All Forum Posts by: Jon Kelly

@Garrett Cannizzo Similar to other posts, the decision comes down to if you have a better option to put your money into after you sell. Maybe this is the time to sell and scale up to larger multi-family? 

Instead of selling you can take advantage of the appreciation by refinancing and pulling cash out. Obviously it hurts your monthly cash flow, but you can pull out $30-50k and buy another property. 

Another consideration is enter into a rent-to-own (or lease to purchase option) agreement with the tenants. Typically, these are 3-year agreements. You agree to the future sale price (build in appreciation) and annual rent increases today over the next three years. In addition to rent they are paying monthly payments ($200-500) towards their future down payment. If they miss future payments or decide to back out of the agreement you keep the rent and future down payment funds. 

@Demetrius Ward start making offers.

Often with BRRRRs investors like to offer cash and waive the inspection. For your first deal you may want to include an inspection so you have the ability to back out if there’s serious issues. You’ll have 30-45 days before closing to focus on lending and prepping for the rehab.

@Bobby Lee Can you explain how it goes from a 6% cap to 2.5% cap? Cap rates do not take mortgages into consideration. 

Cap rates are good for understanding the value of the property. Cash-on-cash return and monthly cash flow per unit may be a better metrics for you to make a decision. 

If sounds like you will be able to pull all of your money out, so your cash-on-cash return is infinity (pretty good). 

Use the BRRRR calculator on BiggerPockets. It will show you analysis before and after the refinance. Best of luck!

Are security cameras sufficient for deterring crime, or is part-time / full-time security necessary? 

Is there a rule of thumb for a minimum number of storage units before you have part-time / full-time boots on the ground? 

I'm currently analyzing a 200-unit self-storage facility in Pennsylvania, which will be my first venture into self-storage.

@Kishun Barker It's a great option and a differentiator from any competition that requires financing. You'll likely be able to offer a lower price because there is little risk in your offer and you can close quicker. Often, those that pay cash tend to use the BRRRR strategy. Find opportunities to rehab the property and increase it's value and then refinance and pull your money out.

Buying the cheapest fixtures/appliances/products. I used to buy "gently" used appliances to save 50% on some of my expenses. So often they break within 1-2 years and my cost to replace and install a new appliance is much higher than it would have been if I installed a new mid-tier option to begin with. 

@Scott Brewster One of the beauties of real estate is there are so many strategies that can work. Is there any way you can look for both (2-4 units or 5+? 

Depending on your market, there may not be too many 5+ properties available. So, why not look for both? 

Maybe instead of # of units or residential vs. commercial, you change your criteria to "$200/unit in cash flow" or 12%+ cash-on-cash return. Then, focus on properties meeting your new criteria regardless of # of units. 

@Alexis York talk to a commercial loan officer. Your interest rate will increase to 4-5%, but you may have better luck getting through the underwriting process.

I would do this if you can’t get a co-signor.

@Alexis York What type of loan are you going for? Look into a commercial loan. It will be slightly more expensive but often they focus more on  the financial performance of the property than the investor. 

@Shane Ward If you want to go with a commercial loan, reach out to Carla Green with Mauch Chunk Trust. I know they will loan in Carbon, but I'm assuming they'll loan in Monroe County too. 

Most of my properties are in Carbon County. If you want to share notes, send me a message and let's connect