All Forum Posts by: Lawrence Potts

Quote from @Rita Samaddar:

Hello Everyone, We live in Colorado Springs (House Hacking) and looking to do our 1st BRRRR in Pueblo. Is Pueblo a good location for cash flow and future appreciation?
Our research says Mesa Junction, Aberdeen, Northside, Belmont, and Pueblo West are good locations. 

1> Are there any specific zip codes that you guys suggest?
2> Please feel free to suggest any good realtor, hard or private money lender, contractors, and property management companies that you are aware of. 

We are new to this so any advice is welcome. Thank you for your time and suggestions. 

Thanks,
Rita & Abhi

@Ryan Thomson might have some better insights on this!

Quote from @Kermaury Musgrove:

How to become a Real Estate Investor,

What did you all do, those that are Investors; (buying and selling houses) do to get started?

I bought a house 🤣

But in all seriousness, buying and going through your first investment was like drinking out of a fire hose! You learn so much! If I were you getting started:

1. Find any and all local REI groups and attend them religiously. Talk to as many people as possible! Network is key.

2. There are some good books out there. Starters include Rich Dad Poor Dad & The BRRRR Book by David Greene.

3. Write out your goals. What do you want to be doing in 10 years? Why do you want to do Real Estate? How will Real Estate help you get to your goal? Take those goals and work backwards each step until you get to today. That’ll help you make a roadmap to your 10 year plan and identify your most important next step.

At the very least, talk to a local lender that invests and have them review your financials. They’ll tell you where to improve your application for preapproval for when you’re ready to buy to improve your approval amount and they’ll help you connect with an agent.

And finally, ask all your questions here at BP!

@Spring Ho, I invested in Louisiana. Not because it was Top 10 places to invest in a google search or on a BP YouTube video or podcast. It was because I had people there for my team. Riches are in the niches. It made sense at the time because I knew the area, I had team members in place, and I could take action. I failed because I didn’t know what I didn’t know and didn’t manage well, to name a few. If I knew then what I know now, I would have stayed and would have been fine. But that’s 20/20, and I’m better for it by taking action and learning. If you decide to go out of state, have a reason outside of because someone on a podcast is doing well or because it’s cheap. 

I will second @Ryan Thomson, there’s a lot that you went over in this post that is a lot to take in and is a visual that you have thought a lot but are also all over the place. You’ve definitely considered a lot of possibilities and you want to make sure you make the most optimal decision. However, action is sometimes more important than waiting too long to make the best decision.

It may be worth it to stay in your backyard even if it’s an expensive market. I know the Portland and suburbs of Portland and there are pockets that you can do well in and are incredibly safe. For example: McMinnville and Newberg are some of the safest areas in the entire state. It’s a commute from Portland metro but I know some that commute from Woodburn, Salem, and beyond to work in Wilsonville, Clackamas, etc. Because it’s cheaper to live there. But the cost of that is sometimes time (commute to work, etc.). Get your transportation in order and start with a safe house hack.

Your ideas are good, maybe just tackle one at a time. Start with the path of least resistant and become the person you need to be in order to take on the bigger steps. Sometimes that will require education, or experience, time, or money. But do the things you need to get there and then make that move. Hope that helps clarify things for you.

Quote from @Josh Baney:

Excited to have found this website and forum! I think I may have stumbled into real estate investing without realizing it haha. My wife and I bought a beach home in SC, 2 years ago during covid. We decided to rent it out on Airbnb when we weren't using it and found we did pretty well. On one trip down, we actually saw the house across the street being remodeled. I went and spoke with the contractor and let him know we love the area and would be interesting in buying the house and to talk to me first before he put it on the market. Happily, purchased that home in May and moved down in August.

Little did I know I may have been doing a form of house hacking, because we furnished the home and rented it out on Airbnb for the busy Summer season before moving down to start the school year with my 1st grader. Those 2 months helped offset a majority of our mortgage woohoo! We kept our original home in Charlotte and rented it out on a 9 month lease. So we now have 3 homes: the one we live in, the Airbnb across the street, and our original home in Charlotte that we are now renting. The house we live in we are going to rent again this Summer and move back to our original home in Clt for 2 months to capitalize on the high season.

My wife and I just found a home we would like to move in as our primary and have just enough to put 5% down. I would then rent the house we live in now on Airbnb full time as we have seen a glimpse of what it can do in the Summer (and have a great gauge with the other Airbnb we have across the street.) Since we have decided to make the full time move, would I be best to sell the Charlotte home, take the equity to put down on our new primary (and wife wants a pool)? Or should we continue renting the Charlotte home and use all our savings for the 5% down. The house in Charlotte I have on a 15 year note at 2.2% with 13 years left so I am reluctant to give that up. We make about $1,000 month renting that home, but on the flip side have about $200k in equity we could use for our new primary, pool, and maybe a potential down payment on another rental home?

