All Forum Posts by: Justin Hennig

@Dylan Thomas

Hey Dylan,

Good for you for saving up this money for your first deal.

How much are you paying for rent? Keep that number in mind when reading my suggestion.

If I were starting out again and in your position, I would invest in a 2-4 unit property on an FHA loan which only requires 3.5% down, live in one unit and rent the others to bring my cost of living down dramatically.

It depends on the purchase price and other factors, but typically You’d probably pay a few hundred a month to own your property with a duplex, live for free in a triplex and get paid a few hundred dollars a month (in addition to living for free) in a fourplex.

I could then save like crazy and either do the same thing again or do a second deal in short order.

This is often called house hacking and it’s how I got started.

So, for a $250,000 property, you would need to pay just $8750 as the down payment, and use the other $1250 towards closing costs.

If the property isn’t in perfect condition, the money you would save by not having to pay such high amounts in rent you could put towards the repairs or making the property more desirable to increase rents thereby making even more cash flow per month.

MICHAEL SKOCZYLAS; Thanks for your reply!

-How does one determine if the estate is taxable?

-If an owner sold a building, wouldn't they have the cash to pay any taxes?

What's the best way to divest an apartment asset for an older owner who wants the best for their family is Option #1

1) hand down asset to children via a will

Other options:

2) Sell outright and pay taxes

3) Exchange into a 1031 fund (Merrill Lynch has a 1031 exchangeable index fund starting at $500k I believe)

4) Contract for deed, pay recapture now and taxes gradually (maybe 2nd best option).

@Lee Haenschen

Buy off-market Lee. Approach owners directly with high motivation and high equity. Find a disheveled place that’s been owned forever. Door knock a Ton. Follow up with them every few weeks. Bring them coffee and get to know them. Build rapport, and trust. You may need to kiss a lot of frogs to find that princess but if you persist you will find a home run. Remember you make $ when you buy, not when you sell. Great Luck!

We have an “Inclement Weather” clause in our lease that requires heat be left to a specified minimum and windows remain closed and if this is not followed, tenant is responsible for frozen pipes or other conditions related to not following this. Never had an issue since adding this clause! Here it is, verbatim: INCLEMENT WEATHER: Tenant shall close all windows, doors, and other building openings tightly when leaving the premises to prevent damage from the elements to the premises. When tenants are away from the premises during the heating season, the thermostat shall be placed at a minimum of 60 degrees to avoid freezing of pipes and other damage. If this is not followed, tenant(s) is/are responsible for damages and all costs caused by frozen pipes and open doors or windows. Tenant Initial 1____2____3____4____

Hey BP! Would you sell a property you own that needs some work to a family member (brother)? Our company bought a 2bed 1 bath 2 car SFR for a great price and we've decided to either rehab it or sell at a discount to my brother and his fiancé who have been searching for a house in a nice neighborhood. Property needs bath and kitchen to be updated and refinish floors and paint, but otherwise in great shape; has new roof and newer windows, high ceilings, hardwood floors, excellent front porch, amazing built-ins, and an unfinished 2nd level with amazing potential to ad an extra bed and bath in a master suite (so 3/2/2 when finished, currently 950 sq feet and finished will be about 1550) My brother and I are very close, and I'm worried since it needs a little work and they know what we paid and will make a good profit on it that for those reasons there might be issues if they buy it as-is and something goes sideways. Thanks BP!

Hey BP! Would you sell a property you own that needs some work to a family member (brother)? Our company bought a 2bed 1 bath 2 car SFR for a great price and we've decided to either rehab it or sell at a discount to my brother and his fiancé who have been searching for a house in a nice neighborhood. Property needs bath and kitchen to be updated and refinish floors and paint, but otherwise in great shape; has new roof and newer windows, high ceilings, hardwood floors, excellent front porch, amazing built-ins, and an unfinished 2nd level with amazing potential to ad an extra bed and bath in a master suite (so 3/2/2 when finished) My brother and I are very close, and I'm worried since it needs a little work and they know what we paid and will make a good profit on it that for those reasons there might be issues if they buy it as-is and something goes sideways. Thanks BP!

What would you do to maximize the rents without 12 months of "loss to lease that amounts to $4-5k?

Just bought a multi-family property and have a tenant group paying $300-400 below market with a dead-basic 1 page written lease about to expire but claim to have a 12 month verbal lease extension with the previous owner at same price...Rents are low (about $1450, should be 1750-1850) and I want to raise them but they (and seller) claim they agreed to another 12 months, which is supposed to start in about a week.

For emphasis, there is nothing in writing regarding an extension.

Furthermore, none of them were screened by the seller (I think they'd agree to a background check).

I want to do some repairs including painting and remodeling if they agree to an increase, but don't feel it's justified at the low price they are currently paying.

Your thoughts are appreciated!

Have a residential building under contract and the bonus space above the large 3 car garage is awesome but without it it would be a deal breaker. Just not worth it south the extra cash flow. I can get $600/mth to rent to artists / designers / photographers ...without it the deal doesn't make sense. Curious what advice you'd give. Property is not zoned Commercial (zoned for a mulli family resiential) so knowing this, trying to keep my Nose clean w the city!

Hey BP,

I have an opportunity to lend on a fix/flip with healthy interest rate / points, already verified property in good neighborhood and comps support claimed ARV. Without going into too much detail, what advice would you give a newbie private lender to protect their capital as best as possible?

Also where would you source the lending contract / paperwork (of course to be reviewed by a real estate attorney as well)?

So far, my list of things I should do include these.  Thanks BP!

1) Verify Experience / Check references of investor

2) Verify Investor has substantial Skin in the Game

3) Verify Deal is actually a deal (has enough meat on the bone / upside potential)

4) Get 1st position (this specific deal 2nd position is best buyer can offer...bank will be in 1st position)

5) Verify Scope of work makes sense and bids/costs are realistic 

6) Check contractor(s) track record / references.

7) Release cash in draw form upon completion of various rehab scope milestones.

What am I missing (and what above is inaccurate)?

Thanks again!