All Forum Posts by: Shawn S.

Hello fellow BP members!

The inventory of the market I am looking to invest in is pretty low. As a result, there is a great deal of cash buyers which makes it difficult for me to be competitive. This is one of the reasons why I am considering partnering with someone that has enough capital to buy properties with cash.

What are the different ways to pursue deals with a partner that has capital? For example, if I am looking to purchase buy and hold SFRs and/or MFRs, how could my potential partner and I structure the acquisition of the deals? Two potential ways I imagine are setting them up as a private money loans or doing owner financing.

Any ideas? Looking forward to hear from any BP members that have worked with partners.

Thanks in advance!

- Shawn

Hi @Ethan Berk,

First off, i just want to say kudos to you for getting after it the way you are at the age of 18! Since you already have this mindset at such a young age you are well on your way to becoming a millionaire!

Regarding your FHA multifamily house hacking idea, I too am interested in using this strategy to start off. I think that your concerns about not having equity in the property after a year are valid. Banking solely on appreciation can be a gamble, unless you have strong data that suggests that a particular market will appreciate. This is one of the reasons why I am interested in using the FHA/203k loan.

With this loan you can roll costs for renovations into your loan so that a property can be repaired to meet the FHA standards -- allowing a buyer to use a low interest, government-backed loan on a property that would otherwise not qualify for traditional loans. Another reason why I like this strategy is because you can buy low and force equity by adding value to the property, which ultimately negates the issue of banking on appreciation only. Additionally, the equity you gain from the added value can be accessed through the cash out refinance after that first year. You can then use that equity towards the down payment for your next purchase.

This strategy resembles the BRRRR strategy, the main difference is that you are living in the property for the first year.

But, as @Peter M. mentioned, you should keep in mind the recent change the FHFA made on the sale of second mortgages on the secondary market. @Dave Meyer wrote a great article that goes over this in detail.

Hope this was helpful! Good luck!

- Shawn

@Bonnie Low, thanks for your response! That’s a good idea and something I haven’t done yet — going to local banks to see how they feel about wholesale deals. I might try that! Thanks again!

Hello BP wholesale experts!

I am pretty new to real estate investing and was wondering if wholesalers typically only sell to buyers who have cash or "fast" money like hard money? Can a buyer use traditional financing when doing a wholesale deal?

Thanks in advance!

- Shawn

Thanks, @Damon Cameron Jr. That is a new one for me, so I will check that book out for sure!

Thanks again!

Hello BP members!

Lately I have been working on improving my deal analysis skills, and in doing so I have realized that I have not been accounting for PMI in my calculations for scenarios where I would have a down payment less than 20%.

My question is as follows: how do I account for PMI in my analysis? Is it typically a set percentage of the mortgage payment?

Any clarification would be great!

Thanks!

- Shawn

Hey guys,

I am new to investing but was wondering when it would be recommended to start looking for a CPA?

Also, what should I look for in a CPA? Is it required that they are "investor-friendly"? My uncle is a CPA, but I am not sure if he is knowledgeable on the different aspects that pertain to real estate investors.

Any advice would greatly appreciated!

Thanks in advance!

- Shawn

Hello BP world!

I am a newbie investor looking to purchase my first investment property. A property just recently went up on the MLS that looked interesting so I did some number crunching to evaluate it as a buy and hold investment/house hack. Please note that this is my first time posting a deal on BP. Therefore, I will most likely leave out information, but I will do my best to provide it all. Feel free to ask questions! Also, to do my analysis I am using the SFH Rental Analysis Excel workbook that J Scott shared on his FilePlace.

Property info:

3/2 1,338 sqft
Asking price: $250,000
Block home built in 1956.

Features:

Has a newly resurfaced pool (2019) and a fireplace (currently capped). Wood and tile flooring. Has wood beam ceilings and finished wood plank ceilings in the kitchen. Master bedroom has bathroom with a large shower.

My concerns:

- Exposed AC ducting on the roof (not in attic) going from what looks like original home structure to additions.
- Structure on adjacent property is uncomfortably close to structure on this property (about 6 ft separation on Google Earth).
- Home sewage uses a septic tank (not sure how much of an issue this is, but I have heard nightmares).
- This is the 5th time this property has been listed for sale in 2021. This seems high to me. The asking price has not changed. The agent remarks on MLS state that the "home is BOM due to bad appraisal; inspections done and no lender required repairs."

My Analysis:

Costs:

Purchase price: $250,000

Improvements: $5,000 (place seems to be in great condition, added this to be conservative)

Closing costs: $15,000 (assuming 6% of purchase price)

Financing:

Down payment: $8,750 (assuming 3.5% down FHA lown)

Interest: 4% (is this conservative enough?)

Mortgage: 30-yr fixed rate

Revenue:

Monthly rent: $1,800 (using rentometer and assuming property is a rental, even though I would most likely house hack it first)

Vacancy rate: 8%

Expenses:

Property taxes: $2,400/yr (rounded Zillow's $196/mo to $200/mo*12 mo/yr)

Home insurance: $1,100/yr (rounding Zillow's $88/mo to $90/mo*12 then rounding that up to the next $100)

Maintenance/repairs: $1,300/yr (assuming 6% of monthly rent and rounding to nearest $100)

Advertising: $150/yr (default value in J. Scott's SFH Rental Analysis Excel workbook)

Administrative: $150/yr (default value in J. Scott's SFH Rental Analysis Excel workbook)

Variable cost property management: $1,980/yr (assuming 10% of monthly rental income)

CapEx: $1,300/mo (assuming 6% of monthly rent and rounding to nearest $100)

Cash flow and ROI (w/ property management):

Annual cash flow: -$2,401

Cash ROI: -8.35%

Total ROI: 6.43%

Cash flow and ROI (w/o property management):

Annual cash flow: -$421

Cash ROI: -1.46%

Total ROI: 13.31%

After actually typing this post and looking at the numbers, this deal now does not make financial sense. However, I still welcome any feedback on my assumptions.

Thanks in advance!

Note the exposed AC ducts on the roof.Note the super close proximity of the neighbor's house.Close proximity to neighbor's house.Across the street from the river and near nicer and larger homes.

- Shawn

@Jonathan Greene,

Awesome stuff here! Both of these seem to have great potential in being effective strategies in appealing to the seller.

Your response to my first question makes a lot of sense. Showing that you are able to afford your offer value, and potentially above, lets the seller know that you are serious.

I am now a fan of the investor one-sheet and will add it to my toolbox. Now I just need to find some examples to go off of. Let me know if you have any!

Thanks, Jonathan!

- Shawn

Thanks, @Henry Clark for being patient and taking the time to give me this advice. I really like everything you are saying here. It is a reminder that I still have a lot of work to do, but is also encouraging and exciting because I love the process of learning new things. I am an engineer, so I am analytical and am a huge proponent for having systems and SOPs in place to streamline processes and create a reproducible product.

This "one-sheet" concept is new to me, but it makes a lot of sense to have something like that so that your criteria is set and specific.

Regarding deal analysis, I have been using J Scott's SFH Rental Analysis spreadsheet to practice analyzing deals. However, I am still learning how to hone in on accurate values for things like vacancy rate, CapEx, insurance, and other expenses, so I have yet to perfect my process.

Again, these are all great tips and reminders. I have added a few things to my "Real Estate To-Do" list, so thanks or that!

- Shawn