All Forum Posts by: Ryan Howell

I would be on the fence.  Do you have any value add opportunity such as passing utilities to the tenants?  I think it would depend on the value add opportunity and what the commercial property will rent for.  I prefer to buy a C+ property in a B neighborhood.  I would also want to walk the neighborhood.  I would likely want more cash flow in that type of neighborhood.

@Curtis Cramblett - Sure thing.  I'm a local investor and also an agent.  I use a PM in the area as well for managing my units.

I'm not an expert, I've only done one seller finance deal.  My suggestion is to stay away from specific numbers as long as possible.  Build the relationship and let them know you're interested in the property.  Take them out for a drink or coffee and chat about being an investor/landlord.  I would take my wife with me, because it helped them see a young couple getting started in investing (where we were at the time).  Learn what they prioritize.  Learn their concerns.  I've met landlords that are burned out managing tenants with no interest of using a PM, where less income to give the headache up makes a lot of sense to them. Some care about the dollars each month, while others care about the interest rate they get and others about the sales price. 

If they are a bit uncomfortable with seller financing, build the relationship and talk about the tax advantages if they can potentially defer their gains and spread them out.

If they are focused on price and not interest rate - give them their price at a low enough rate to meet your cash flow targets.  

If they are focused on interest rate, adjust the price/terms to a point to hit your targets.

As far as an attorney, I just drafted what I wanted into a contract.  They had their attorney after the contract was signed, draw up the actual promissory note to match the contract wording.

Part of real estate investing is getting comfortable with some level of unknown. Every piece of real estate is different and you'll always be learning. Start with your goals and strengths and use that to pick a strategy...whether BRRRR, house hack, etc. I like to also look at the worst case scenario. In the long run, real estate is generally going to be a good investment, so just make sure the first deal is not going to undo you financially by ensuring to look at the worst case scenarios. Here's an example...

Lets say you're buying a SF or duplex to rent long term.  

What happens if your wrong on your rents?  Do you have a way to still cover the mortgage?  On my first one, I knew I could cover 100% vacancy from my work income if absolutely necessary, so I didn't have to worry.  I also budget a property manager, but could manage on my own if necessary.

What happens if the ARV is wrong? If you're estimating you will have 30% equity when your done remodeling, you can be off 30% and still be okay. Do you think you're within 30% of the ARV? If so, you should still break even, worst case.

What if your repair estimates are wrong?  Can you go over on nights and weekends yourself and lay flooring or paint to reduce your remodel costs?  Do you have a backup plan there?

If you have a backup strategy for each of these scenarios, then you're probably going to do just fine.  I read books and listened to podcasts (and still do), but I reached a point of saturation where I knew I needed to move forward.  Realize you'll never have every answer to every question.

You can put down due diligence money in NC (a check to the seller if they sign the contract, that is non-refundable).  That tends to show you're serious.  I also always include a letter from the lender showing you approved.  Lastly, if you can discern the sellers situation, I often advise to write a letter with a picture of your family letting them know why you want to own their home and appeal to the emotional side of the equation.

If you are getting a traditional loan, they will typically lend based on the lesser of LTV and LTC (loan-to-cost) until a seasoning period is complete (typically 6 months of ownership). If you plan to live there, we see a lot of owner-occupant traditional loans with 3-5% down. There are some loans like USDA that are 0% down, but its typically regardless of whether you have a lot of equity in the deal or not.

You can always refinance after the seasoning period and take out 80-85% of the home value, just be sure you don't take out so much that the property is no longer a "good" deal.  Make sure you still achieve your cash flow and equity targets.

Great question, should be an interesting thread. Personally, I have 2 kids. We started with a live-in flip of sorts before kids, but didn't finish until after the first one. I remember having no kitchen, a microwave/fridge/coffee pot and that was it for a couple months with a newborn. Once we started getting rentals, our date night without kids consisted of going to REIA meetings most of the time.

I use my personal name if I'm using a traditional loan and my LLC if not. My understanding (not an attorney) is that the LLC gives you some liability protection, but unless you completely keep your finances separated from personal, that they can "pierce the corporate veil" anyway. Many will deed it into the LLC after getting a traditional loan, but with ultra-low interest rates, I'm not taking a chance on the due on sale clause, personally.

Its odd your lender advised you to keep it in the LLC...I suspect they aren't a traditional lender, but commercial? If you want the best terms and can qualify for traditional, I would absolutely go that route. Get an umbrella policy and take advantage of the rates and terms.

Billy, you have experience that will definitely be an asset as you start investing.  I would advise you read the E-Myth, as I suspect working in apartments as an operator vs as an investor are different and it will help you from the mindset perspective.

I would also read some of the BP books and the podcast to start learning the different strategies out there.  Determine your goals.  Why do you want to invest? Is it because you want some passive income now or long term wealth building?  That may help you align with a strategy.  You don't have to try and buy a large building.  You could start with a single family or duplex/triplex in your area.  Also, consider house-hacking a small multifamily as a way to get started.  

I primarily own small multifamily. The pro's are it is easier to find cash flowing deals vs SFH (at least in my area). It is also great when you have more than one person paying rent. You can remodel one unit at a time and still have some income. The disadvantage is appreciation - mine have done very well actually, but in general I would say SFH are always going to be in high demand. The other is exit strategy. When the market is good and investors are buying, you can sell a MF but your buyers are typically only investors. SFH's have a larger buyer pool which in my opinion makes them more stable if you ever need to sell.

If its your first deal, I wouldn't shy from either based on any of my comments above.  I would say if you plan to build a large portfolio, I'd want a mixture to ensure I'm well diversified.