All Forum Posts by: Patrick Menefee

@Robert English how are you funding the acquisition and refinance? Are you looking at hard/private money or conventional? And have you talked to a bank?

Banks have rules and requirements related to the percentage of a loan that can be charged in fees, which equates to minimum loan amounts. It looks like you're planning on a 20% down 30yr fixed loan for the acquisition of a $20k property, which isn't going to happen. You're going to need an alternate funding source, and you're probably going to have to increase your closing costs

Same with the refi...it depends on the fees, but refinancing a property worth $50k can be cutting it close too

@Jeff Alwine you have plenty of great advice here but I want to take it a different direction. Why do you want to self manage? Are you looking to save money on the deal? Get the experience? What's your motivating factor? The rest of the advice is fantastic, but it also helps to know the why

@Jared Leet absolutely, shoot me a message with your number!

@Reed Meyer I know I mentioned The Slight Edge last night...going to emphasize that again by channeling my inner David Greene with an analogy 

Investing in real estate is like going to the gym. The tactics, strategies, and techniques of investing are the bench press, squats, and deadlifts of working out. They're fundamental to what makes you stronger, but only if you apply them consistently and properly. What's more valuable...doing squats, deadlifts, and bench for 3 hours once a week? Or for a half hour every single day?

Think about investing the same way! Learning how to analyze a deal is vitally important, but only if you do so consistently. Critical to building your business is setting the foundation, and that starts with mindset. Develop the vision to identify what you truly want. Develop the mindset to develop action plans to achieve your results. Develop the discipline to work towards your goals daily

Create the foundation to set all of those pieces in place, and the activities become significantly easier. I've found that foundation is built through books like

The Slight Edge

Think and Grow Rich

Tribe of Millionaires

The Compound Effect

The 12 Week Year

High Performance Habits

Wealth Can't Wait

Set For Life

The Miracle Morning

Get your mind right, and the results are much easier to achieve!

I love this question. I believe so, and I also believe this will lead to an increase in private money available to investors (giant caveat - investors with a reputation and one that people trust)

If you have a lot of cash to invest, where are you going to go with it? The bank is a worthless option. The stock market is incredibly volatile, so unless you're a day trader capitalizing on the fluctuation or you're someone parking their money in an index fund for the next 30 years that's not the most appetizing option. Crypto...well, you could also invest in derivatives based on the underlying accuracy of meteorologists

Real estate (with the right person) looks like a much more appealing option, and I believe we're poised to see more private money available than we did before

@Reed Meyer it depends what i feel like learning and what kind of crap i uncover haha. Primarily stuff like painting, flooring, demo, and some cabinets, but I’ve also done some drywall (hated it) and am about to do some subfloor work. My rehabs are usually mostly cosmetic so far, but sometimes you pull something up and discover some unexpected problems

@Nick Troutman id echo the sentiment of caution, but want to add a note to the comment about not getting into multifamily. I assume the comment was in regards to large multifamily, not 2-4 unit...the larger deals have a lot more credit and interest rate risk due to the type of loan, but IMO 2-4 units are a safer bet than SFH right now

It's the age old discussion about mitigating risk by owning multiple units...I have 12 units and 3 mortgages. I need 3-4 units occupied and paying rent to cover all my debt payments, a fact that makes me feel much safer in times like now. SFH still isn't a bad way to go, but don't shy away from multifamily because someone said it

Moreover, and i know this isn’t what you asked for, but it’s important to realize that there are a million ways to invest in real estate. You should never make a decision based on a single comment by anyone, no matter how smart they are. Take their advice under advisement, but make your own decision. What works for me may not work for you

@Reed Meyer first do all, congrats on your upcoming graduation and initial dive into REI!

I’m investing full time and have done so while traveling for work 4 days a week (until Covid). I’d strongly suggest finding a light rehab for your first one and factoring the cost of hiring a contractor into the deal. The benefit is threefold: (1) you maximize your time (2) you get practice managing a contractor (3) the rehab is light so you can go out on nights and weekends to do some of the work if you so choose

I type this as I’m heading out after work to work on one of my units. It’s certainly possible, you just have to figure out how to make the most out of your time and play to your strengths! Good luck!

Just to be clear, that $700 is not truly your "cash flow". PITI plus utilities only account for a portion of the expenses/reserves that should be factored into a deal. Are you self managing or using a management service? How long have the tenants been there?

We're also only talking in one true number, so what does that $700 represent? Is that on rents of $1500-2000? Or rent of $3000+? 

Property management runs 8-10% monthly, plus a leasing fee of either 50% or 100% of first months rent. If you have annual turnover, that amounts to an additional 4.2%-8.4% of rent. On the low end and at $2000 rent, that drops your "cash flow" to ~$450. $3000 rent and you're looking at over half of your "cash flow".

That leaves you with $350-450 to "ramp up" your reserves for other repairs, assuming you take no distribution and have no other expenses.

At the end of the day it all depends on your risk tolerance and what you consider a good deal. Personally, I want to account for ~20% reserves on top of my property management and other expenses. Only then do I consider the rest cash flow. If your risk tolerance level is significantly higher, or your profit margin requirements are way lower, then obviously a different deal will be great for you. I would just make sure you take everything into consideration!

I'm sorry to hear that you and your wife both got laid off. Ultimately your broker is right in a way, but there are a million ways to answer this question.

The first and most important question I have for you is...what does your current financial picture look like? Do you and your wife have any other income coming in currently, or are you living off of savings until you get your job back? Are your "savings" truly savings for investments, or are they the only cash you have on hand and therefore should be viewed as an emergency fund?

The second question is...which part of the goal is most important to you and your wife? Is it living in a house you own that's the most important, or is it renting it out? If it's the former, your broker is right and you should wait until you have stable income again. Lenders will require this for an owner occupied mortgage.

If it's the latter, why do you need to buy a house first? If your goal is to generate additional income, given your current circumstances you may be better off continuing to rent and instead focus on opportunities to invest with little money down. 

Let's put it another way. You can't qualify for a conventional mortgage without a job, so you're going to have to get creative to close on a property. Getting creative costs money (e.g. private loans, commercial loans, non-traditional options), a lot more than a standard 30yr fixed mortgage, making it a horrible option for a home you intend to live in. So if you have to get creative, it needs to provide you with income to cover the higher expenses, reserves, and pay a profit. As a result you need to know what you're doing, and ideally find someone with money to partner with (as long as you can add value)

There are a lot of other ways to go from here, but let's start with these 3 questions:

1. How does your financial picture look?
2. Is your goal to invest, or to own your own home?
3. How well versed are you on real estate investing? (e.g. are you just starting out, have you done a ton of research and just need the first deal, etc.)

Those questions will help inform your next steps big time