All Forum Posts by: Ryan Wydler

@Eddie Gonnella yeah I’m always eager to meet other BP people in the area. You’re welcome to come by anytime. I’d love to check out your project too.

I go to the RING meeting pretty consistently, really good information and networking and almost no ‘selling’. They meet on the second Tuesday of every month down at great American ranch in Midlothian. My buddy who does this full time goes to a bunch of other ones in the area.

Anyways, looks great so far man. Keep putting out content!

- Ryan

Awesome man, Keep documenting. I like the budget break down. I am working on my first BRRRR in the Fan right now too. Look forward to seeing yours play out. Do you attend in meet ups in Richmond?

I picked up this #BRRRR/househack project in THE FAN in Richmond, Va it was being advertised on Craigslist for sale by owner. It has a BUNCH of deferred maintenance and the previous owner smoked inside and had a cat but its a Solid piece of Real Estate in a great location. I'm posting weekly 90 second videos on my Facebook and Instragram to document the entire process, but I thought I'd share the numbers and 'investment strategy' here on BP with my fellow investor nerds.

First of all, its a 3 bed 2 bath 1,260 sq ft Row home (The far end with the black roof) with off street parking.

I'm using that sweet sweet owner occupied 5% down, 3.85% fixed 30 year interest rate to purchase the home for $200,000 (She was asking $289,000, but she was realistic in knowing how much updating it needs). So because I also plan to Househack the property (live in the downstairs bedroom and rent out the 2 upstairs bedrooms), I was able to purchase a BRRRR with bank financing on the front end (I know, I will pay closing costs twice) and have a kind of BRRRR on training wheels because I have a fixed rate payment so even if I mess up the rehab, there is no balloon note with a private lender that is coming due in 5 months. I just divert my high savings rate into paying down the 0% (introductory rate) credit cards I used for the rehab.

I really recommend if someone is looking to start with their first deal and its an option, try to combine 2 or more of the multiple strategies they talk about on the podcast and at BP: Househacking, BRRRR, live in flip, partnership, syndicate, wholesale, 1031 exchange. I think that's really where the magic happens when you can combine multiple strategies. Ok, end tangent. Back to the numbers.

5% down payment means only $10,000 down and call it another $10,000 for closing costs.

Upfront cash - $20,000 [For this I just pumped up my savings rate when I discovered BP and FI back in late 2017, and i took a loan from my 401k at work]

Projected rehab budget - $50,000 (Low end) - $ 70,000 (high end) [This I'm putting all on Credit Cards that I've opened with 12 months of 0% interest rate, and hopefully I refinance in 6-8 months]

Estimated ARV - $350,000 (I think I am being conservative..)

Estimated Refinance - (0.75*350,000) = $262,500

So I don't know if it will be a "Perfect BRRRR" but I'm learning so much and we are still so early in the process.

Projected Rent while HH – $550 (bed 1) + $750 (bed 2 + private bath) = $1,250

So I’m only out of pocket a couple hundred if you include utilities.

Estimated new PITI - $1,650

Estimated Rent after HH - $1,250 (upstairs beds) + $600 = $1,850

So Not a huge spread but since this is a BRRRR and I'm doing a bunch of capital improvements on the front end, and I think I'm being pretty conservative on the rent estimates, and this is a fantastic location: I'm happy to hold it through another cycle.

Love to meet and network with the local BP community, I attend the RING meeting here in Richmond So hopefully I’ll meet some of you all there or feel free to reach out with questions.

Go Get Some! *JOCKO voice

Peace

@Scott Trench, I would be really interested to get your input on this. 

I've been reading the 4-hour work week and it talks about building a 'Muse', a system that passively generates income for you (usually in the form of a product that can be easily/quickly manufactured).

It got me thinking a lot about starting some kind of 'side hustle' as a lot of people in the FIRE community might call it, to generate some additional income outside of my W2.

Then I started to think about what a business really is, it's an entity just like your neighbor Joe. Joe has a Balance Sheet that Lists his Assets, Liabilities, Income, and Expenses. A business also has a balance sheet.

Simultaneously I was reading about the business model of insurance companies (not sure why), from what I understand, An insurance company will charge monthly premiums from customers (using some mathematical model involving risk quantification to determine a premium) and make payouts to legitimate claims, Ideally there is a positive delta between the total premiums charged and the sum of all the claims paid out, That is the company’s profit. HOWEVER, these companies also invest the premiums in safe short-term assets like bonds in the meantime (between payouts) to make additional income.