Am I considered a real estate investor? I have been saving up the old fashion way to put down payments of 5 - 10%. After we buy this next home as a primary, it seems like I could be using hard money loans a lot quicker and then refinancing to traditional if I would like to continue to buy more properties? Long post and loaded questions I know but would appreciate any advice.

Great job! Whether you call yourself an investor or not, you made good decisions, and that’s more important than the label itself. We get guys calling themselves investors all the time and make bad decisions (or no decisions) on a consistent basis, so actions are more important than titles.

To answer your question….part of it depends on you and your risk tolerance. If you’ve been comfortable with 15 year note at 2.2% and you want to ride that out until you’re debt free, that’s great. Keep at it. You’ll be doing great especially it’s all paid off. Most people can’t swing that and have to do a 30 year note. They’d do a 40 if they could! It’s up to you. One could argue that you should refinance to a 30 to cashflow more. Others want no debt. Either is right.

One strategy would be to consider Return on Equity. If you have $200k in equity, how much of a return could you get on that if you bought an asset versus it growing in the current property? Whether you refinance, sell, use a HELOC, etc., some could say you need to deploy it into the market. If I were you, wait. If you’re not is a rush to grow, you’re already saving 5-10% to buy your next primary, you’re cashflowing well, what is the rush? I’m assuming your preferences in investing and risk tolerance, but if you like your jobs, your pace is comfortable, and no sense of urgency to scale massively, then you have the blessing of pumping the brakes and waiting. Some of us need to scale massively on a timeline to hit our goals so we don’t have the time to discern the most optimal next step. Contrary to what most may say on here, I say take a step back, take a breather, look at this from a 10,000 foot view, and determine what you want and what’s best for your family at your pace.

Some people like using hard money and going the BRRRR route. It’s faster (theoretically) because you can have more jobs going on at once (OPM rather than just your own capital). It’s riskier. Hard money is higher interest rates, it’s usually short term, interest only payments, and charge a lot of points up front (it’s how they make their money). And the refinance part is always the most underrated phase: some banks need 1 year of rental income. Which means if you buy today, 3 months to rehab, then 12 months of rental income on paper, that’s at least +15 months until you get your money back. That’s a long time to have high interest money locked in place. Your holding costs may cut your profit margin out and it may not be worth it versus you saving your money and buying the conventional way. Take a look at your savings rate versus the cost and time cost / opportunity cost of going the hard money route and determine what’s best. It makes sense for those that are scaled to a position of having multiple projects going on and have cashflow to leverage themselves against a few bad projects, down times in market, etc. 

You’ve done well, we are happy you found BP, and we want to see you grow 👍I hope that helped! Let us know if you have any other questions.

Quote from @Spring Ho:

Hello, 
After reading books( rich dad poor dad, etc) , and listening to BP, I've decided I really want to get my life on a path of financial freedom, and free of my restrictive parents. 

My goal is to have my first property I buy, to be a multifamily. My ideal goal is to buy a quadplex or triplex. If I truly can't find a good deal then I'd be okay settling for a duplex and wait the year to do the exchange and slowly build up my portfolio (I want to buy and hold my properties). One of my discouraging factor is that I don't make much to start with, and hope the real estate investing will help change that.

My question I have right now to start is, where should I go? I've read post that we don't need to look far, just from our backyard, but in Portland oregon the prices seem out of my reach. I know the very first step I should do is talk to a lender to better gauge what I can afford, but do I need to talk to a lender that is local to where I buy? Since I'm not sure if I want to invest in Portland oregon with how the prices are. I don't want to go out of portland/beaverton/hillsboro since the things I want near my property is ease of transportation, as I don't have a car.

What states would be good to start a multifamily where I can make some cash flow or at least break even so I can save for a downpayment for my next property? 

I'm interested in doing short-term leasing in the units also for travel nurses/insurances, so a health focused area is nice too!

I'm a 25F so safety is a high priority for me as an individual, so states with high crime rate such as Ohio and Indiana is not appealing. But this is just based on research I've done on the internet, so any insight to help explain that I don't have to be as weary would be awesome if a location you are advising has concerns. 

I also would like the location to be a bit convenient for me to travel by transit 

States/areas I've looked into, but not sure if I should make the jump:

-Minnesota Minneapolis/St.Paul  ( heard rent is going down in these areas, and it's not landlord friendly either)

-Iowa Des moines

I have about 11k that I've saved up that I can put for a downpayment and 8k to cover closing cost; but if I can have the seller to pay that then it would help with any remodeling to help increase the properties value or I can use it to buy a cheap car that can get me to point A- B

TLDR:

Good states to start buying your first multifamily home?

