All Forum Posts by: Brian Moore

I've bought a couple off the MLS but have had the benefit of having a lot of patience. Hey @Michael S. Helton, how do I get invited to these back rooms? :-)

I'd echo the sentiments already given. On my last deal I had taken the lender's ability to close for granted, and lost the loan two days before close. I was also in a 1031 and therefore had a gun to my head on closing the deal because my 45 day selection window had already passed. Sounds like your two brokers are within a few hundred dollars of each other so this is a no brainer- go with the established track record. However if you find that your previous lender is out of alignment by a few thousand dollars, it's probably time to switch horses.

Though not entirely related, hopefully my love for debt can provide you with some inspiration and/or tactics...

Give me a lever long enough and a fulcrum on which to place it, and I shall move the world. -Archimedes

Compound interest is the eighth wonder of the world. He who understands it, earns it; he who doesn't, pays it. -Einstein

If you can borrow money at 3% and use it to safely earn 4%, how much would you borrow? You'd borrow all of it. -Kiyosaki

A bank is a place that will lend you money if you can prove that you don't need it. -Bob Hope

Dave Ramsey is an idiot. -The majority of BP membership

In summary, debt and leverage are the trained investor's best friends. I celebrated the day I was able to obtain $1M in debt, because you can't celebrate becoming a millionaire without coming off as a huge D-Bag. I'm thankful that I've developed a track record in which financial institutions and private lenders will loan me large sums of money, and I study hard every day in stewardship of utilizing and protecting that capital. If you're able to earn a positive return on all of the debt you obtain, drag your Excel calculation out to the right and extrapolate where your debt will lead you to financial independence. All of that being said, always be mindful of cash flow and reserves otherwise the whole thing eventually goes up in flames! 

@Kevin HillI've been following this post and thought I would weigh in on a couple points:

There's been a lot of references to 'crazy low interest rates' but I thought it would help to quantify that for the newbies. During the crash of '07-08, primary 30 year fixed was approx 5.5% whereas now it is heading south of 3%. Investment mortgages are typically 0.5-1% higher rates than primary residence. I'm getting my whole portfolio refinanced at 3.5% and below for investment property. The savings in interest rates of '07 vs present rates results in $350 cashflow on a $300K loan amount. I'll agree it's bad to catch a falling knife if hundreds of thousands of foreclosures are on the horizon (which is totally unknown), but if the numbers work and you can cashflow decently on a LTR, short term changes in property value are just paper losses while your rent checks and cashflow are real money each month. Rental rates in good markets haven't been known to crash; they may go flat or decline slightly but your cashflow should be stable.

@Jon Pierre- I confess that I've tried to be a 'market timer' but it hasn't gone well. Selling part of your portfolio to trade them like stocks (Sell high, Buy low) seems like it could go awry. The two main problem areas I foresee are the RE costs involved in the two transactions, and trading out your nicely performing rentals for unknown foreclosures AKA headaches. You had mentioned selling your vacant properties, but there's still a lot of piece of mind that you've probably done several improvements and know the property's history up and down. Though it sounds like a tempting model, I think the unknowns and the negatives outweigh the positives. Best of luck though! Time will tell. 

Hi All, I'm working on a 3.625% 30 year fixed for my primary in San Diego with a jumbo cash out refi, and the lender is crediting $3K in closing costs (so I'm out the door for roughly $500-800). I think the rate could have been better, but my strategy is to come back to the table in 6 months and refi the new inflated loan balance as a non-cashout which will hopefully be around 2.75% fingers crossed!

Next month I will be looking to refi my 2 unit Reno investment property and am currently searching for lenders if anyone has a good referral?  

Hi Johnny, I'm an out of state investor who closed on my first Reno investment in December and I'm happy to report a positive experience thus far. As some folks have stated in this thread, the appreciation play of a $300-400K SFR will likely be neutral on cashflow. I went the other route and chose a 2 unit with that same budget in a part of Sparks that was one of the more affordable parts of town. I wouldn't call it a 'rough' area (not a lot of crime) but all dwellings are 60-100 years old with the occasional run down property on each block. That being said cashflow has been great; $800/month (before factoring in Capex or maintenance expenses) which in my experience are great numbers given the proximity to CA. Also note that this was an MLS deal and I had a 1031 exchange about to expire, so I'm very happy with the outcome given these circumstances. My 2 unit won't appreciate like a SFR but I'm bullish on the TRIC driving appreciation to the area as a whole and my property is just off I-80 so very proximal for the growing workforce (i.e. renters) that the Industrial Center will bring. Best of luck and feel free to reach out for any questions or referrals.

