All Forum Posts by: Nick Velez

It is always so fascinating to me when people say there are no good deals. As a lender and investor, I get to see the various deals my clients are doing and so many of them are crushing it! I have STR investors in Florida making 25% cash on cash returns, long term rental investors picking up properties directly off the MLS and cash flowing day 1 in various states, and house hackers completely removing their housing payment from the picture allowing them to save for for the next property.

The beautiful thing about real estate is there are so many ways to succeed and a plethora of strategies depending on your comfort level and how active you want to be. If I only invested in REIT's or stocks 5 years ago when I started, my net worth would be 95% lower than it is today. Diversity is great, but the fundamentals for real property are too strong in my opinion.

I do hope your mindset shifts and you look back 5 years from now and say damn I wish I started sooner. 

I would personally never invest in a high crime area, especially for an asset that will have below average appreciation. $300 a month cash flow is not a bad target but when you are dealing with properties of that caliber, one bad tenant or big repair can wipe out years of cash flow. 

On my end, I would never purchase a property that won't produce at lease 1k in net cash flow, and it must be in a desirable area that is expected to appreciate. I have been looking at my year end numbers and most of my properties (STR's of course), will have generated over 3k a month in net cash flow on a 12 month average. More work? Barely, but I guarantee they will be in better shape 3 years from now than a 100k property in a high crime area. Just my 2 cents.

I disagree with the notion that brokers cost the consumer more money. There are obviously exceptions to this depending on the loan product but take rocket mortgage for example. They make a small spread on wholesale deals versus taxing the consumer outrageously on the retail channel. The wholesale channel is a lean business practice for the most part while with retail, there is significantly more expenses such as marketing, employee benefits, admin staff, etc. I sure as heck wish I had all of that!

On the other side of the coin, someone going through a broker or IMB to purchase an investment property, is likely going to spend significantly more than they would at a bank who holds the loan in house, because of LLPA's with Fannie/Freddie. Removing or lowering those LLPA's would level the playing field in terms of pricing, but making investment property loans more affordable is not going to help decrease prices. 

I am not going to say there is a best lending model, but brokers legally can not be paid as much as IMB's, and I tend to be cheaper in more situation than not when comparing a loan estimate from an actual lender. 

@Patrick Brown

A local investor focused agent is going to be your best resource starting out, ideally one who has a portfolio themselves! I HIGHLY suggest you connect with @Josh Green, he is an investor and has helped so many other BP members acquire their first investment property. 

I wish LLC's weren't preached as much as they have been in the past. They are a great tool for asset protection (when you have assets to protect), but they are by no means the end all be all of liability mitigation. Far too many first time investors obtain less than ideal financing terms, just for the ability to vest in a LLC. I fell trap to this myself when I first started off and now I am refinancing properties out of LLC's, to obtain better terms.

Best of luck on the journey! 

Depends on property age but I almost always do a sewer scope, especially if the pipes are cast iron. Replacing them can be a costly nightmare that can be avoided with a simple inspection. I have had too many clients not get one, only to find collapses in the line or roots growing in to where repair was not feasible. 

@Timothy Cannon

Welcome! I am local to Gainesville, there is a monthly bigger pockets meet up with some awesome individuals that lead it. I would search Gainesville Florida Bigger Pockets Investor Meetup on facebook and request to join. 

@Marc Shin

Primarily to capitalize on the higher bonus depreciation since it is declining by 20% every year at the moment until it phases out. The goal of a cost seg is typically not to offset the income from the property, but to offset income from your active income (potentially a high W2 job). I have a lot of clients who have had great income this year and thus they are rushing to purchase a property by the end of the year, so they can place it in service. The year it is placed in service, is the year you can utilize the cost seg. Placing a property in service in December of this year versus January of next year is a 20% delta. 

Investors in general, tend to be more active at the end of the year from what I noticed. There tends to be less competition from every day home owners who need to move in the spring/summer before the new school year starts and thus the possibility of having more leverage on sellers. On the flip side, inventory tends to be lower so it really depends on the inventory level in your specific market. 

@Sam Faas

I won't knock you for paying cash but just because you don't need flood insurance, does not mean it's a good idea to not have it. There were plenty of people not in a flood zone that wish they purchased flood insurance. 

In any case, I am sure that market will rebound shortly and things will go back to how they were. I HIGHLY suggest connecting with a local expert such as @Josh Green. He owns and operates several STR's in the area and has it down to a science.

@Jesse Gaynor

I would trust a 4% appreciation rate in real estate over a 10% average return on an ETF. Real estate is tangible and given market conditions, your specific area is poised for a significant amount of growth in the future. As you mentioned, your appreciation is based on the 700k figure but you are also getting debt pay down as well. If you were to eventually move out of the property and rent it, your tenant now pays off your debt. This option does not exist in the stock market. 

Note that while you can put down 25%, you could leverage even more and put down as little as 5% in most situations. If I were you, I would connect with a local market expert who can give you concrete data on your market and what the future holds. You are extremely lucky because @Josh Green is one of the best realtors I have met, and he happens to be in your market!