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All Forum Posts by: Joshua Christensen

Joshua Christensen has started 20 posts and replied 272 times.

Post: Strategy to Purchase a 9-Unit Building

Joshua Christensen
Posted
  • Investor
  • Albuquerque, NM
  • Posts 281
  • Votes 229
Quote from @Rafael Carvajal Jr:

Seeking advice on purchasing a 9-unit building! Interested in strategies, financing options, and any valuable insights from those experienced in real estate. Your input is greatly appreciated!


 Hey!  It's a great question and very open ended.  There are a lot of ways you can take it depending on your available cash, the condition of the property, etc.

What strategies have you explored up to this point?  

Some have stated DSCR loans. They can be good options. Freddie small balance loans are complicated and have a lot of different sniff tests and experience requirements based on your balance sheet and experience levels. Local Credit Unions can have some nice lending options.

My favorite option on deals like this are to see if the seller will entertain owner financing and get creative on the terms.  Offer a higher price for a lower interest rate and longer term.  Offer a lower price for a larger down payment with middle of the road rates.  Offer lower down payment with a higher rate?

You might be able to do a lease with the option to purchase (spell out the sales price and terms in the option) that you'll exercise within 3 - 5 years. Essentially, pay them "rent" to control the property. You won't get the tax benefits during the lease period but you can grab control of the asset until it qualifies for a DSCR with nothing out of pocket. These typically come with a non-refundable deposit that is applied to the purchase later.

Lots of options if your seller is willing to play.  if there is a broker involved, your options get reduced.  Minimum down when a broker is involved will be 10-15% to make sure closing costs are covered and the seller has some walking cash.  

On owner financing deals, I'm more likely to discover what's most important to the seller and craft a deal that works for them first and for me second.  Set it all up in Escrow so an independent 3rd party controls the money for all your payments and there is a good audited record.

Post: Advice on Next Steps

Joshua Christensen
Posted
  • Investor
  • Albuquerque, NM
  • Posts 281
  • Votes 229
Quote from @Paul Clemens:

Hello all,

I was looking for some advice with possible best next steps to expand on a newbie portfolio with 1 live in duplex (live on bottom, rent the top floor) rental. Especially in this market with high interest rates, high competition, and low supply. Here is the situation I'm in and what my goal is....

I currently live in central Connecticut about 30 minutes from Hartford. My wife and 5 children currently live in a duplex where we rent the top floor and live on the bottom. Our total mortgage is $2,300 a month. We rent the top floor for $1400 a month, leaving us paying $900 a month for just our house. We do not have much savings so could not afford to put another down payment on another multifamily , but since buying the property for 295K in 2021, the estimated price of the home currently is 407-430K. We put 25K as a down payment. With that said, are there any possible low risk steps we can take to acquire more property and build our portfolio with the low savings we have, but the increased appreciation and potential equity since buying the property in 2021. We are locked in a 30 year fixed at 3.3 percent for this property. All advice is wanted and welcome. Thank you so much. 

PS. If you need more information to give better advice, please do not hesitate to ask. 

 Hey Paul,

With very little savings, I'd consider a couple of things.  There is some good pointers provided.  Think about this.  You have 5 kids living in what could be an additional income unit.  

Have you considered finding a single family home with a 3.5% down FHA loan that you can move your family to and immediately start generating positive income from your currently occupied unit? Yes, interest rates are a little higher these days (down this week into the 6's), so you marry the house and date the rate. You can always refinance down the road. Unless you have a lot of overhead expenses and personal debt, your $170k income can more than qualify you for a house.

How are the rents you're charging?  At market rate?  Below market rate?  Can you raise rent?  Can you get 15 or 1600 per month for the unit?  

That would give you a positive $600-700 per month swing that could help offset your new mortgage on a single family for you all.

Look around for Off Market homes that the seller may consider owner financing.  less down, you could negotiate a lower interest rate in your deal.  

I bought my current home in 2019 with $500 and took over the guys house payments.  I refinanced and bought him out in 2023.  I'm in negotiations for another one around the corner now and I'll rent my house out.  

There are ways to make it work with the right creativity.  

Post: Ready to start investing into rental properties

Joshua Christensen
Posted
  • Investor
  • Albuquerque, NM
  • Posts 281
  • Votes 229
Quote from @Grozie Thomas:

Hello, I am new to real estate and property management. I would like to start investing in multi-family rental properties. I am a total beginner. I have a decent amount to invest and great credit currently. Also have a house and land in Mississippi that was inherited, that I am looking to invest into. Any advice or options available would be wonderful. Looking to start immediately. Located in the Dallas/Fort Worth area of Texas.

