All Forum Posts by: Michael Doherty

@Matt S. I would only sell if you have or plan to identify a better asset to go into. Could be for a number of reasons. If you want to scale up and get more units under 1 roof. If you like Mobil home parts/self storage more now... if you want something closer to home or want to change markets all together. As many others have said, it's a sellers market, albeit rates are very low. 

I would not sell for the sake of selling. There are plenty of lenders who will do a cash out refinance. I am currently doing one now on my 5 unit building. Getting 75% LTV for 10 yr fixed 25 year amortization at 4.5%.

@Joseph Scaglione CT is not a tenant friendly state relative to other southern tenant friendly states. Ct, like NY have a formal process for tenant eviction ect. As others have said, tenant screening is most important. 

From a cash flow standpoint, I would consider Hartford County and specifically towns like New Britain, Bristol, Hartford, Plainville and Middletown (technically Middlesex county) but close enough. 

You should be to clear 200+ a door cash flow after all expenses paid in these towns. 

@Miguel Horta I would have the lender hire another appraisal. Albeit you will have to pay for it but the alternative doesn't seem much better. If you and your agent are confident on the 75k value and can justify it with comps the appraiser missed you could also fight it. I've fought appraisals before and won but they only increased it by 5k. It's free to do so but does take up some of your time. 

Unfortunately I won't be much help with that question. Every market is different and I am not familiar with your market. The rule of thumb I use which could be applied to any market generally speaking is: ARV x .70 - Rehab costs= Max offer price.

So $200,000 ARV x.7= $140,000- $50,000 (estimated rehab costs)= Max offer of $90,000. I think if you use that rule of thumb you should be in good shape with a large enough buffer for any unaccounted factors.

@Christopher Lane congrats on securing the LOC... first step complete! Have you already identified the property you want? To find the best deals you may want to do a little bit of marketing to try and find off market deals. I have been using mailers through deal machine and it's been working well. You could also start driving for dollars. You could also hire an investment friendly broker to help bring you deals or reach out to some wholesalers.

You could put the property in an LLC. Your LLC is just the holding company so I think it could be a California LLC but check with a real estate attorney.

Offer a price where the numbers make sense for you. There is no 'rule' on how much you should offer.

Just be conservative with your rehab costs. Things add up pretty quick, always factor 10-20% for contingencies. Also check on the ARV. I would be conservative on this as well. You can enlist the help of a broker to assist you with ARV.

I am not sure the logistics on your last comment about the rehab/HUD. I have never done that before. My last BRRRR I closed, rehabbed it then did the cash out and got about 75% of my all in capital back.

@Cory Lucas unfortunately it sounds like he does not have an interest in helping you search for for BRRRR property.

As both an investor friendly agent and investor I can see both sides. From the investor standpoint: before I was licensed I was sure to hire an investor friendly realtor who owned investment property. One... he could provide his insights and leverage his experience and two, he knew how to navigate the market. I would recommend you look for the same. Someone who owns investment property can speak the language and close a deal out for you. 

As an agent now...I will provide an agents standpoint and please do not take this the wrong way... just devil advocate. 

I do not know your market but if it's anything like the East Coast finding possible flips/BRRR's on market right now is nearly impossible... numbers just don't work. Working with first time flippers can be challenging because of the lack of experience and you end up showing 10-15 houses before you can get one under contract. Then you have to go back 2-3 times to that same house because they have to get quotes from their contractors ect. All the houses you are showing are relatively inexpensive because they are 'flip' properties and need a good amount of work. If they are a decent agent they are most likely working with 7-10 clients at one time and their time is limited. Just from a time/money standpoint, it doesn't make sense to devote all your time and energy to a small commission check. And if you are doing a BRRRR and not flipping it... they know they will also not get the sale on the back end.

