All Forum Posts by: Konstantin Ginzburg

@Eugene Chin

The vast majority of non-owner occupied financing packages will require you putting down at least 20% for a down payment, with 25% being a fairly common expectation as well. If you are willing to live in the property for at least 1 year though, you would be able to qualify for owner occupancy financing which have much lower down payment requirements. For example, while the FHA loan you mentioned was intended for first time home buyers; it is actually available to all home buyers who plan on living in the home for at least 1 year. There are certain requirements though such as the new property needing to be at least 60 miles from your current primary residence. If your goal is to purchase a property with a low down payment in the immediate future, sacrificing your personal comfort for a 1 year might be a worthwhile trade off. You could rent out your current primary residency for 1 year in the mean time and move back after the terms of the financing have been met. There are other lenders and financing packages aside from FHA loans available for owner occupancy, those can typically be found in regional banks and local credit unions and will be something you may need to find in your region through referrals or personally visiting these institutions.

 The capitalization rate that I was previously targeting was 7%. However, I have not looked for deals since the interest rate hikes began so there is a good chance that capitalization rates on that level will be harder to come by. There are always challenges in real estate investing that need to be over come so sorting through many deals will likely be required. For example, while interest rates when I was acquiring properties were low; there was also a lot of competition from buyers for those properties so I had to contend with that challenge. In the future, there may be other challenges such as access to financing at all. Long term wealth building is not easy. If it was, anyone would be able to do it. Don't get discouraged if you go through many properties without being able to find deals that suite your goals. Just keep your head up and keep looking. You will find them sooner or later with persistence. 

 I calculate my numbers and determine what price I need to acquire the property at to meet my capitalization rate requirement (or whatever other financial metric you use to determine whether or not a deal meets your needs). Once you have this offer in mind; this should be your new max offer that you are willing to close at. Offer a bit below this max (10-20k under maybe) so you have some wiggle room in negotiation. This is assuming that this property is being offered at fair market rate. If the owner is not not willing to accept an offer at your max offer rate or below than it is likely time to move on to the next offer. There will always be other deals to be made so have to avoid getting dragged into a bidding war or getting emotionally invested in a deal. 

@Emmalia Alao

I have a contractor who I have used recently in New Orleans. His name is Gary Tymphony and he owns Tymphony Construction LLC. He typically takes on larger projects but I was extremely happy with the work that he was able to do for us.

https://www.hbagno.org/members...

I currently own 10 units around Louisiana. 6 of the units are self managed and 4 are managed by a property management company but we actively manage the property manager. We are looking into strategies to further streamline the process and allow us to regain more of our time. Each property has a home warranty so repairs typically just require a call to the home warranty company who then organizes the logistics of setting up a handyman from their network. The other primary time requirement is tenant interviews and screening; which I feel could also be out sourced with a pre-made script (at least the initial phase of tenant screening). Has anyone on here had experience utilizing a virtual assistant to help with property management? If so, do you feel that they added substantial value to your operations? If yes, who did you use for this service?  

It depends on your strategy. If you want to use long term rentals (1 year lease or more); then those tenants are more often going to want to bring in their own furniture so there will not be much advantage to you furnishing the unit on your own. If you want to do medium or short term rentals; then there is a larger chance of the tenants wanting a furnished unit. You usually are able to charge more for a furnished unit in monthly rent but if you have no furniture already and have to fully furnish from scratch, then it will likely take you a long time to recoup your investment. 

@Carrie Brauninger

Since this is your first step into real estate investing; my advice is to stay in the area you are currently living in or at least are within a commutable distance. Out of state investing can definitely work but it requires you to have a set team that is that location to real allow the system to flow smoothly (essentially you need boots on the ground). This means you would need a team of realtors and property managers (along with some other team members) that you completely trust. Have you looked into house hacking in your area? If there are multifamily (4 units and below) properties available near you, you could look into purchasing one of those. As long as the property is 4 units or less; the financing works the same as with a single family home and if you plan on moving into the property for at least a year; you should be able to qualify for primary residence financing options such as an FHA loan (among other programs) that would qualify you for lower interest financing. By living in one unit and renting out the remaining units; you could potentially build equity, gain value through appreciation, and still cash flow all at the same time. You would also gain the experience of how to manage a property so you will be better able to manage from long distance if you do want to try out of state investing down the road.

@Davidangel Muniz

Thanks for sharing. It sounds like you are off to a great start and I wish you luck on this venture. House hacking provides a great first step into real estate investing so it sounds like you are well on your way to achieving your goals. Feel free to reach out if you have any questions at all. 

@Dee Guzman

One strategy that I employ is placing a VERY heavy emphasis on location. I would much rather buy the ugliest house in a great neighborhood than buying the best house in a bad neighborhood. Fixing a single house may cost money and time but it can be done. By fixing up a house in a good neighborhood up to the standard of the other houses over time, there is a much higher probability of enjoying substantial equity gains through forced appreciation. 

To give two examples, one of the first rental properties we purchased: we decided on the area of town we wanted to purchase by identifying two locations of town that were currently very affluent. One was in the central portion of town and was expanding to the southeast and the other was in the southern section of town and expanding northwest. We picked the region and neighborhoods between these two sections to invest in with the mindset that there is a high probability these regions will eventually merge with continued expansion which will increase the value of our property through association. In the mean time, we would benefit from increasing values as these two neighborhoods fund high-end school districts, public works, sports complexes, and shops.

Another property we acquired, we intended on using as a short term rental. Once again, we emphasized location heavily. We identified neighborhoods that were in attraction tourist destinations with attractions and highly ranked restaurants within walking distance. At the same time, the neighborhood was near two major universities and central to 3 major hospitals so that we could tap into multiple short term rental markets ranging from tourists to traveling medical professionals to student housing. 

By heavily emphasizing location through careful research and selection, we give ourselves multiple options to pivot to over the years as the industry and environment shifts. 

Yes, a HELOC on your primary residence can be used as a down payment. But keep in mind that using a HELOC carries interest payments with it which will increase your cost of capital and add on to the cost of capital that will be required for your new investment property loan. This increased cost of capital will need to be overcome to justify the additional property (the new property needs to be a very good deal).