Is anyone planning on taking a proactive approach and reaching out to all tenants to communicate about their situation before the end of the month? Or is it best to let sleeping dogs lay, hope that most of the checks come in, and then communicate with the late pays? I've got a relatively small portfolio in this audience but hearing a lot of valid points that stimulus and unemployment may not make its way to the landlord's pocket if the government is advertising no evictions for all.

Investment Info:

Small multi-family (2-4 units) buy & hold investment in Sparks.

Purchase price: $330,000
Cash invested: $90,000

Contributors:
Cooper Marcus, Michael S. Helton

2 Unit investment property purchased using proceeds from a 1031 for the purposes of Buy and Hold

What made you interested in investing in this type of deal?

I wanted to exit a previous investment in a condo which I only had 18% debt to equity (severely under leveraged). I shopped in my main market of DFW but also shopped locally in San Diego and in Reno. I'm new to the Reno market and heard good things from folks in my network. I'm also a big Tesla fan, and the Gigafactory plus other nearby businesses appear to be driving the job market in the area.

How did you find this deal and how did you negotiate it?

MLS. I followed several properties and made an offer on the subject property about $30K under list when it was 40 DOM. I brought it to my agent and she provided a handful of other properties, but the subject property was still my favorite. There were some counter offers but we were able to make the deal at a price that still worked with my numbers. The seller also conceded almost $5000 in repairs after the inspections due to some undisclosed safety issues with the electrical and plumbing.

How did you finance this deal?

25% down traditional investment property financing using my 1031 proceeds.
***Lessons Learned:This was my 8th deal and by far the most difficult escrow (other 7 were 100% troublefree). Initially applied for financing thru BofA which offered 4.75% on a 30 yr fixed working with a loan officer I had previous experience with. Regardless, the loan fell apart 2 days before close due to underwriters being nervous about my other 4 loans.

How did you add value to the deal?

The property was in decent shape. One unit was already rented. On the other unit I resolved the safety issues and also modified the layout. It is a 3 bedroom but one of the bedrooms was only accessible from the main living area through another bedroom. We opened a doorway directly to the main room and sealed off the existing doorway for $2500 as I'm sure all tenants would prefer this layout. I'm renting the unit for now and plan to do some additional value add on the next turn.

What was the outcome?

Both units rented and $650 cashflow per month. I don't consider this property a 'deal' by any means and I got somewhat forced into it due to my 1031 exchange time limits running out, but it has fairly decent cashflow for such proximity to CA. I'm bullish on Reno and optimistic about both appreciation and an increasing rental market.

Lessons learned? Challenges?

***Continued: My CPA had also filed 2018 tax return with CapEx items filed as OpEx thus impairing the margins and Debt to Income ratio of my portfolio. Seller demanded $1400 to stay in escrow. 2nd lender was 5.375% for the same product but managed to close 90 days into the initial escrow..which put me into December with a vacancy! I also switched employers during escrow which caused additional issues. I came into this deal with a lot of hubris about my ability to obtain financing, NEVER AGAIN!!!

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

@Cooper Marcus provided me with a property manager referral that I ended up using, but it might be a little preliminary to recommend this company. Also @Michael Helton is a local investor and was very generous with advice and providing alternative lenders when I was having difficulties with financing. Thanks guys!

Thanks Dusty. I don't see of any positives coming from submitting the form, and pray that I don't get reassessed to purchase price. From what I understand reassessments seem to be arbitrary. For due diligence I ran through a number of comparable purchases to my property that have changed hands in the last 2-3 years. Public tax records indicate that none of them had taxes reassessed to purchase price. Fingers crossed!

Hi All, I wanted to inquire to this group about a similar strategy that this thread tip-toes on but doesn't directly address. Could I use a 1031 then a BRRRR to free up capital?

Ex: $200K sale on relinquished property with $120K equity, purchase $200K replacement property 'all cash' with $120K 1031 proceeds and $80K personal savings, BRRRR the replacement property and eventually get an ARV appraisal of 240K, Refi with a note of $180K (75/25 LTV), replace the 80K in savings and you are left with $100K cash with zero strings, restrictions or tax implications. (I've ignored the BRRRR rehab budget but this is just a hypothetical).

I suppose it would be much simpler to just cash out refi the existing property to free up $60-70K capital but perhaps the terms are considerably less favorable? Another scenario where this example can be useful is to expand options for the 1031 replacement property. I recently completed a 1031 where I was only searching for properties that were priced at 4x of my 1031 equity because the only plan I had in mind was conventional financing with 25% down on a multi-unit. Evaluating cheaper BRRRR properties would have widened my horizons and I could have possibly landed a better deal. Looking forward to your input. Thanks!