All Forum Posts by: Michael Wentzel

Welcome to BP. You get a big congratulations for taking action. It sounds like a huge first leap, but it is action. So that is good.

Private money can be great if you can find it. Finding it with little or not experience is usually harder. I've been told that you need to look at the 3 F's... family, friends and fools. We have found private lenders mainly among our friends, but we also managed to get a bit of experience on our own. The other challenge is most private lenders and hard-money lenders are not going to want a loan outstanding for 60 months. Many want to be in an out in under 12 months. A few of my private lenders have gone up to 36 months, but that is unusual.

So start talking to your friends and family. You might find a partner there. Beyond that you might find some small local banks to work with you and hard-money lenders, but both are challenging if you don't have much experience. If it is a great deal and profits enough to share, maybe you could bring in a partner with experience to help you get the financing and get the deal done. 

Mike

@Account Closed

Weclome to BP! You have found a great resource. It is great that you have a pile of cash, but it can also be dangerous. We currently have 17 properties with 23 units in them. We are realizing the transaction time (17 closings) and extra paperwork for 17 individual properties is a bit of a pain. We are going to start looking into small apartment buildings which should help to keep down some costs and administration. The challenge is that you're brand-new. We have learned and made mistakes on small single-family properties with small amounts of money. So I feel like we've learned a few lessons and are ready from a small apartment building. With your cash, you might be able to find a good mentor and skip the single-family properties and go for a small apartment building.

Mike

Yeah... I am using BRRRR on almost every property we purchase. We don't have a pile of cash to put into down payments, so we create the equity by buying run-down properties, fixing them up (with contractors), turning them over to a property manager and then refinancing our cash back out. Our numbers have tended to be much smaller. We typically buy a property for around $25,000, put $20,000 into it and get it appraised around $60,000. So that give us our equity and allows us to refinance all the cash out and do it again.

Mike

@Matt Foster

I would take 75% of the equity out of the rental property and have down payments on three more similar homes. In the end you should still have your equity, but it will be in four different properties. You have now increased your risk because you have $450,000 in debt against the four houses. But you also have $5600 in monthly income. So that should be a healthy margin to pay the bank every month (making money on the principal pay down), multiple any appreciation in the market by 4, take a huge tax right off in depreciation and mortgage interest and still have some healthy cash flow.

Mike

@Cody Holden

Most Real Estate investors probably land in the first group. It is difficult to get a loan for most start-up businesses, but banks like to loan against real estate because it is an asset they can take if you don't pay them. This allows investors to get started with smaller amounts of money as they usually only need to come up with a down payment. Using loans also allows you to scale up quickly and get the mortgage interest tax deduction. So these are a few of the reason investors go the bank loan route.

Others like to purchase properties for all cash because it brings there risk way down. They have no monthly payment to the bank, so they have less expenses and little chance of losing the property. But unless you have a pile of cash sitting around, this is a hard and slow strategy to employ.

I am firmly in the first group.

Mike

@Patrick Satchell

Welcome to BP! You have come to the right place to learn... and nearly everything on here is free. I recommend the Ultimate Beginner's Guide on the education tab up above. That will give you a quick overview of real estate investing strategies in a short period of reading. I have also listened to every single BP podcast while I've been driving or exercising or sitting around. The BP podcast covers are wealth of material from a multitude of perspectives.

After that you'll need to get off your computer. Meet a few lenders, a few Realtors and a few property managers in your target area to get going. If your area has a local REIA, start attending.

As questions come up, as BP members on the forums.

Mike

@Scott Ranallo

That seems like a tight timeline for 20 units. I assume you have asked for 5 extra days and the seller said "no". Have you done properties this big in the past? If so, I would proceed with the team you have in place. If not, I would get more advice and input before moving forward.

Mike

@Sefton Oxford

Welcome to BP! You have come to the right place to learn... and nearly everything on here is free. I recommend the Ultimate Beginner's Guide on the education tab up above. That will give you a quick overview of real estate investing strategies in a short period of reading. I have also listened to every single BP podcast while I've been driving or exercising or sitting around. The BP podcast covers are wealth of material from a multitude of perspectives.

After that you'll need to get off your computer. Meet a few lenders, a few Realtors and a few property managers in your target area to get going. If your area has a local REIA, start attending.

As questions come up, as BP members on the forums.

Mike

We have been working with private lenders for a couple of years. We have developed a pretty good system with promissory notes and deeds of trusts here in Colorado. Then a potential lender asked me this question and I don't know the answer.

He wants to invest money from his children's college savings accounts into a property. The savings account is NOT a 529 account. I think it is just a normal savings account in the child's name. He wants the promissory note and deed of trust in the child's name. Is that possible? Will I run into any hurdles when I refinance to a commercial bank loan in a year and half?

Mike

@Isaac Taylor

I have also been looking at the Cleveland market. @James Wise seems to be one of the Cleveland experts here on BP. He wrote a blog or article a while ago describing the different zip codes in Cleveland. That might be a helpful resource for you if you can find it.

Mike