Isn't this a business model that all businesses should adopt? Doesn't it make good financial sense for a Business to have multiple streams of income just as it does for your neighbor Joe? If Joe was to rely 100% on his W2 income to survive, most of us here in the BP community at least would consider that Risky. Joe should invest in real estate to have some passive income in addition to his W2, but so should Joe's Custom Cowboy hat business, right??

Let's say ‘The Four-Hour work week' has got me FIRED up, I'm ready to build my Muse and get some passive income. Say I'm starting a Lunch box company targeting Young professionals that travel a lot. Does it make sense for 'LunchBox LLC' to have two departments, one that sells lunchboxes another that invests company profits into Office Space, Commercial Space, or even income producing Residential Real Estate?

I'm curious what people on BP and in my local area (Richmond, VA) think? Isn't this what big companies like Berkshire Hathaway do? Does BP own the building it's HQ is located at? What reason would a business owner have not to own its own Office building? Should every business owner adopt the McDonald's model? Why or why not?

@Patrick Merone Petersburg looks like a great area for the BRRRR Strategy. I have been analyzing properties on the edge close to Fort Lee. Only visited a handful of times but I know @Dillon Dull has been really successful with the BRRRR strategy in Petersburg

Thank you everyone for your reply,

@Greg Dickerson I have been qualified for financing with an FHA Loan on the property since its currently a four unit and I am moving into one of the units during the construction phase. The idea (at least as far as I understand it) is that once all the necessary permitting and construction is done the property will be considered a 5 unit (anything greater than four units is considered Commercial??) And since I now theoretically have a 5 unit property (assuming of course city approval of the rehab/ construction plan) I can control the value of the property by increasing income instead of relying on comps.. I guess I am assuming an appraiser will look at it very black and white:

4 units or less - residential - value based on comps

5 units or more - commercial - value based on income

It sounds like that may not be the case? and with smaller multifamily the appraisal might be made of a kind of blend?

@Stephen Glover Great point, I need to do some research with the city. The property is zoned R-6 and in the Citizens Guide to Residential Zoning Districts & Regulations on the Richmond City website R-6 properties allow for "One dwelling unit located in an accessory building, containing two or more stories (lawfully existing prior to the date of this section), with conditions" ... which to your point sounds like accessory units are only "grandfathered in" .. still I will reach out to the planning department for more information. I guess my post/ question is more about the appraisal and cap rates for multifamily properties. If Theoretically I were to legally add another unit to a 4 unit property would it be considered a Commercial space? would I then be able to find an appraiser & bank to refinance the property solely based on the income??

Again Thanks everyone for the input, I will update as the deal plays out.

In the Museum District of Richmond Va I've found a multifamily (4 units) property on a good size lot for that area that has a back ally access with a good size back yard and no garage like most of the neighbors have.

Please some one well versed in Commercial properties and multifamily tell me if I'm on the right track with this line of thinking..

My approach is to buy the property using A conventional residential financing and build a garage with an upstairs apartment, making the grand total number of units on the property a fabulous Five.. which is infinitely more in the eyes of Lenders because a 5 unit property is considered a Commercial Space. Thus the income of the property determines the value. Here's what I think I can do

Purchase Price - $675,000

Cost to build 5th unit $70,000

projected:

average income of each unit - $1,100

gross monthly income - $5,500

annual gross income - $66,000

NOI (assuming 50% Rule) - $33,000

At a 4.0% Cap I can presumably refinance out all of the "Original Money"and into a Commercial Loan... Right?

What am I missing on this analysis? Is Multifamily really that simple and awesome? That I can control the value of the asset solely based on the income it provides and the Cap Rate? But that leads to some questions on Cap Rate..

Who "sets" the cap rate for an area?? What Cap rates are expected in that area? I know the formula for a Cap rate and I understand how they are used to value and compare multifamily assets but how can I expect a Cap rate to change over time? It must be specific to markets but how does it change with economic climate?

Hey BP,

I am curious if anyone is using the airbnb model in my local area, Richmond, Va (Lakeside, West End)? What obstacles did or do you face with the county doing business as a short term rental? Have you been able to create systems to scale? 

What is it like managing a portfolio of short term rentals? 

What is everyone's thoughts on a property near a Military Air Station? If you are from the Va beach area like I am, you are almost certainly familiar with the infamous jet noise which is not always pleasant. I remember as a kid growing up, our house was not in the immediate vicinity of the base but you still often heard jet noise and I didn't love it. How much of a deterrent would something like this be for an otherwise good looking deal on paper? 

Any thoughts would be appreciated!

- Ryan