All Forum Posts by: Justin Pumpr

@Lindsey Konchar First off, congrats on getting your first property. That's a huge win! In terms of the equity, remember you won't get all $170,000 out. If you're doing a cash out refi, the most you'll likely get is 80% of the appraised value as a primary residence. Others have made great points about what your returns need to be to make that worthwhile.

Another word of caution I'd share after going this path myself is that you're likely not actually making whatever you think you're making per month in cashflow on the duplex you bought. I did some quick maths and this is what I'm seeing in terms of your profit and loss:

This is actually LOSING $198/month. Obviously I made some assumptions here such as 10% management fee (maybe you're self managing) and your tax and insurance amounts (maybe they are higher/lower) and your repairs/capex amounts. That said, given you paid $200k for this, I'm going to assume it's an older building in probably a C class neighbourhood. Unless you did a full gut of this property and replaced everything, then you need to be budgeting for repairs, turnover and big ticket item costs. I made this mistake myself and thought I was cash flowing nicely and then I had a tenant move out after a year and it cost me $6k to turn it. I had a roof that needed replacing and that was another $6k. Obviously I don't know the full story and what your goals with real estate are, but cash flow from rentals can quickly turn into an expensive lesson and not the path to financial freedom you may have though

Thanks all for the posts! Definitely some good advice in here. I did manage to get the flip rented out on a lease option. While I will still lose money on it in the long run, I'm at least breaking even on it monthly and no longer have the headache of it. 

Ironically, I was ready to let go of multifamily and focus on more lease options, but then my team finally got an offer accepted on a 54 unit. I have mixed feelings about it, so we'll see where that goes.

Fortunately over the last 6 months we have been able to pay off a decent portion of the debt, so things are starting to look up. 

In terms of getting a mentor, I had one of those and paid $18k for the privilege. His advice (before the debt issues even arose) was to sell my whole portfolio and start over doing wholesaling. He also said he'd help me acquire large multifamily, but then had never even heard of Crexi, or Loopnet and had never owned anything larger than a duplex. 

Hi @Ian Stuart Thanks for hosting this. Hopefully you're still active on here! I was wondering what the best way to structure a deal with seller carry is? We have an LOI accepted on a property where the seller is going to carry roughly half of the 25% down payment. We were hoping to get agency debt on this to get the best rate. Is that possible?

 Thanks @Jordan Moorhead. That's an option, but we'd like someone a bit more business savvy to see our business plan through 

Can anybody recommend a PM for mobile home parks in the Kansas City MSA (on the MO side).

Cheers!

@Samuel Diouf It's in southern sourthern orchards. On E Gates street, east of Parsons. I don't really want to seller finance it, but I figure that opens up my buyer's pool a bit. It was listed on the MLS previously as a traditional sale and didn't sell

Hey all,

What would you suggest for this property?

It appraised last week for $388k. I'd be happy to sell it on a lease option or seller finance (wrap) for $350,000.

If I seller finance I need to charge at least a 7% interest rate as that is what my rate on the property will be. I'd be able to make a couple of hundred a month that way, but I lose a lot of tax benefits.

My preference is a lease option, but I'm struggling to price this out. My break even without putting anything away for cap ex, vacancy, or maintenance is $2,395. Market rent in the area is around $1,800-$2,000, although working market rent out is hard as there's nothing of this size, or condition available in this pocket of the Columbus. 

Any thoughts on what the ideal way to structure the lease option is since my breakeven is quite far above market? I could add the "rent credit" on top of the market rent, but then that's a $400-$600/month premium on top of the rent that's supposed to go towards the purchase price. Over a 2 year lease that's almost $15k which is pretty significant. I don't know of any mortgage where you can reduce your principle down by that much over 2 years!

Also, STR and MTR don't work on this property. I also don't want to have to pay to furnish a 2,000sq ft home for those, or for a padsplit.

All help appreciated!

@Jason Wray I actually already work with the Federal Savings bank and am currently refinancing one of my properties with you. Almost all my portfolio is in Columbus OH. In fact all of my problem properties have been in OH. I only have one investment property in CA and that's been the most stable and best performing asset out of all of them

@Wale Lawal Once this flip gone wrong is taken care of my portfolio will actually be pretty stable. Not including the 13 unit that is. Who knows if/when that will be finished. I'm mostly a silent investor on that one, so I don't have much control over it. We tried selling it at auction and didn't get any bids, so we have to get it finished

Hey all,

I'm seeking some advice/input to help me work out what's next for me. Some background:

I got into REI to earn enough income from rentals to replace my W2. That journey started in 2016 when I bought a duplex to house hack. Using the equity I built up in that property I got a HELOC and started investing remotely out of state. My first property was a SFR that I BRRRR'd. This seemed to go well and I got it rented and cash flowing pretty well. I then bought another SFR, a couple of duplexes, a 4-plex and invested as a partner in a 13 unit. After that I bought another SFR to BRRRR and then is when things started to go wrong.

- The SFR had huge foundation issues. What was supposed to be a $30k rehab, turned into a $75k one. I had to sell this because it wouldn't cashflow. I took a $40k loss on this.

- To make up for that loss I bought a property to flip. That property was also supposed to be a few month flip, but I had to fire my contractor who I'd been working with on all my properties. I finally got the work done, but didn't get any offers until recently. I got it into contract and then had a huge plumbing failure during the home inspection. That property is now looking like a $100k loss. 

- The 13 unit I went in on has been almost 2 years and still hasn't had the framing inspection passed

- All my taxes doubled on my rentals, so now my cash flow has plummeted. 

- I've had multiple vacancies, including one where the tenant left after a year and cost me $6k in turn costs. This was only cashflowing $250/month

- I ended up selling the 4 unit for breakeven because that was a money pit

- I've also spent the last year underwriting larger multifamily properties. I've underwritten hundreds of deals, submitted tens of LOIs and not had a single one accepted

- The BRRRRs I did do weren't true BRRRRs because of low appraisals, or not accounting for all costs properly and I ended up leaving around $10k for each one in the deal. Multiply that by 8 properties and that adds up quickly

At this point I've amassed around $150k in debt, I'm spending hours a day trying to find large multifamily properties with nothing to show for it and the whole passive income dream I was sold seems to be a huge lie. My wife and I earn over $350k a year in our jobs and all of that is now going to pay down debt.

We have the option to increase our HELOC to unlock some more capital which I'm considering doing to try and get a good return on my money and pay down the debt faster, but given past experiences I'm not convinced it won't end up with more debt.

What would you do at this point? Sell it all and start over? Sell it all and give up on REI altogether? Keep going and learn from my mistakes?

Any advice and input welcome!

Thanks for the responses. To confirm, I'm looking at large apartment buildings. For my single families I follow similar rules that you mentioned, but my understanding is for apartment buildings that a cost per unit is usually used. Are you both using your methods for 20+ unit apartments too?