All Forum Posts by: Salvatore Lentini

@David A Lisowski - what's the best way?  All 3!  Seriously, if you want to grow a portfolio you need to use all available financing resources.  If you rely on any one source you are going to limit your growth.  If you rely solely on your own savings, you will quickly deplete it and will only be able to buy 1 property every few years.  If you rely solely on hard money or high interest private money, you will have a hard time cash flowing.  If you rely solely on money partners (money for equity) you will have a hard time building your net worth.  So you need to use what's right for the specific deal and sometimes a combination of different sources.

@Veronika Burnette - it depends on your area. Is a rental license required? You should talk to your insurance agent to see what type of coverage you should have. You don't have to form an LLC. There is fierce debate over this. I know an accountant that is very conservative and he does not have LLCs for his numerous properties. He just makes sure he is adequately insured on each and then also has a large umbrella policy. LLCs provide protection but along with that can be higher rates. But it's also easier/clearer to expense your rentals through an LLC (separate bank accounts, credit card). If you're only doing this ONE property right now it's not a huge decision. If you plan on owning more, you might as well set up an LLC now.

@Julian Broyles - if you are not getting bank financing then you don't HAVE TO get an appraisal, but I would.  Also be sure to get an inspection and a Pase 1 environmental.  Doing those 3 things will cost you money but could save you a lot of money down the road.  They will also confirm if you are making the right choice.

@Rebecca Bailey - I had a real estate attorney provide one.  Yes, it cost money but I wanted to make sure I was adequately protected.  There are ones for free online that people use.  Or you can use a legal online services company for boiler plate agreements.  The big thing you want to make sure is in there is an assignment clause.  That means YOU are agreeing to buy it OR someone you assign it to will buy it.  There is no set time.  Every deal is different.  But keep in mind, if you're getting a property under contract for a cash purchase, it's usually going to be from a seller that is highly motivated and probably under a time crunch.  The timeline is a negotiation.

@Nicki Shelton - the 2% rule is just a rule of thumb.  Think of it as something you can use to weed out potential investment very quickly.  But, it is just that.... a rule of thumb.  There's hidden gold in some deals that can make a property worth more than it appears at first.  Maybe current rents are too low.  Maybe it's a 3 unit multi family with one of the 3 bedroom units could easily split into two 1 bedroom units.  I did this on an apartment building I bought.  The building was in rough shape.  There was a 3BR getting $900 a month rent.  I converted it into two 1BR units.  Those units now get $750 and $850 for a total of $1600/month.  Maybe there's a detached 2 car garage that hasn't been used in years because the doors are broken and it's filled with garbage.  Fix the doors, hire a junk hauler, put a wall down the middle and now you can get $100/month per garage.  Or, maybe like a previous response of mine, it's in a location where new development is happening.  It may not quite reach your 2% threshold but in the next few years it will be well above that.

To figure out purchase price you just have to work backwards.  Or forwards and backwards at the same time.  How much are rents?  Subtract out repairs, vacancy, capex, taxes, insurance etc.  How much do you want to cash flow per month?  Subtract that too.  What's left?  That amount is what you can afford for your monthly mortgage.  Now you can figure out the max purchase price based on the financing available to you.

@Frank Lin - Thanks for your question.  The out of state question is popular!  See my answers to prior out of state questions.  You can message me with another specific question.

@Zack Francis - You can see my responses to the out of state question a few tims on here.  Regarding SF vs MF.  They both have their pros and cons.  I talk about them in my online course.  There is no ONE right way.  I know successful investors that only buy SF and I know others that only buy MF.  I started with SF and then smaller MF, bigger MF, commercial, office and land development.  I wouldn't say any one of those areas is "the right way" to invest.  Personally I like to be diversified and I enjoy learning about new asset classes to invest in.  You need to figure out what works for your lifestyle (how much time you have, how much money you have, how many rental units/doors do you ultimately want and over what period of time?).  These are all specific to you and your fiance so only you can answer them.

@Matt Caresco - it seems like this is a common theme.  Where to buy to cash flow better.  You can see some of my other responses to similar questions.  Prices are high in general throughout the country so it makes the higher priced areas even more painful!

@John Townsend - yes, I've heard about the boom in Boise.  Do you think it's sustainable and/or justified?  If you do, can you find deals on the fringes?  Which direction is development heading?  Sit in on or read the planning commission hearings in your city/town.  Find out where new developments, new commercial areas, new parks, running and biking trails, corporations etc are going and start buying near there.  Sometimes you need buy in the spots that may not look the best now (so you get a deal) but you know in the next 5 years will be worth more and become more desirable.  I bought 2 properties on a block in 2017 that at the time was in a neighborhood with mixed residential and industrial/old warehouses.  I knew about plans (going through borough approval) to knock down a bunch of warehouses and turn it into a luxury townhouse subdivision.  When I first bought the properties they seemed like pretty boring, average deals.  Now, 2021... 1/2 the townhouses are done and sold and the other half are framed out.  The block looks A LOT different now and the value of my properties have doubled just because they are next door.  So see if you can look on the fringes of Boise or next towns over.

@Andrea D. - it depends on what you can offer.  Keep in mind, successful investors are busy or if they're not busy it's because they invest and manage their lifestyle in a way so as to specifically NOT be busy.  When you are looking for someone to shadow, keep that in mind.  How will you interfere with their current lifestyle and business routines?  Think of what you can offer.  I see you're a CPA, maybe you can use those skills in a way to help an investor as a barter arrangement?  It doesn't necessarily mean doing their taxes but maybe they've been looking to get their business set up in QuickBooks or Freshbooks or something that they have little knowledge of.  Or maybe they've been wanting to invest in Opportunity Zones, or take advantage of a 1031 Exchange but are not well versed... you could offer to research the topic for them.  Become an tax expert in something real estate related and you probably won't have a problem finding your share of investors willing to partner with you on a project, or deals to invest in.  My accountant invested in several projects with me (as did my Realtor, lawyer, contractor, bank teller etc).  Immerse yourself in real estate from a CPA standpoint and figure out what you can offer in return for shadowing.  For now though, message me a specific question and I'm happy to answer.