another great way to choose your path is to actually run numbers on different scenarios. Instead of guessing which strategic will lead you to the promised land, you should use the BP calculator and run numbers on BRRRR vs. "nicer" Buy-and-hold.

@Michael Stowers why did you wait until you're in escrow to ask this question? What made you go this far and now hit the pause button? 

Completely depends on your goals. A lot of investors invest for cashflow, so this would be an easy "NO" for them. Others will bank on future appreciation and be willing to hold. You have to ask yourself which strategy you prefer. 

@Steven Barr you're asking the right question. 

The likely answer is: it's easier to convince a buyer of a "value add" opportunity than to actually perform the value add opportunity. The seller knows the property and the tenants. The seller knows the challenges that will occur in raising rents 25-50%... 

Frankly, it's laughable, just like the 2-8% CoC, that someone would put that in the description and expect a buyer to purchase.

@Drew T Heberer I would challenge you get out a sheet of paper and sketch what you think the process looks like from beginning to end. Then share your sketch in this forum and people can comment if it looks good or provide edits. 

By forcing yourself to think through the process will help you 10x more than seeing someone else's visual. 

As @Rick Pozos said, there's nothing better than actually doing. 

@Joshua Sonico Looking at macro trends is informative, but it usually doesn't mean a whole lot for local markets. 

Focus on your local market. Focus on investing for cashflow instead of appreciation. Be conservative in your underwriting. 

@Solace Medina Why give notice to all 4 units? Why not upgrade them on a rolling schedule? Start with unit 1, then unit 2, etc. You can also give tenants the opportunity to move to a newly renovated unit. 

If you still decide to provide notice to all 4 at once, I don't think there's much you can do to avoid the "awkward, weird situation..." You already provided notice so you'll be dealing with unhappy and potentially uncooperative tenants. It's going to be challenging to gain access to all units at the same time for multiple days over the next 30 days. You can try to walk multiple contractors through at the same time. Contractors can also make their bids based on what's known to them. You can get rough estimates based on what they would expect to see and then they can verify and formalize a proposal after tenants vacate. 

@Dan Hertler If you're constantly getting hit with "time bombs" you need to reconsider your due diligence and underwriting. 

I understand the question but this is a silly example. How can you buy a property without knowing the age of the HVAC? If the age of the HVAC is near the end of its useful life you need to budget for this when you underwrite. You can either assume higher reserves for years 1-3 (or until the HVAC goes), adjust the purchase price or receive seller credit. Of course surprises will always come, but you can limit the damage. 

@Greta Hansen Begg This is great initial research into potential opportunities, but you're missing the #1 and most important thing to making a decision... the numbers! What is the ROI or COC return (either is fine) for each of these opportunities? That will give you your answer.

If both A and B provide 12%+ COC then make aggressive offers on both. It's highly unlikely both will accept your offers if they are aggressive enough.

Last piece of advice - keep it simple for your first property. I wouldn't bank on converting the shed into a casita. If you can, then great. But, by adding too many options it slows down your decision making. If you have too many options you will struggle to choose anything. Keep it simple. Prove to yourself the concept works and then start to get creative. 

@Sachin Amin so far so good. I'm almost finished with the necessary turnover and facelift on the property. I expect 40%+ cash-on-cash returns beginning in year 2. I have a property manager in place. Financed the deal. I may refinance after the forced appreciation or explore a HELOC.

@Evan Anderson $3k in annual cashflow? That's 2% cash-on-cash return...

Maintenance is less than 1% and no CAPEX? You have no reserves...

How confident are you this property will appreciate to $850k in the next 3 years? Otherwise it seems like a waste of time and money