All Forum Posts by: Luke Bricca

@Christina Colon

It sounds like this tenant could be a problem in the future - however, if you boot him without planning and your place sits vacant for a month or two, you're likely down a few thousand dollars instead of a few hundred bucks for landscaping.

If the landscaping costs are relatively inexpensive, you could plan to not renew the tenant, start showing the property to other tenants a month or two before lease-end, and have a new tenant (who won't complain about handling landscaping) begin renting within a week or two of the problematic tenant moving out, thereby saving you lost rent on your place sitting vacant.

@Helene Goodworth the only advice I'd give is that rents in a market as a whole are not usually the best way to approximate what your specific property would rent for. I really only try and use comps within a 0.25mi radius (0.5mi radius at max).

@Felicia West

The best answer to this is you should model out what each situation will cost you in excel. There are typically different interest rates associated with how much you are putting down (20%, 25%, 30%, etc.) as well as different points charged.

Model out each situation in excel and you'll have a concrete answer as to which is cheapest.

@Deal H.

I agree with the comments above. Turnkey is safer, much harder to get your net yields to pencil, and you lose out on building immediate equity through renovation. BRRRR is typically more expensive, requires more people (contractors, etc.), but will allow you to build equity up front & potentially refi should rates decrease.

@Allen Higbee 

Guts always make me nervous - there's typically a lot more reno required than most models suggest, which usually kills your ROI. Unless you are incredibly confident in your reno assumptions, I'd recommend getting a contractor out there ASAP to give you an accurate reno estimate if you want to go that path.

@Harish Pasupuleti

Turnkey properties are attractive due to their low barrier to entry, especially for new investors, but they also have the extreme negative of eliminating your ability to build immediate equity through reno. Typically the big ways you make money through real estate investing are passive appreciation, forced appreciation via reno, and cash flow.

Of those 3 money-making facets of real estate, only forced appreciation via reno occurs quickly. Even though looking for properties in need of reno is more difficult and likely will require more up-front capital, you will likely make far more money, far more quickly.

@Calvin Craig

In my experience, deals that are not 50/50 (when both partners are putting in equal capital) typically suffer from the partner who has a lower % not being fully bought in. To avoid partnership issues, 50/50 is likely your best bet.

@Robin Castillo

LLCs are useful for legal protection, but they require separate tax filing, typically cost several hundred dollars to create, and most non-commercial lenders will not lend to LLCs.

Commercial lenders will lend to LLCs, but their interest rates are significantly higher and they require collateral that regular lenders don't.

I would not create a LLC specifically due to the issues in getting a traditional mortgage it will likely cause.

One potential route though, is to get a traditional mortgage in your name and then assume the loan after a 6mo "seasoning" period with your LLC. In some cases, your lender will not allow this or will call the note due, but this is pretty rare.

@Brody Trott you'll want to run the numbers on as many duplexes in your chosen market as possible. Brandon Turner's Rental Property Investing book is an excellent primer to understanding the happy path for purchasing a property - however in this market it really comes down to having bulletproof assumptions on rents/taxes/R&M/etc. as with rates as high as they are/inventory as low as it is, there is less cushion in your returns if you analyze properties with bad assumptions.

@Helene Goodworth your assumptions (vacancy, R&M, etc.) look correct. However, where you could get into trouble are your rents (not to say they're wrong, but if they are you could buy into a deal that does not pencil). If you're pulling rents from a service like Rentometer, they're historically very inaccurate.

In my experience, the best rents come from going onto Zillow, looking within the same neighborhood/subdivision (usually within 0.25mi of the subject property), and filtering specifically for properties that have rented in the last 3mo (with similar sqft). The differences in bed/bath counts actually do not matter that much, but typically sqft does.

If you are off by even $100/mo per unit rent-wise, this could turn an 8% CoC return into a 3% CoC return instantly - in which case you'd have been better off just putting your money in the S&P500 and not a rental property.