All Forum Posts by: Kenneth Garrett

@James Hamilton

It took me a year attending REIA meetings and watching others before I felt like I knew enough to get started. My background was construction so I felt I understood rehabs fairly well. My first project was a SF BRRRR, I didn't find out about BRRRR or bigger pockets until later after I had done a few. I had a full time W-2 so time was limited. I met private lenders at those REIA meetings and had built solid relationships over that first year. I put a house under contract for $85,000, a 3/1 and asked one of the private lenders if he would fund it. It took 3 private lenders on that first deal. I paid for the rehab ($17,000) and hired a contractor and oversaw the project. Project went well. When I refinanced, I got all my money back except for $2000. Within 6 months I had recouped all of my money and had a cash flowing project. After that I was off to the races. Probably have done 20 BRRRR's 6 flips or so and bought a STR at beach vacation area. My goal was to create generational wealth for my family and have solid income during retirement. A lot of SF, 2 unit, 4 units. I stayed in the area I was comfortable with. I loved sf. They were fairly easy to get, rehab and refi. If I wanted to sell one they weee easier then multi units. Renters were typically families and stayed multiple years. I self managed so I could learn the ins and outs in case I was going to turn it over to a pm. I felt by managing myself, I would be better equipped to manager my pm, since I had experienced many things by managing myself. It's been a great experience. Not all of it has been smooth, but it was definitely worth it. I continue to look for good projects to invest in.

@Eric Goodman

I self managed my STR 1000 miles away. What I did do was I went there for closing and set up my team of cleaners, maintenance man and other systems. Ring door bell, Schlage encode for automatic keyless entry. Slight renovations during that time and furnished it. It was a lot in 3 weeks, but then it was all set up.

I think this depends on your situation.  Rates are going to continue to rise so in next 3-6 months they will be higher. Who know how long they will take to come down.  You can always refinance again if the rates come down enough.  In the meantime, you can take the cash flow from the rent and apply it to your cash on cash return.  If you put $200,000 into the project as an example and it rents for $2500 a month that’s a 15% cash on cash return.   It will take a few years to recoup a 100% of your money, not counting maintenance, capex, pm, etc.  The advantage is if you just rehabbed it then there should be very little maintenance or capex in theory.  I self manage my properties even some from out of state.  

@Conner Hitchcock

The stories never end. Unfortunately your washer crapped out. That cost a few bucks for the washer and the cleanup. That stuff happens. There is always a big debate about whether you provide appliances or not. It is driven by the market you are in. I always provided them because without them you are at a market disadvantage. I always self managed my units. I always update my units, so I rarely get calls. Here is my story. Boiler went out in December. Two unit building in the Chicagoland market. Cold weather. Had to set them up with a hotel for 7 nights while the boiler got replaced. I got a lot of feedback on putting them up in a hotel. I just thought it was the right thing to do, considering they had no where to go.

@Archimedes Jao

The numbers loan officers are going to go by is the appraised value minus current debt on property. The LTV depends of the lender. With the economy it might be 70%. It also depends on residential loans v. Commercial loans (DSCR).

Example

Appraised value 200,000

75% 150,000

Debt on property 100,000

Possible 50,000 cash out

When you are looking for cash out, the LTV changes with some lenders. You will need to do some searching. I found small local banks are easier to deal with then the large banks especially if your going the DSCR route.

@Randall Re II

Contact the city's zoning department (might be the planning department) or the building department. Each jurisdiction is a little different. If they allow ADU's then you might be able to do it provided you meet the building setbacks and minimum square footage. What about parking for that structure, is there enough?

@Klavish Faraj

I’ve done both; used private lenders and have lended. I only lend to investors I know, this way I can vet them and I already have a good understanding of the success of their project. I did the buy the private book, it’s a great book and did pick up on some tips. In general, you should be able to analyze a deal to make sure it’s a good deal and has a good chance of being successful. I wouldn’t suggest someone without any knowledge of real estate investing be a private lender without the ability to analyze deals. It is your hard earned money.

Most lenders go through an attorney and create a mortgage or deed of trust depends on your state, a promissory note is prepared which is really the guiding force on the agreement. It stipulates who is lending and who is borrowing, the terms, the default rate if applicable, etc. Money should always flow to a title company at a formal closing never ever directly to an individual or company. You are the bank, just like a mortgage lender. There is always a degree of risk, nothing is risk free, but you should protect yourself as best you can. Interview possible borrowers. They will tell you there successful deals, but I’m interested in the deals that didn’t go smooth and how did they resolve it. Did they make there lender whole. You should at all cost protect your lender. Even if it means a loss. That lender will probably lend to you again if you show your integrity.

@Chris Morris

I would look at this differently. First of all it’s the local jurisdiction who decides whether a civil engineer is required for your project. I would prefer to have an architect who can also do engineering, but that is not easy to do, it really depends on your market. In my area, most architects don’t touch civil work, there are to many pitfalls with storm water management requirements in the Chicago market.

@Mike Schoeffel

I can speak only on the winter aspect. Many of my investments are in the Chicagoland market. Hard winters (cold, snow, no sun for 30 days, etc). Real estate sales are generally also down. Less people looking. I’ve rented units every month. Thanksgiving through January are definitely the most difficult. Be flexible during these times of year. You might need to offer a reduced rent amount (10% reduction or so). I only issue minimum 12 month leases, but what I do is make a 15 month lease or whatever number of months to avoid the winter months for renewal . My goal is to have the lease end in March, April, May which is the better time of year (spring time).