Hey @Grozie Thomas,

Welcome to BP and to the wonderful world of multi-family investing.  Like anything it is a process to learn.  My first question is do you want to own real estate or do you want to be a property manager?  

With smaller 2-4 unit props, you can live in 1 unit and rent the others to offset your mortgage while you learn small property management.  The more units you add, the nuances and challenges of PM come into play.  

Smaller 2-4 unit props also have better financing terms through conventional lenders than 5+ that have to go through commercial lending (you will need some experience for those loans, in most cases).

Syndications are definitely an option for a truly passive real estate investor wanting a solid return and to own a % of the asset.  It was mentioned earlier that you invest in the jockey, not the asset.  Be sure your general partnership team knows their stuff.

It's a great decision to start young and build for the future!  Real estate is a long game and great wealth can be built with a solid strategy.  I strongly believe that you collect real estate and don't trade it.  

Happy Holidays!

Post: Best Practices for Political Activism

Joshua Christensen
Posted
  • Investor
  • Albuquerque, NM
  • Posts 281
  • Votes 229
Quote from @James McGovern:
So what can a landlord do proactively to convince their tenants to not participate in the creation of such laws?
When you work with your tenants, evictions are rare.  Build a system that does a great job on the front end qualifying good tenants and don't make any exceptions for good stories.  Have a written policy.  No prior felony, No drug related charges, No violent crimes, No evictions, 3x rent for income (33% of income for rent is a high number) Credit score thresholds.  Every adult must be on the lease with a background check.  

Be proactive rather than reactive.  You'll reduce the need for this type of reasoning.  Evictions are usually symptoms of poor background checks by the landlord.  Everything in writing to stay within Fair Housing laws and Anti-Discrimination laws.

Post: Best Practices for Political Activism

Joshua Christensen
Posted
  • Investor
  • Albuquerque, NM
  • Posts 281
  • Votes 229
Quote from @James McGovern:

I have several investors lined up who are willing to invest in a large commercial apartment building but are growing increasingly concerned with the municipality passing tenant friendly laws that make it more difficult to evict. Does it make sense to include clauses that limit a tenants ability to petition government for ideas that harm landlords over time? Is there a way to form a convenant that is written with the government to never pass laws that are hostile to landlords?

 @James McGovern

That's a question for an attorney.  Contract law cannot override legislative law.  A judge can throw out sections of your contract that are illegal.  Discuss with a good real estate attorney to find a way around that issue.  

In my experience, Evictions are the boogeyman.  Know the local ordinaces and what the contract law is in your state for evictions.  Even in tenant friendly states, there are evictions, so find out from solid property managers how their systems allow them to evict and what are some of the "gotcha's" that the courts rule in favor of the tenant.  Every state and every municipality is different.  

Post: HELP Evaluate a multifamily

Joshua Christensen
Posted
  • Investor
  • Albuquerque, NM
  • Posts 281
  • Votes 229

@Irving Moorehead

Have you looked at the tools section here on Bigger Pockets?  Evaluating a 6 unit is not much different than a duplex, other than 6 units.  You'll still be able to find sales comps.

Is the 6 unit a single building or is it 2 tri-plexes next door on separate parcels?  If it's 2 parcels, you may be able to do 2 conventional loans for the purchase.  Better yet, work on negotiating owner financing terms if available and set your own terms.

Know your current rents against projected rents and your current expenses against projected expenses. Know your improvement (CAPEX) money needed if any. Then look to see if it will cash flow to fit your portfolio goals.

Just because it falls into a "commercial" lending box, don't over complicate a small multi-family.  You can overthink it pretty fast.  When you start getting into 16/2-+ units, then you'll have more to consider, but for now, keep it simple.   

Post: 401k Loan for down payment on investment property

Joshua Christensen
Posted
  • Investor
  • Albuquerque, NM
  • Posts 281
  • Votes 229
Quote from @Carlos Tavares:

@Dennis Parslow Parslow

Just remember if you are able to liquidate you will likely end up with about half of what’s there , that’s an expensive trade off

@Dennis Parslow Carlos is correct with the heavy burden of the taxes on the 401k.  Are you familiar with the 2017 Tax Cuts and Jobs act that allows for Bonus deprecition to be taken in the first year a business asset is put into service?   A piece of income producing property may qualify for this.  Talk to a tax professional to help you with this.  In 2024, the bonus depreciation is 60% of the value of the asset put into service.  There's a possibility that you may have enough depreciation to offset any taxes owed on the 401k withdrawl.  There are a lot of nuances so make sure to discuss with your tax pro.  They can help you navigate what is possible.  