Now that doesn't excuse someone to act the way this realtor has but it could be what's going through his head. I would have an open conversation with the realtor and be honest. It could just be as simple as it's just not working out and you move on. If that's the case, when you start looking again make sure to ask a lot of questions to your new realtor. Do you work with investors... do you own property have you worked with flippers before ect ect. When you find someone make sure not to waste their time. Run your numbers to the best of your ability before seeing the house. Schedule your contractor to join you the same day as showing. When your running your numbers be realistic. If you keep sending low ball offers it will become frustrating for the realtor. Explain that you are in this for the long-term (if you are) and you want to keep using the same realtor and build relationships ect. Hope this helps provide context from both sides. 

@David C. it really depends on the unit size and how your are originally funding the deal. If you are using a traditional bank (frannie/freddie loan) for 1-4 units they will most likely make you purchase it in your name. This will be the cheapest option from an interest rate standpoint. Other non traditional banks, like hard money or portfolio loans do not repackage the loan and sell it like frannie or freddie do so you can buy in LLC. If you are buying over 4 units or any mixed use it's considered commercial and most lenders will require it to be in an LLC anyways.

If you are paying Cash... no lender involved it's obviously up to you. On my last BRRRR deal I bought a 2 family home in the name of my LLC but used a portfolio lender (non traditional bank). The lender funded 75% LTV and 100% of the rehab. I paid 1-2 points at closing and my rate was 9% interest only. Once I refinanced (with the same lender) my rate is now 5.5%.

Hindsight, I should have refinanced in my personal name with a normal bank to get the lower rate (3-4%) and then quick claimed back to my LLC for asset protection. This is the method I would recommend.

So to answerer your question... it all depends. You can do it both ways just know the pros and cons to both.

@Corazon B. what works for my partner @Ryan Deasy and I is Facebook marketplace. I post an ad there for a rental with pictures, detailed description ect. When they request to see if its available and set up a showing, I send them a list of pre screening/qualifying questions. This weeds out most tire tickers and the other half don't respond. Of those left that are 'qualified' I set up an in person showing. Out of the group of people that schedule to come, 25% don't show. I then weed it down to a few more and I then request credit/background screening and have them fill out an application. From there we make a selection. Out of 25 units we have a pretty good track record of no evictions or bad tenants (knock on wood).

We like Facebook because we can get a small glimpse of the people we are renting to through pictures, messages, FB wall, ect ect.... its all out there for the public. You cant get the same level of detail through other methods. 

@Weston Bovee as many others have said if you are looking for properties on 'realtor' 'zillow' or other sites, most often than not, an agent is representing the seller and you will have to discuss details with them directly. If not there should be a contact section for FOSB. Counter to what some people believe a listing agent will be more than happy to help you out especially if you are 'unrepresented' because it means a higher payout for them. Perhaps you can get a better deal because of this. On the other side you don't have anyone fighting for you and if you have never negotiated a deal before, there is a lot of moving parts... nonetheless not rocket science. You'll definitely want to hire a real estate attorney to do the contract work for you and closing. 

Only get your license if you plan to be actively 'selling' properties either your own or on behalf of people. There are many fees associated with being a realtor, probably $2,500-3k a year. My partner and I do direct mail campaigns once a month through Dealmachine and it has yielding tremendous results. That is something you may want to consider for finding off market properties. 

@Thomas Farley I think you should think about using your FHA differently than what you described. Think about it as an opportunity to get into the max amount of units possible rather than spend the max you can. So in this case try to get a 3 or 4 unit building. Whether that cost $500k or 1m, if it cash flows then it's irrelevant. Although check your local FHA limits per county. I know around here they will lend up to about 600-800k maybe less. But depending on your town ect it will vary- so check with your lender on that.

Also if you have a significant other and can get them on board with RE investing, you could use an FHA again if it was never in their name to begin with. For example.... I bought a duplex in 2016 with FHA (wish I went bigger). I purchased in my name only. Then 2 years later my gf bought a triplex with an FHA. She bought this in her name only. Then 2 years after that we actually used a low down conventional mortgage (10% down) to buy a single family together.

Additionally, you can also use an FHA again if you have a life changing event... you moved, job change, had kids and have to 'upgrade' ect ect.