All Forum Posts by: Sam Smith

@Evan Tuuk, As far as your partner's concern, I would say interest-only is actually the more conservative option for an investor. It gives you greater cash flows up front, which mean you will be able to more easily handle vacancies, damages, or anything else that might happen. Basically, it's a sort of safety net. Then, after ten years you will start to pay principle as well, but by that time you should be able to raise rents significantly, which means you should still be cash-flowing. 

Have your partner run the numbers in a bunch of different situations. It sounds like they are getting spooked by something they're not familiar with, when the thing they are not familiar with could actually be the best thing for you both.

But, the most important thing is that you are both completely on board with whatever deal you do. Relationships are more important than money.

@Patrick Thomas Dickinson

Based on what you described, I would look at joining a syndicate (or two) as a limited partner in an apartment complex (or two). Obviously you'd want to run the numbers and do your due diligence, but if you're looking for the lowest possible maintenance with a solid return, then I think that would be of interest to you.

@Mystica Maxie

Great question! If the tenants are paying I'd rather buy the property with tenants already included. In fact, some people make good money in real estate by buying a property, putting a tenant in there, and then selling the property as a "turn-key" investment. That's because if you buy a property with no tenant, you can't be exactly sure what kind of rent tenants will pay and how long it might remain vacant. If a tenant is included, then crunching the numbers is much more straightforward.

But on your question about tri- and quadplexes, those are kind of hard to come by as well. I don't know if it's just "market cycles" or what, but since house-hacking has become so popular the numbers don't make much sense in the multifamily units on the MLS.

HOWEVER, there are other options that I'm actually considering for myself (so if you find good intel on this please let me know). And that is, finding a property with a detached garage or a basement with a separate entrance/exit and converting that space into an additional dwelling unit (called an ADU) which I can either rent out short term on airbnb/vrbo or longer term. So, you're basically making your own duplex. The sticking point for me though is the licensing and permitting. When I lived in Austin they basically made it as hard as possible to make this happen. Other cities are apparently much more lenient.

Hope I haven't discouraged you at all! I just want to be upfront with what I've seen. After all, a duplex, triplex, or quadplex could be just around the corner from you and it could be a great deal. You never know! 

@Patrick Thomas Dickinson, do you mind if I ask what your goal is? Do you want to own as many doors as possible in one deal, or spread your risk over a couple of properties over the next few months?

By being open with your lender about evaluating your options, they should be able to be candid with you about the options they can offer you. Keep in mind, you aren't asking them for anything. You are partners. They want you to succeed, and successful partners communicate openly. At least, that's how I frame it in my mind.

@Christopher Abele, if your parents are stubborn like mine are, I'd say let them try the sign in front first, but make sure they are firm on their price. Explain to them that a lot of people will take fsbo to mean "I can talk them down and get a good deal". 

As much as I hate to admit it, listing with a realtor does net you more money on average, so let them try with the sign, and if/when it doesn't work out for the price they want, ask them to try listing with a realtor.

Also, putting the listing on zillow is not too difficult. No reason to put it on the MLS unless they want to chop off that 3% for the buyer's side, and at that point they should just get their own realtor to handle everything for them.

Good Luck!

@Evan Tuuk, as @Brenden Mitchum alluded to, it would be helpful to know what the mortgage converts to if you don't pay off the principal in the first ten years. Does the entire value of the duplexes come due all at once? I wouldn't imagine it would.

My friend just got a 10-year interest-only second mortgage, which converts to a 15-year mortgage if he doesn't pay off the note in the first 10 years. Like Brenden said, this is a steal for a number of reasons. First of all, the interest is what you get to deduct off your taxes. Plus, the cash flow will allow you to profit off of your investment. Worst comes to worst, you can sell the property after 10 years and cash in on all the upgrades you made and keep all that cash flow you had.

One tip I have is to consider an attorney from a small town in Texas. They'll charge you way less and the state law is the same. It's free to call around and ask what they would charge you. No reason to pay Dallas prices when an attorney in Bowie can do just as good of a job.

Hey @Shane Welch,

Sorry you're running into this issue. Did it come up when you originally bought the property? And what method did you use to buy it originally?

@David Pearson

Did the lender say why they wanted to do them as 5 individual properties, each with their own mortgage? Is it because their commission would be higher?

Have you asked some local banks about doing a portfolio loan? That might get you a better interest rate since the value of the total package would be high. For a deal like this, I imagine some local banks would make some competitive bids. 

Good luck with it!

@Ryan McLaughlin, exceptional! Love that before and after pic.

Did you have any trouble with zoning or permits? How much do these cost and what is the general process?

Congrats!