Additionally, I'd wait to make the withdrawl until Jan 1 rather than today if you want to use this strategy so you have 12 months to put some RE into service for next year's taxes to offset the tax.

best wishes.

Post: First Time BRRR Loans

Joshua Christensen
Posted
  • Investor
  • Albuquerque, NM
  • Posts 281
  • Votes 229
Quote from @Adama Bah:

Hi all,

I'm having hard time getting loan for BRRR since this is my first time undertaking this kind of project.
The deal is right in great location and local to my other property. 
I am interested in 90% purchase and 100% rehab cost. 
Please share any lender that can help with this situation.  
Thanks a lot. 


Hey Adam, the purchase rehabs I've seen are 80-85% LTV & 90-100% rehab money. Banks are taking it on the chin right now and lending is tighter than it was 2 years ago, so you may need to bring in a partner for the difference on your first few to get some experience and fill the gap.

Find a partner with experience and you may get better terms.

Try Ryan Prisco - 626-818-1919 - He is a broker with access to several different companies that do these types of loans.  He's licensed in 16 states I believe.

Post: Should I refinance my house-hacked HML?

Joshua Christensen
Posted
  • Investor
  • Albuquerque, NM
  • Posts 281
  • Votes 229

@Anthony Williamson It's a great question.  First, I believe your assumption about 5% interest rates is aggressive.  Owner occupied cash out refi's come with a hefty bump on the interest rate. I would assume a 6.5% rate for a cash out by the end of 2024.  Don't wait.  Remember that when you refi, time it in such a way as to close the first week of the month.  You can skip that month's payment & the next months giving you roughly 45-50 days without a house payment.  It is all absorbed in interest and in your costs, but not out of pocket each month.  

Numbers are the real story at the time of the refi.  Don't focus so much on the cost of the refi as your monthly savings will provide you a break even point.  Typically on a refi, that should be the 18 month to 2 year point.  With a 10% hard loan, I don't think you'll have a difficult time hitting that.

Example.  Your closing costs are going to be closer to $8000 or so.  Look at a $500 savings.  How long will it take to break even on a new loan?  16 months.  That's a heck of a deal.  

Don't overcomplicate the Roth IRA into the equation. You're overthinking it. keep it simple. Rinse and repeat as often as you can.

If you plan on keeping the house long term, the overall long term effect of tenant paying the mortgage and appreciation will more than pay for the refi.  Your NetWorth will climb.  It's a long road.  Keep harvesting equity over time to reinvest.  You do not have to pay taxes on loans.  In fact, the interest can save you money on taxes as interest expense against the rental income.  

Hope that all helps!

Post: Advice for a Newbie?... Deal finding & Underwriting

Joshua Christensen
Posted
  • Investor
  • Albuquerque, NM
  • Posts 281
  • Votes 229
Quote from @Hunter Kahn:
Quote from @Joshua Christensen:

Hunter, with no experience and asking the questions you're asking, a start in larger multi-family may be a leap you're not quite ready for.  I suggest you find someone already doing what you want to do and see how you can add value to their team. Learn from them while doing deals with them.  It's a learn while you earn model.  Take a small role and dig in.  In 2-3 years you could be up and running on your own.  There are a lot of moving parts in multifamily.


 I appreciate the advice Josh! It may be out of my scope and believe me I don't want to be the arrogant new-guy who gets smoked right out the gate. The reason I started aiming my efforts at multifamily is twofold. The first reason is exactly what you said, I've been working on the side with a gentleman who is doing exactly that for the exact same reasons I'm looking to start building my RE portfolio. Secondly, with my W-2 I have almost about a third of the year off. So my hope was that I can use that time to really dig deep into it. But again, I really don't want to fall victim to arrogance. Do you think, with what I've stated above, that such a strategy is too risky? Is it feasible? I'm having trouble determining this on my own.

 Hey @hunter just start networking and find a team that really impresses you.  Observe what they are doing and find a way to add some value.  Build a relationship and start working with them.  You'll learn with a learners spirit.  It just takes time.  

@Hunter Kahnundefined