All Forum Posts by: Robert Leonard

Hi everyone,

I am a relatively new real estate investor. I have completed one deal, and I am sort of in the middle of a second deal (house hack, kind of), but for both of these deals I didn't run the numbers as I should have. Both of these transactions took place before I discovered BP and before I really invested in my REI education. I was lucky on the first deal to have made a profit, and the second deal is looking like it will be profitable as well, but as I have learned, I need to run the numbers.

I am looking to scale my business and take my first steps into multifamily, but before I do that, I'd greatly appreciate assistance and opinions on the numbers I ran for a deal I recently found. It is a two unit multifamily property in an area that I am quite familiar with; it is only about 3-4 miles from my childhood home in the town that I lived in for 22 years. It's in a nice area and a good school district. My numbers seem to show it would earn about $400-$500 per month in cash flow. I would like to follow the BRRRR strategy on this deal, if I were to pursue it, and I need to fund this deal with private and/or hard money.

I would greatly appreciate any feedback you may have on these numbers, this property, this deal, funding it with hard money, etc. I'd like to see if I am heading in the right direction. Thanks for the help - I really appreciate it.

Robert

Congrats on this deal, @Axel Ragnarsson! Can you elaborate a bit more on "private money"? Was this outside investors, hard money, family investors? Did you buy the property in cash fully funded by private money? How did you handle closing costs when refinancing, were they rolled into the loan?

How do you approach the location of properties? Do you look for properties in "good" areas or are you not too concerned with it? I know the area of this property relatively well, actually, so I am interested to hear what made you what to invest in it. 

Robert Leonard

@Patrick Soukup very valuable information and advice - I greatly appreciate it. Thank you!

@Andrew B. Got it, that makes perfect sense. So, it is just something that has to be handled with reserves when the time comes. Thanks!

@Matt Crusinberry Thanks for the explanation. It sounds like its a problem that just has to be handled with reserves, whether it be personal funds or money set aside from previously collected rents.

Hi everyone, I am a relatively new RE investor. I have completed one deal (buy and hold turned into a fix and flip) and I am in the middle of my second deal (house hack turning into buy and hold). 

I have listened to many of the BP podcast episodes, read many articles, attended a few webinars with Brandon Turner, and I just bought Turner and Dorkin's new book (I have not read it yet though). However, one lingering question that I can't seem to find a concrete answer to is how to handle vacancy costs. 

I know when you are running the numbers on a deal you put an estimated % into vacancy costs, but how does this truly help in the event of a vacancy? For an easy numbers example, if you put 4% vacancy costs (this is the number Turner used in the last webinar I attended) into your formula when running the numbers, and the monthly rent is $1,000 and the mortgage itself is $400. That is only $40 per month set aside for vacancy costs; it would take 10 months to have enough set aside in a "vacancy reserve" to cover the costs of just the mortgage payment for ONE month. If this is your only property, there'd be no other rental income to cover these costs, so it would have to be paid out of pocket for the owner. 

Is this where having enough personal reserves come into play? Or how do investors handle this situation? One unit vacant at a cost to the owner of $400 per month is not a huge deal, but what if you own 7-10 units and maybe 3-4 are vacant for a few months? Now the owner is out of pocket $1,200-$1,600 per month... It starts to add up quickly. 

Any information/clarification you can provide is greatly appreciated!

Robert

@Colleen Prescott I read the same article and was a little ... confused? Surprised? Much of the information in the article was very interesting and informative, but I find it somewhat conflicting that BP has articles like that saying NOT to invest out of state, then there is David Greene on the BP podcast (and his book) swearing my investing in out of state...

It is certainly great to have both perspectives, allowing investors to make the most informed decisions they can, it was just a bit surprising given what I've listened to from David Greene. 

@Chris Perrin I am also in a similar boat; I did not just move to NH, but I am relatively new to RE investing in the NH area and would also like to attend RE events and network. I'd greatly appreciate you sharing any information you come across about RE events in the NH area and I will do the same.

Robert

@Aditya Maini I agree with @Chace Fraser. 

As far as this investment goes, for me this was a happy medium between acquiring an investment property I wanted and something my significant other would be happy with for our family and newborn. It is likely not the best investment property or deal I could have found, but it was a middle-ground for us and will allow me to begin adding to my real estate portfolio. I expect to be able to hold on to this property for the foreseeable future and eventually cash flow it once we move. 

@Aditya Maini It is a tough time to find good deals with prices quite elevated, but it can certainly be done. Be sure to do your due diligence and run the numbers. Best of luck!