All Forum Posts by: Rob Barry

I'm no expert here but I usually look for a personal recombination from somebody I trust and would be more likely to trust someone with a demonstrated high reputation. I don't know of any such ratings sites. But that's what BP is for!

I'm new to investing in real estate, but have been in securities for long enough to have figured out a an approach that works for me.

In investing, as in most things, I think at least 80% of people's dissatisfaction with themselves come from comparing themselves to others. At the end of the day, if I have enough for me and mine to live the life we want, and the net worth continues to grow, I don't stress about what John nextdoor is up to.

It's best, I think, to hold an "attitude of abundance." That is, you're proud of what you've built, eager for more, and happy to celebrate the success of others. 

Let's say you're just starting out in real estate and have one SFH rental free and clear with no mortgage borrowing history. Then let's say you get so eager, you want to sell your small business and move all your working assets to R.E. To keep things simple, let's say the business cashflows about $350k, but is in a high-risk industry, and could sell for $1million after commissions and closing fees (not accounting for capital gains tax).

Would you sell out and invest as fast as you can find good deals, knowing you'll have to stop and wait when you hit the "seasoning" wall? Or would proceed slower and wait until you've got the initial borrowing speed bumps out of the way? And, most importantly, what would you invest in?

I just started investing in Atlanta and the numbers look pretty good. Easy to do >8%. But nothing like it was three years ago when the market was bottomed out. I missed the boat on that, but my friends who go in then saw something like 97% ROI in three years. Now I like it primarily for the low cost of entry and strong local job market. There are deals to find for sure. But it's not the smorgasbord it was.

Good points. I've heard that some people buy under their own name and move it over to the LLC after financing is secured. I'll have a chat with my attorney about that.

 I need to pay cash for these kinds of deals, since banks don't seem to like to give mortgates for distressed properties. Aren't mortgages, specifically, lending for the purchase of an asset, vs home equity loans, which are for pulling out equity from an existing asset?

So I'm closing this week on my first SFH and, as you might imagine, quite eager. It was a foreclosure and I paid cash. Purchased it through an LLC, as an out-of-state investor. My team on the ground should have it rehabbed and rented by the end of March barring any surprises.

My goal is to get to $3m in SFH holdings under heavy leverage as fast as possible in my target market (Atlanta), and then re-assess goals and paydown speed. Each new acquisition will probably cost $80-$100k. Though prices are rising, so time is somewhat of the essence.

My question is, how would more experienced investors structure the financing and think about how much leverage to take on and target repayment schedule?

I'd been thinking to start with an interest only HELOC on the first property with a 10-year draw period, and to use HELs from each new property, plus income, to pay it off after each new purchase. Is that what others do? I'm targeting foreclosures for the most part, so traditional mortgages are an unlikely tool for me unless I stray from the plan.

I do have fairly strong business income and a wife whose salary we're learning to live off. I am looking to put at least 60% of my income directly into R.E.

I'm also considering whether to do 15 or 30 year terms on these. This first property, for example, would cashflow about $5k/year at 70% leverage with a 30-year note and about $2.5k with 15-year note. Thoughts?

Thanks in advance.

Feelers are out for my first deal. I've narrowed to the Atlanta suburbs because the local economic growth outlook looks good and home prices are reasonable, yet rising. I feel a bit of FOMO for not having jumped in a few years back. Low-end properties appear to have literally doubled in value since then. My investor brain warns me that growth like this can't possibly continue for long, but things still seem undervalued (eg. new townhouse constructions are costing $110k-plus for what currently sells for ~$70k).

Long-term goal is to rapidly grow a portfolio of cashflow properties (SFRs and townhouses) under high leverage until my leverage reaches around 70% the value of my business, sell my business to clear all debts, and then shift into larger multis and commercial deals.

To keep things as automated as possible, I've plugged into a buyer's agent and property management team that comes highly regarded from friends who've worked with them for years. I've got about $80k cash set aside (income from my small business) comfortably for the first deal. Looking to leverage the cash for a discount on purchase price. I'm an American living in London and really don't want to self-manage properties and rehabs. 

Assumptions

My impression is that in the $70k-$80k price range, given recent rising prices of townhouses, a turnkey townhouse would cost more or less the same as the distressed properties in the comps after rehabbing. Slim pickings for real deals at that range. Conversely, I could save up bit more to target SFR foreclosures nearer to $100k all-in, and maybe find a nice equity boost for the HELOC, but at a higher risk of headaches. I could do the safe thing and start off with an already-rented vanilla townhouse and a mortgage for maybe $20k down and see if I need to learn any lessons. Or I could just go as big as possible from the start...

My questions to you fine ladies and gentlemen:

1) Are my assumptions on-point or off-base from what you've seen

2) Which approach would you start with

3) What do you think about the growth outlook in rental demand for townhouses vs SFRs in the burbs around Atlanta?

4) Any general advice for reaching my goals and avoiding pitfalls?

Thanks so much.

Wow, thanks John, that's more than I was hoping for! I really appreciate the in-depth analysis. I will most certainly spend some time analyzing the West and Southwest areas in more depth. The way you describe it, it may be just the sort of area I'm looking for.

@Chance Bridges - Thanks for your thoughts. I'll reach out shortly.

@John Ford - Interesting, I hadn't yet learned of the Beltline project. So it includes parks, transit (rail?) and trails? What do the locals say about it? Also, can you give me an idea of how far along it is/when it got going? I just wonder if it's a truly meaningful and value-bringing project, or one of those ways politicians energize their constituents by slapping a coat of paint on an old rail line and some parks. Just playing devil's advocate here!

So I've saved up some cash, currently am living internationally, and am eager to start building a small portfolio. My strategy will be to rehab distressed sub $100k homes (target average: $75k bought and rehabbed with $1k ish rents) and cashflow them. Most likely I'd go for single families with some multis mixed in as the working capital grows. But I want to focus on one city so I can find one team to run everything. 

Right now I've been looking into Atlanta, and it seems like an ideal city to focus on; decent-sized rents, solid growth, jobs to go around (correct me if I'm wrong). There seems to be a ton of inventory out there, which is great because I want to stack them fast once I get going.

So I have three questions:

1) Would you recommend any other markets to look at that could give me what I'm looking for?

2) How do you think Atlanta looks now? Am I late to the punch? I know it was all the rage in 2013...

3) I'm new at this, so I'd be grateful for any non-obvious tips on how you would assess a city's investment viability and what you'd look out for in the research stage I'm in.