All Forum Posts by: Michael Garofalo

@Andrew Goodwin, not all HELOCs require you to pay off the balance in full at the end of the draw period. In fact most good ones convert into a 25 or 30 year amortized loan. Sure the interest rate is variable, but prime is still quite low based on historical records. 

@Aymen Mandil, the HELOC is a very good product because of the fact that it is a revolving line of credit rather than a lump sum of cash. If I were you, I would get one and use it to BRRRR and then refi out into something longer term, to clear the entire balance on the line. That is what I did on my last deal, and it works really well. Just my 2 cents, everyone has a different strategy and tolerance for risk.

Does anyone have a recommended gutter/siding specialist, as well as a roofer that services the greater Pittsburgh area they'd be willing to recommend via direct message? I'm working to get estimates on 2 buildings recently placed under contract that need an overhaul of the gutter systems, as well as siding work and potentially a small front porch roof replacement. 

The first estimate I received seems extremely overpriced and the company is definitely trying to up-sell. Looking for more of a "mom and pop" small business operation than one of the larger corporations. Thank you very much in advance!

Agree with @Nick Giulioni and create a new LLC if that is possible, and give yourself (and the partner) each a 50% equity stake. If it's too late (and you're set to close), purchasing as "tenants in common" (where you both are listed on the deed) might make more sense. I'd consult your attorney though to see what they recommend.

Process is the virtually the same as securing a first mortgage. Bank will verify income, employment, credit history, and order an appraisal. Only major difference is you already know the title is clean, so that helps things move a little faster. Also most banks will waive closing costs. In terms of timeline, it depends on how fast you move, and how good your loan officer is. If you work with someone competent and provide all the necessary documentation up front, it shouldn't take more than a few weeks. If there are delays in providing paperwork or more verification is needed, it could take 30 days or more.

@Christina Harris if you are looking in DC proper, check out this program called "DC Open Doors." It's designed specifically for first time homebuyers who earn good income but need assistance with the first down payment. I believe they offer $10k and the only major stipulation is you have to live in the residence for ~5 years (otherwise you must pay a pro-rated amount back).

@Kyle Barker, like @Russell Brazil mentioned, condos are great in this market, they just require extensive due diligence. The fees in my building have not been increased for at least 8 years, and right now we have over 700k in reserves, some of which will be going towards a cosmetic rehab this summer for all the common areas. If the HOA is healthy and the location is solid, you can't lose.

Scott,

There is some truth, but also some exaggeration involved. Doing one deal does not mean you are automatically going to start picking up tons of properties. You're ability to grow and scale will depend on your access to capital and the professionals you surround yourself with. After you've done one transaction and can speak intelligently about your successes and failures, you will start to earn the trust of others and expand your network. Generally speaking, things do get easier after you have done your first but it's not 100% black and white.

My personal recommendation is to start off on something smaller (2-4 units) to get your feet wet and to build up your track record. The first deal is not going to let you quit your job, but it will allow you to make and learn from mistakes, and hopefully also give you more financial flexibility. 

I think of acquisitions in terms of "what will this unit cover for me?" I don't take the conventional route of "i need x number of doors producing $100/month so I can replace all of my income." In my case, each property has a purpose. I live in DC and my primary residence is in an A+ neighborhood, so the cash flow will not be as great once I move out and start renting it, but i will benefit from long term appreciation, which I view as something to cash out for say a child's college education fund, or supplementing retirement. I also have another unit in a lower income neighborhood where the cash flow is high; for this one I have ear marked it as my "vacation fund." I'm currently working towards closing a deal out of state with a business partner, where cash flow opportunities are higher and acquisition prices much lower compared to where I live. Will look to that income to help cover simple living costs (say my cell phone and internet bills).

Hope this helps, I'm sure others will have different opinions but that is the beauty of BP, lots of diverse and interesting perspectives!

Ok, yes looks like no specific verbiage for this scenario exists, but at the end of the day, to me it sounds like you are not comfortable with him bringing this thing in. This is not a situation where the trailer could be considered necessary for medical or emotional well-being purposes (or at least I don't think that argument would ever hold up in court, however I am not a lawyer). It seems like these tenants are reasonable people, so worst case they will be a little pissed off if you tell them no, and potentially won't renew their lease at the end of their term. 

For future lease agreements, maybe put something in there that strictly prohibits trailers of any kind so you never have to deal with this situation again? Just my 2 cents, best of luck navigating through this issue!

A rough rule of thumb I use when first estimating rehab costs is $25/sq ft for cosmetic rehab (new flooring, appliances, paint, anything visible and within the walls) and $50/sq ft for a total gut. To me it sounds like you are more in the "total gut" boat but I'd have to see pictures and know more about the issues to be certain. Granted, these are very rough estimates, material cost and labor varies significantly based on your market.

A new roof should run you anywhere from $9,000-$15,000 depending on the size and material you choose. To totally remodel a bathroom the right way, it will depend on the size but each will probably be $3,000-$6,000. New floors, again will depend on the material you chose; if this is a buy and hold rental, go with laminate or vinyl plank flooring for max durability as well as carpet.

Also, you need to consider the shape the systems are in. How is the electrical and HVAC? How old is the building? If super old, you would want to get a sewer line camera test done to make sure there are no critical plumbing issues that need addressing. 

If the property truly needs $40,000 worth of work and is an unlivable condition, you aren't going to be able to get a conventional 30-year fixed loan on the 80k acquisition price. You would need to pay cash, perform renovations, then go back to the bank and refinance, which will make your monthly payments go up. Or do something like a 203k loan where you can lump in the cost the renovations. Either way, your mortgage payment is going to be more than $343 per month. Additionally, your expenses seem high and for me, that CAP rate is way too low.

Not trying to be negative but for someone who has been in the game for a few years now, I would not buy at this price if it needed that much work.

What does your lease agreement say about trailers or oversized vehicles? Do you have anything in there that expressively prohibits it, or requires written permission from you, the landlord? 

If it were me, and I didn't want the eyesore, I would politely say no and reference the lease agreement if you have something in there to justify the rejection. If there is nothing in the lease, then I would consider how good these tenants have been. If they have paid on time and not caused any issues, and you sense they might make for long-term tenants, I probably wouldn't charge anything extra. If they have been late on payments or caused other issues, then yes I would tell them there is going to be an additional fee. And I would make that fee somewhat substantial so that they have to really think twice about whether or not they need to have that thing accessible 24/7.