All Forum Posts by: Drago Stanimirovic

Hi Zahcary,

Congrats on planning to buy your first investment property! When it comes to hard money lenders and rehab costs, it's common for lenders to require you to pay a portion of the rehab costs upfront. Typically, lenders fund around 80-90% of the purchase price and rehab costs, with you covering the rest.

Finding a lender who will pay 100% of the rehab costs up front is rare. Most hard money loans work on a draw system, where you pay for part of the rehab initially, and the lender reimburses you in stages as work is completed. They do this to limit risk.

However, some lenders may be more flexible if the deal is particularly strong, and your experience or financials are solid. Still, expecting a full 100% rehab payment upfront is less likely without significant collateral or a great track record.

If you need help finding hard money lenders or structuring the financing, I’d be happy to assist! Regards, Drago

Nice example here Travis, but calling mid-term rental arbitrage “terrible” might be too broad. 

The $11k you spent on furnishings is high-many operators cut those costs, which can reduce your break-even period.

While 1.5x long-term rents is typical in places like Oregon and Texas, some niche markets (e.g., corporate housing, traveling nurses) do achieve the 2-2.5x multiple. It depends on targeting the right demand.

Owning offers appreciation, but arbitrage provides flexibility without long-term market exposure, which some investors prefer. It’s not about the model being flawed, it’s about finding the right fit. Best, Drago

I guess this is your first deal with this partner so based on the inputs i would suggest structuring the deal 50/50 to leverage both partners' strengths. The partner with good credit secures financing and handles financial management, while the rehab expert oversees renovation and project execution. Both contribute capital equally, and profits are split based on ownership. Adjust the split if one invests more or takes on greater responsibility. Ensure major decisions are made jointly.

This setup balances the partnership and fairly rewards both contributions. Let me know if you need help structuring financing or further details!

Regards,

Drago

Hi Lilly,

You're right to question those claims. Achieving 2-2.5x base rent in rental arbitrage is highly market-dependent and may work in tourist-heavy areas but is less realistic in stable markets like Houston. A 30%-50% premium over long-term rents is much more typical in cities like Houston.

Many hosts likely cherry-pick their best months to make profits sound bigger, often downplaying costs like furnishing, utilities, and management. Be cautious, those inflated numbers are often used to sell courses.

It's smart to base decisions on your market research. If you'd like help crunching numbers or exploring financing options, feel free to reach out!

Regards,

Drago

Hi Enrique,

Great question! When it comes to adding a 1/2 bathroom, even if it may not significantly increase your ARV (especially if you're already at the top of the market for the area), it can still provide value from a rental perspective. Here's why:

1. 1. Attractiveness to Renters:
   Renters often prioritize convenience, and having that extra half bath can make the property more appealing, especially for families or roommates. This can lead to faster leasing and fewer vacancies.
2. 2. Rental Value Increase:
   While exact rental increases can vary depending on the market, adding a 1/2 bath could allow you to charge a higher rent, possibly by $50-$100 per month or more, depending on tenant demand. It makes the property feel more spacious and functional, which could justify a higher rent compared to similar properties without the extra bathroom.
3. 3. Market Differentiation:
   Even if the ARV isn't impacted, it can set your property apart from others in the area. Competing properties might be capped at 1 bathroom, so the extra half bath could make yours stand out, potentially allowing you to maintain a higher rent over time.
4. 4. Long-term Investment Value:
   Over time, demand for properties with more amenities (like the extra half bath) could increase, which may help you achieve better returns, even if the immediate ARV bump is minimal.

Overall, it may not drastically change the ARV, but for rental purposes, it could enhance the property's desirability and boost cash flow. I'd recommend checking local rental comps with 1.5 baths to see the specific rent premium in your area.

Hope this helps, and best of luck with the rehab! 

Feel free to ask if you need further insights or financing help on future projects.

Best regards,

Drago

Hi Ryan,

It sounds like you're in a great position with your rental property, especially with both positive cash flow and significant appreciation over the years. When deciding whether to sell and reinvest in a higher cash-flowing market, you can use several tools and strategies to compare high appreciation markets versus high cash flow markets. Here’s a breakdown of what you can consider:

1. Return on Equity (ROE) Calculation:
One key metric to assess is your current Return on Equity. Given that your equity has doubled, it’s worth evaluating if your current property is underperforming based on the equity you’ve built.

Formula:
ROE = (Annual Cash Flow / Total Equity) x 100

If your ROE is relatively low, it might be more beneficial to sell the property and invest in a higher cash-flowing market.

