All Forum Posts by: Kenneth Garrett

@Thomas O'Donnell

This comes up a lot on here. There are some scenarios where it might make sense as in retirement, but in your case you should keep that money for future possible investments. Just remember when you buy your next investment your DTI will impact your capability to borrow (mortgage) again using residential mortgages. Your DTI is not going to change based on you paying down the principle. I agree with @Kevin Sobilo and @Joe Villeneuve keep your cash for yourself.  

@Montez B.

First off you need to buy properties at a discount. Can get you find these on the MLS, yes you can, but they are hard to find. Off market properties are harder to find, but they potentially have the biggest upside. Anytime you are looking at buying an investment property you need to know the values in that area. As others have said it's all about comps. If you don't have a real estate agent you can use Zillow, Redfin, Realtor.com, etc and look at solds. Compare like houses for like houses. Same neighborhood, same style of house, same bed/bath, similar square footage, etc. I hope you can see the pattern.

Example if a property is totally outdated and I can buy it at a discount, I have to run comps. If a property is on the market for $150,000 and is in need of work. I look at comps of updated properties. If updated ones sell for $200,000 that’s a $50,000 difference. You need to calculate the cost of updating it, marketing it, closing costs, holding costs, etc. If there is enough spread then it’s worth it. Don’t forget profit. $50,000 might not be enough after you do the math. If you can buy a 2 bedroom and it has enough square footage to make a 3rd bedroom that is going to be your biggest return.

@Andrew Diamond

I’m not a fan buying things site unseen. At least drive by and see what it looks like. You can’t assume the condition, you need to get some idea. Peek in windows. Although technically that is trespassing without permission. If it needs a roof, siding, etc your probably already in for 20K without seeing the inside. Definitely helps if you have expert knowledge in that neighborhood, that way you have a good of at least typical rehab costs.

I have had good luck by buying foreclosures directly from small local banks. When they foreclose many times they just sit on them until there ready to move the asset. In this case, I have always been able to walk the property. The great thing is there is no competition. It's great for BRRRR or flip projects.

@David Jones

I don’t think there are any studies that lean one way or another. Your market probably has more to do with lease length then anything else. I started out doing two year leases, then one year leases. I know plenty of other investors who swear by mtm. In the Midwest with LTR, you don’t want a tenant moving out at Thanksgiving time through the end of February. It’s the most difficult time to find a tenant. This would be the downside of a mtm lease. Although, I’ve been able to fill units at those winter times, you might have to lower your rent a bit. There is no guarantee a tenant will stay the length of a lease, but for the most part most honor the lease length.

You can read David Greene's book on BRRRR, or you can just ask here and we will answer your questions.

I self manage my properties, but then I moved to another state. I have a handyman who can take care of the calls and if I need a new tenant he can show it. I bought a STR in Florida while I was living in the Midwest. I went down there to furnish and find a cleaner and handyman. It works well. Nothing wrong with using a pm, I just prefer to handle it myself and it really doesn't take much time at all.

@Ademola Dawodu

I've done plenty of DSCR loans. None of them ever showed up on my personal credit. The loan is taken out in your entity, not you personally. They do run a personal credit check, but the loan is based on the asset not you. Of course, if your credit is not good they won't lend to you or your paying a higher interest rate.

I found small local banks and credit unions are the easiest to work with. The process is much easier then a residential loan. Much less intrusive into every penny you have. I don’t have to explain why my 85 year old aunt sent me $10 for my birthday. It is lender specific.

@Luka Jozic

That kitchen is really outdated. It all depends on your competition. If the competition has updated kitchens and you don’t then you probably need to update. On the other hand if the competition has old kitchens like yours and you update yours, I would think you could get a higher rent. It takes time to recoup rehab costs. One thought is if by updating the kitchen it reduces days on market then that out money in your pocket. An updated kitchen is generally a positive thing, but it all depends on your market. It will definitely be easier for your pm to rent the unit with an updated kitchen.

If I could reduce days on market and get a higher rent then I would probably spend the money. It might take a couple of years to recoup my money, but if your going to keep the unit long term, I think you will be ahead. A reduction in days on market from 30 to 15 at $1000 rent is $500 plus if you can rent it for $100 more a month that’s $1700. That’s about two years to recoup your funds.