-Low crime rate

-decent location that is accessible to reliable transit

-growing city (economy, jobs .etc)

Ideas which state to go to before I talk with a lender; or can I talk to any lender located anywhere; so I can make multiple credit checks all at once when I talk to them.

Thank you, for reading. I look forward to your responses! 

Sounds like you’ve really put a lot of thought into your first step. These are important things to go over before you make your first purchase. Great work 👏 some things to consider:

You may need to have a larger down payment going non-owner occupied (potentially up to 25%). Some lenders have more favorable DP’s (potentially 10%) but but may have stricter requirements. As usual, talk to a lender!

I think house hacking to start with is the best way to hedge your capital and investment and scale quickly. Minimal down payment, barrier of entry is lower, and if you make a mistake (which all of us do), it's more forgiving. You can also use that income to help your DTI to qualify for more. I know it'll be hard to find a triplex/quadplex in Portland but prices become a little more favorable the farther down you go Portland HWY (Newberg, Sherwood, etc.).

If you decide to go out of state, you’ll need to build a strong team: contractors, property managers, lenders, and real estate agents/deal finders. You can build that team through biggerpockets! Just takes a lot of time and discernment. I got started out of state and almost lost it all (my fault, didn’t take the time to learn what I needed and ask the right questions like what you’re doing now). But definitely doable for anyone if you do it smart.

If you need a lender, I recommend @Grant Schroeder . He's helped a lot of investors and owns a good size portfolio in the area. I know he has a 0% down first time homebuyer product that has no PMI and a 10% nonowner occupied investment product.

Hope that helps! Let us know what you decide to do.

Quote from @Antonio Easter:

How do I rent properties to Sober Living?

Listen, I'm not looking for your opinion on drug addicts, either your opinion on what you THINK the neighbors will think or feel about  a Sober Living house being in their neighborhood.  

I'm looking for valuable replies, not for aimless replies to stoke the ego of the one leaving it.

Thank you.

I know of one investor in my area that has a few of these Oxford homes. Definitely needed for the community and profitable as an owner. It’ll be hard to delegate landlord responsibilities but if you have someone that can do it, pay them well. Like any other property, set the bar for expectations and rules and it should perform well. Insurance will be higher. And some counties/cities might offer incentives for taking these on too. 

Of course! That’s the unfortunate part of going all in self-employed: we lose the ability to be financeable traditionally for a few years. So I understand where you are coming from. Best of luck! It really depends on what the partner needs in a deal, it’ll differ person to person. But good to brainstorm and think ahead 👍

Their definition of commercial may differ to our definition of commercial. So both of you may be right in your own language per say, and both see each other as wrong. Like @Ryan Thomson mentioned, speak with local investors that have run in to this situation as figure out what they've done to work around this. It may be location, not zoning classification. Who knows? Could be classified incorrectly with the city and need to be re-zoned, re-assessed, etc. Might need to do some digging into the deep bureaucratic black hole of local government. Have fun. That would drive me insane. Let us know what they say. I hope that was helpful. Best of luck.

Quote from @Sebastian Roy:

Hey everyone,

I'm curious about some different ways to structure a partnership with a house hack, if I would live there and they would not. In this case, the property would likely not cashflow so what is in the deal for the other partner if there's no cashflow, Equity?

Thanks!

 This is a great questions! I like the creativity. Here are a few things to consider:

In an owner-occupied situation, you automatically lose cashflow which can be a big incentive for a partner, especially a partner that is bringing in capital. You are asking them to delay return and have their money parked somewhere that isn't liquid that could be parked in a better potential deal. What value are you bringing to the table? Lower down payment? The other value you could be bringing is equity. If you owner occupy for 2 of the recent 5 years, you can defer on capital gains if you sell, therefore saving you money to pay them back? But it seems like you are looking long term since you mentioned you want to live in it for a year and move on to the next property. Run the numbers with a partner and see if it makes sense for them (CoC, ROI, risk tolerance levels, etc). It might be easier to do the deal yourself if you plan on owner occupying. As mentioned earlier, there are a lot of DPA's (down payment assistance) programs and lenders that have 0% down products. I suggest speaking with a lender first before trying to snag a partner in a deal that may not make a lot of sense. Hope that helps!

You'd have to speak with the city/county/municipality about usage. Zoning can differ from house to house. I tried buying an old abandoned skating rink in a residential area to convert to office spaces to "work hack" and the zoning only permitted for residential up to 4 units. Parking is a consideration as well as density, set backs, etc., but if it's in a commercially zoned space and cannot justify residential use, it'll be an act of congress and a miracle to try to change the zoning on that. I think it's a great idea conceptually, but may be hard to pass. I think you could still turn it into a quadplex commercially and rent out to businesses? Safer triple net leases and potentially easier refinancing since it'll go off of NOI rather than comps? Hope that helps! Let us know what you decide to do with it.