2. Cash-on-Cash Return:
If you're considering a property in a different market, cash-on-cash return helps compare how much immediate return you're getting on your invested cash.

Formula:
Cash-on-Cash Return = (Annual Pre-Tax Cash Flow / Total Cash Invested) x 100

High cash-flow markets (typically found in secondary or tertiary markets) often have higher cash-on-cash returns but may offer lower appreciation over time.

3. Appreciation Potential:
Evaluate potential appreciation in different markets by studying:

• Historical Market Trends: Tools like Zillow, Redfin, or local MLS can give you historical price data. Look for cities with strong population growth, job creation, and infrastructure development.
• Cap Rate Compression: In appreciating markets, cap rates tend to compress over time, signaling strong property value increases. You can track cap rate trends on platforms like CoStar or LoopNet.

4. Market Analysis Tools:

• Mashvisor: Provides in-depth analysis of neighborhoods for both short-term and long-term rental properties, including cash flow estimates, cap rates, and appreciation potential.
• Roofstock: A marketplace for single-family rentals that allows you to compare cash flow and appreciation potential across various markets.
• Zillow’s Market Reports: These show market appreciation trends across different cities, helping you spot high-growth areas.

5. 1031 Exchange:
If you sell your current property and reinvest in a higher cash-flowing property, you may want to consider a 1031 exchange to defer capital gains taxes. This can maximize your investment potential when moving to a higher cash-flow market.

6. Comparing Markets:
High appreciation markets (like Los Angeles, San Francisco, etc.) tend to have lower cap rates and higher property prices, making them less cash-flow-friendly but better for long-term appreciation. High cash-flow markets (e.g., parts of the Midwest or Southeast) offer higher yields but lower appreciation.

A strategy could be to diversify: Sell your high-appreciation property in LA, then invest in a few smaller, higher cash-flow properties in secondary markets to balance both cash flow and growth.

If you'd like help analyzing financing options or structuring a 1031 exchange for a new property, I’d be happy to assist! 

Best regards,

Drago

Hi Dillon,

That's a great approach! Doing deal analysis before diving into your first investment is smart, it helps build your confidence and lets you understand what makes a deal profitable. Bigger Pockets is an excellent resource for learning and connecting with experienced investors.

Here’s a simple framework to analyze deals:

1. Set Clear Investment Goals: Decide if you're looking for cash flow, appreciation, or both. This will guide your deal criteria.
2. Run the Numbers: Focus on key metrics:
• Cash-on-Cash Return: Annual cash flow divided by the total cash invested.
• Cap Rate: Net operating income divided by the property price.
• Cash Flow: Rental income minus all expenses (mortgage, taxes, insurance, maintenance).
3. Market Research: Study the local market trends, job growth, and property appreciation to ensure long-term profitability.
4. Risk Assessment: Consider vacancy rates, potential repairs, and unexpected expenses.

Once you're comfortable analyzing a few deals, you’ll be in a great spot to pull the trigger on your first property.

If you need help with financing or want advice on what options might work for you, feel free to reach out. I'd be happy to assist!

Best Regards,

Drago

Hi Sonia,

It sounds like you're off to a solid start with good credit and a cash-flowing property in mind. Securing financing for a multi-family 12-unit property can be a bit different from single-family deals I think i can help you fund your 12-unit property with better terms. With your solid credit and the property’s positive cash flow, we can explore options like commercial lenders, portfolio loans, or even creative financing like seller financing or partnerships.

Let me know if you'd like assistance! Feel free to reach out.

Best, 

Drago

Hey Kaiden,

Congrats on starting your real estate journey! Jumping into a fourplex is a great way to gain firsthand investing experience while building credibility as an agent. Here's a breakdown of some key things to consider, particularly in a market like Gallatin County (which has been booming):

1. 5% Cash-on-Cash Return (COC)

While a 5% COC return is on the lower end for some investors, it's not bad for a first deal, especially in a high-demand area like Gallatin County. The return depends on your goals—if you're looking for long-term appreciation and you're confident in the future of the local market, this could be a solid investment. Montana has seen significant appreciation in recent years, so capital growth could offset the lower COC in the short term.

2. Property Potential vs. Fixing Costs

If the property needs fixing, it could offer even more potential for increasing rents and boosting your COC over time. Be sure to thoroughly calculate rehab costs. If the fixes are cosmetic or minor, that's a big plus, but if there are larger repairs (roof, plumbing, etc.), ensure you budget for those. Consider getting contractor bids during your inspection period to have more accurate numbers.

