All Forum Posts by: Owen Schwaegerle

@Maxim Lorenz - great question about employment history or credit score. You can use both. Sometimes people don't have a credit score at all and in that case I'd use employment history. You want to make sure they have the income to cover the payments. However, credit scores are a great way to view someones payment history and you get to see how many outstanding debt payments they have. For example, let's you have rent of $1500/mo and your minimum screening requirement is income that is 2.5x the rent. That means you would need income of $3,750/mo in order to live there. If someone earns $4,000/mo they might look like a good prospect. However, if the credit report shows they have $1,000/mo in car loans and $200/mo in student loans, and they've been late a few times so their credit score is below 650, then they actually do not have earn enough and the report reflects that they have been late in the past. This is a good indication that you would want to select a more creditworthy tenant.

We have had a number of people no show for showings. This was wasting our time, so we became very structured in our qualification process after that. 

We always do a pre-qualifying phone interview. Minimum requirements are income is 2.5x the rent, 650+ credit score, and no evictions, delinquent rents etc. Then we have them fill out an application - it used to be Cozy.co and is now Apartments.com. From there, we will verify if they are truly qualified or not based on their credit report and background check and then set up the showing.

We will be doing an investor mastermind lunch on Tuesday, August 24th at 12PM in Paso Robles at Finca Restaurant. We will be presenting on the house hacking strategy as a way to live rent free. After lunch, we will be caravanning over to tour a few rental properties and some renovations that are being done in between tenant turnovers.

Please RSVP to me or @Ben Tilbury for the event!

Thanks, Rachel!

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

Purchase price: $575,000
Cash invested: $62,000

After listening to BiggerPockets for three years, reading dozens of books and audiobooks, being inspired by countless people who shared their stories, my wife and I made our first real estate investment purchase. It was a 4plex.

We decided to house hack so that we could live rent free. Scott Trench's book, Set for Life, resonated with us. We knew that if we wanted to achieve financial independence early, we were going to have to live in an unconventional way.

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

We live in a very expensive area. The cost for housing is extremely high! Many young people decide they cannot afford to buy a home in our area, so they move and relocate out of state or to more affordable areas. We love where we live so much that we decided we wanted to do whatever we could to plant roots and stay in our community.

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

We watched the market for years. We prospected, sent direct mail, and proactively searched for property. One day, a new listing came available. It was a 4plex for $560,000. When we saw it we immediately knew it was a deal. The listing agent was from out of the area and under priced it significantly. Usually multiunit properties in our area to go for $200-300K/door. This was priced at $140K/door - a true deal! The property was also about a 1/3 acre and had a front house and a triplex behind it.

How did you finance this deal?

As a self-employed real estate professional, my income did not count towards qualifying us for the mortgage since I had not been in the industry two years yet. My wife's income from her W2 job counted, and we could use the income from three of the units to help us qualify. Since we were going to be living in the property as our primary residence, we only needed to put 5% down, or $28,750. The rental income was about $3,500/mo, which totally covered our Principal Interest Taxes Insurance (PITI).

How did you add value to the deal?

We had to improve the units and we were able to raise rents! We had to put in about $30,000 of work to make the property better.

What was the outcome?

After we closed on the property, my wife was able to leave her W2 job and join me in our real estate businesses full time.

We had to do a lot of work. There was a ton of sweat equity that we needed to do. We spent all summer with our family, friends, and contractor working on the project to make it much nicer before we moved into it.

Lessons learned? Challenges?

The lender you work with matters! Not all lenders are created equally. One of the lenders we attempted to work with was less experienced and could not get us the loan we needed to qualify. It almost cost us the deal. We had to switch lenders midway through escrow, and the new lender totally came in clutch and helped us close the deal! Know you market! We were able to quickly analyze the deal and realized that it was a great price/door. It also almost hits the 1% rule, which is very uncommon here

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

Yes, I'd recommend Kim Rivas for financing with KD Capital Mortgage in Paso Robles. She is incredible! We represented ourselves on the purchase of the property since we are licensed real estate agents.

If you can't make it this time, we will be doing another one next month.

@Dylan Miracle, yes it was fun being in Dr. B's class and seeing your presentation.

@Jen Narragon incredible deal! Thank you for sharing. That is an awesome 4plex. Will you be converting the basement to be an ADU?

We are hosting another Investor Lunch at the Hotel SLO in downtown San Luis Obispo. We are a group of real estate investors and professionals that get together to talk about real estate investing and strategy. If you want to mastermind and network with other investors, this is going to be a great, casual lunch to do so. @Ben Tilbury and I will be hosting the event.

If you'd like to join, let us know!

Though the deadline has passed, I wanted to make an update here. One thing that several people in California did to protect family property was to pass their property/estate to their children before they passed by signing a deed over to them. It seems like this was one of the best solutions proposed after spending countless hours researching the situation.

Not sure how everyone else on this thread did. Any updates on what you guys did?  Nic Lynette Deanne Collin Bob?

@Matt Dickens, that is an awesome idea! How were you finding the SFR? Did you get an off market deal or did you find an on market one? How much fixing did you need to do or are you planning on doing?