All Forum Posts by: Ryan Webster

@Adrian Fajardo

The problem is in the questions. If your goal financial freedom. What is the the amount of monthy cashflow that will buy your freedom. It is $2000, $5000, $10,000. Define your cash flow goal.

Next the path to get there.....

Please note capital does not create capital. Investing capital can create cash flow, and build net worth. You can leverage net worth for more capital. Capital is the least important piece of investing in real estate. Learn how to identify a good investment, a good market, create and exicute a good business plan, and you wont need capital.

How much cash flow is your 4 plex producing, what amount of equity is it building, what percentage of your cashflow goal does this property generate. How many similar properties would you have to buy to meet your goal.

Are there enough 4 places in your market you could acquire to meet your goal?

Most importantly how much of your time does it take to manage these properties. Is there enough cash flow to hire a professional property manager.

Do you know anyone in multifamily you could partner with? What would you bring to this partnership? What would they bring? Are you bringing things to the table the other partner needs. If you can form a productive partnership. Make a plan to meet your goals. How many units will you need? How much cashflow will each unit need to produce?

What market will you invest in and why?

@Guil Rocha

Yes there is a way to insure the note. But its very expensive, very complication, and only suitable for very specific applications. I've used this method on very large and very distressed deals with great upside potential but significant risk. We used bond insurance to offset a percentage of the risk. You'll need a very good securties lawyer. Essentially You'll put the investment property in a corporation structured in such a way that you can issue corporate bonds. You'll then need a guarantor, high net worth, or an amazing business plan to convince a financial firm to provide bond insurance guaranteeing the bonds. If the deal is good enough to cover the extra cost and meet the underwriting requirements for the firm backing the bonds, that alone will prove you don't need the insurance.

@M. Anthony Contrascere

The most important part is how you define comp. Make sure properties are similar in location, class, size,# of units, unit mix, and amenities. You broker can pull these for you but make sure its your broker and not the sellers broker. I frequently use apartments.com for my own multifamily under writting. I search by zip code then filter by amenities, and review each property individually for the remaining qualifications. If your looking at sfh rentals zillow work well. But the easiest way is to have your broker pull them so long as they understand your requirements.

@Logan Jamieson

Yes start with your goals.

If you goal is just to acquire massive portfolio you need to focus on a finding, and building a team. Chase good deals with the largest number of units you get with your capital an resources. Make business plans that allow you to force appreciation and pull out equity to buy the next property.

Also if you have $300,000 in liquidity you should be able to acquire a loan for $900,000. I'm assume the $350,000 is home equity loan on your personal residence this should secure an additional $1,050,000 in leverage. (Make sure you account for principal and interest for the $350,000 in your underwriting.) This will give you a great place to start from a capital perspective. Most of us started with much less or used opm. But make sure you do your home work. That amount of capital means nothing if you dont have a good deal. It is very easy to lose money in real estate. So double, and triple check your under writting, don't be lazy with your due diligence. Make sure you have your lawyer write your PSA. And most importantly remember you can buy a good deal and lose a ton of money if you and your team can't manage the property and exicute your business plan.

@JaMario Price

No problem

Just keep at it, it's a marathon not a sprint.

Better Knowledge = better investment

Ignorance = bad investment

Also keep learning, always ask for help, and never assume anything you dont have to and you get were your going.

@Delbert Standifer

Thats a very doable goal.

Who will manage these properties?

@JaMario Price

I like the ambition I agree buy and hold is the superior strategy. I summarize the under writing and business plan but I reccomend you read some books on the subject to gain a more in depth understanding which will go a long way in helping you build your portfolio in the future.

I start my business plans with market data.

You need to find out the following about your market/ sub market

Averge rents

Are rents trending up or down

Is it cheaper to rent or own a home

What is the median income in your market

What is the average occupancy

What is average appreciation in your market

What are the laws that may apply to your rental investment in your area ie rent control, optional property tax increases.

Once you know these thing you can get a good idea as to the supply and demand of rentals in you market and start to make educated assumptions about how yours will perform in the future.

Next under writting

First understand real estate investment is primarily to things rolled into the same investment firstly an asset( the physical building and the land it sits on) and the business in the building (the tenent/s, cashflow, expenses, and managment.)

Not all business make money, and not all investment are winners it's you job to make your business/investment make money. No one will do this for you, in fact almost everything is working hard to take money out of your pocket. You have income and expenses as long as income is greater than expenses you have a good investment this part is common sense . Where most people lose there way is not understanding all of the expenses in running your business. Typically the larger expenses in real estate are taxes, insurance, debt, maintenance, and vacancy. Yes you need to account for the property being vacant some of the time. Income is usually just rent sometimes pet rent there are some other minor contributions you'll learn about later.

Make a list of expenses every possible one you and think of and then balance that against your income and see if you have a positive or negative number. Also start reading every book you can on real estate investing

@JaMario Price

What is you strategy do you plan to rent or flip?

If renting will it cash flow after paying taxes, insurance, principal and interest, and accounting for some vacancy and reserves.

If flipping can you pay realitor fees, capital gains tax, rehab and carrying cost and still clear enough cash to make it worth the headache. You need to gather information and run the numbers first.

As far as negotiating deferred payment on owner financing this can be done easily if the owner has confidence in you and your business plan. I usually present the argument " you want me to succeed right? You want me to rehab this property and make payments to you and or get a loan to buy it out right. Allow me to defer payments until I can make the property generate cashflow or increase its value. Which will insure my success and make sure you get your money."

It seems to me you have the cart before the horse. I wouldn't worry about financing yet. It is very easy to get money for a good deal. In my experience people will start to line up to give you money if you can consistently find good deals.

Start with your underwriting and business plan make sure you can make money on this deal then worry about how to negotiate financing.

@Said Manar

You'd be better off investing in a syndication deal. Because of the long distance and lack of capital it will be hard to realize any meaningful roi. In a syndicated deal you'll purchase a share in a large multimillion dollar asset. And you wont have the headache of managing the investment. Typical we target at least a 15% irr and aim to double to triple investor capital through the term of the investment. Often times we are able to add value and refinance returning all investor capital while they still maintain their share in the deal.

@Jonathan Gunn

Talk to your banker they will direct you to the correct banking product/products. Depending on you living arrangements sometimes 203k loans work. In other cases bridge loans work or a combination of conventional and loc. There are many option. In order to determine what's best you need a business plan including but not limited to.

The purchase price

Renovation cost

Arv

Time horizon for completion of renovations

Time line to sell or hold property.

Contingency budget

Once you have your business plan take it to your banker and they will help you find the product that best suits your needs