3. Inflated Housing Market

You mentioned the market is inflated—this is important to weigh carefully. High prices can eat into short-term returns, but if you believe the area has room for growth and demand (which seems likely given SW Montana’s attractiveness for remote workers and lifestyle buyers), the investment could pay off long-term through appreciation and rent increases.

4. Value-Add Opportunities

Given that you’re looking at a property that needs work, think about ways you can add value beyond just repairs. Examples:

• Renovating units to increase rental rates.
• Energy efficiency upgrades to reduce operating costs.
• Converting spaces or adding amenities that will appeal to higher-paying tenants.

5. Consider Future Scalability

A fourplex is a great starter deal because it combines the benefits of multi-family while still qualifying for residential financing. If this works out well, it can position you to grow your portfolio quickly. You can live in one unit (house hacking) if that makes sense for you, and get better loan terms.

6. Evaluate Local Vacancy Rates & Rental Demand

Since Gallatin County is a growing market, it’s essential to ensure there's strong rental demand and low vacancy rates. Research local rent trends, the tenant profile, and how seasonal factors (e.g., university students, tourism, etc.) may impact demand.

7. Financing Considerations

Don't forget to explore various financing options. If you can, lock in a long-term fixed-rate mortgage at today's rates. It's also worth checking if there are any incentives, especially for first-time investors or through FHA (if house hacking).

Final Thoughts:

A 5% COC return isn't the highest, but if you see potential for appreciation, rent growth, and forced value through renovations, this could be a good deal to launch your investing career. The experience and the asset itself might be more valuable than a higher immediate return.

If you need help with financing or exploring options that fit your situation, feel free to reach out. Happy to guide you further!

Best regards,

Drago

Hey Carlos,

Sounds like you’ve got a great track record with your projects and are looking to keep the momentum going after your investor retires. Finding new private investors or hard money lenders can be a bit challenging, but given your experience and portfolio, you're in a good spot to attract new funding. Here are a few strategies that might work for you:

1. Networking and Real Estate Investor Meetups:

• Get involved in local real estate investor groups and networking events in New Mexico and Texas. Real estate meetups, REI clubs, and conferences are excellent ways to connect with potential investors.
• BiggerPockets is also a great online community where you can meet private investors and lenders. Joining forums, sharing your success stories, and reaching out to investors in the NM/TX area can open new doors.

2. Private Investor Syndications:

• Consider real estate syndications where you can raise capital from a group of private investors. You can offer them a share of equity in exchange for capital, and since you have a strong track record, you might find interest in smaller-scale multifamily projects (20-30 units).
• Create a pitch deck showcasing your past successful projects, the profit margins, and your plan for future developments. This can help secure funds from multiple investors at once.

3. Hard Money Lenders:

• Hard money lenders are always looking for experienced developers like you. You could work with regional lenders in Texas and New Mexico who specialize in apartment construction or multifamily projects.
• Some well-known hard money lenders in the region include:
• Lima One Capital
• Kiavi (formerly LendingHome)
• Visio Lending
• New Silver
• These lenders typically have higher interest rates than banks but are quicker and more flexible.

4. Real Estate Crowdfunding Platforms:

• Platforms like Fundrise, RealtyMogul, or CrowdStreet allow you to raise money from multiple investors. These platforms have strict vetting processes, but if you have a solid deal, they might be a good way to fund your projects without going through traditional financial institutions.

5. Leverage Past Relationships:

• Since you’ve built a solid foundation with your retiring investor, ask them if they can refer you to other investors in their network. Seasoned investors often know others who are interested in real estate, and a warm introduction can be a strong lead.

6. Real Estate Attorneys & CPAs:

• Connect with real estate attorneys or CPAs in your area. They often have clients who are looking for investment opportunities. Building relationships with professionals in the real estate investment space can lead to referrals and introductions to potential investors.

7. Social Media and Content Marketing:

• Build an online presence through LinkedIn, Instagram, or even YouTube, where you share your development progress, success stories, and plans for future projects. This can attract high-net-worth individuals looking to invest passively in real estate.
• You can also create a newsletter or website for your projects, showcasing your expertise, construction process, and investment opportunities.

8. Real Estate Investment Trusts (REITs) and Family Offices:

• Family offices and small private equity firms often look for real estate projects to invest in. You can approach them directly, especially if they’re looking to diversify their portfolio in multifamily developments.

It sounds like you have the experience and track record to attract new investors. Keep leveraging your expertise, build relationships, and use your portfolio to show potential investors the value of partnering with you.

If you need help connecting with hard money lenders or want guidance on structuring investor deals, feel free to reach out!

Best of luck with your future projects,
Drago