All Forum Posts by: Will Kenner

@Scott M. @Matt Davis I agree, this deal sounds like an expensive headache. Not only are you starting off with an incorrigible tenant, but sounds like MA laws regarding lead paint will transfer undue liability to you.

@Keith Cuddeback As the other respondents have said, there are several factors to consider other than "cash flow" vs. BRRRR. Cash flow is important as this will help ensure you can successfully operate the property from one month to the next. Buying a property that will see appreciation is key to building wealth. Lastly, in my opinion, cash reserves are crucial as this is what allows you to weather any storm and changes in market corrections so you can survive long enough to see that appreciation. Banking solely on appreciation, especially in a market cycle such as this, can lead to significant difficulties in the short term. (Refer to 2006-2008) Therefore, always ensuring your deal is strong and works in the short term is key when first starting out.

That said, you may want to focus on getting through your first deal before jumping into multiple units. You will learn so many valuable lessons in property evaluation, the transaction process, and property management with that first deal. And as they say on the BP podcasts, your first deal doesn't have to be a home run. Once you get that first deal, and are armed with more knowledge, you can move on to the next and start constructing more complicated deals, always making sure you are well capitalized. Buying right, stabilizing your properties, and having cash reserves will always allow you to BRRRR later down the line. You don't have to find that perfect BRRRR right off the bat. Even if interest rates go up, your monthly payment may still decrease as you'll have been paying down your principal so your new financing will be for a lesser amount and over a new amortization.

Specific to your question about buying a turn-key at a higher than market price vs. spending a bit more time researching, I would recommend the later. Over paying for a property sets you up for difficulty if conditions soften: decreased cash flow and an almost guarantee that you won't be able to do a re-fi of any kind. Since you have a background in construction, I would assume a turn-key property isn't crucial for starting out. You'd be well suited to estimate rehab costs and have connections to subs that your average investor wouldn't. Spending your time finding a property that needs improvements well within your skill set may be the better play. Your acquisition price will be more favorable, you'll get the tax benefits doing the repairs and improvement yourself, and you'll have control over how much you spend, always being mindful of your cash reserves. 

@Rand Knutson Nicely done Rand, congrats! That's going to be an awesome house hack! Best ally of real estate is time, and getting started at your age will set you up for great success. 

@Chad Bartlett Looks like you've thought a lot about the numbers. I would say aside from those, the most important part to consider is the Operating Agreement for all the partnerships you form, specially with friends. You want to make sure everyone is on the same page before entering into a partnership on a property. A few things that come to mind are:

- How do you decide when one partner gets to use a property for personal use when someone else wants to use it? Or it is during a peak time for STR.

-What if a partner wants to let another friend use the property, would they have to pay? 

-What happens if a partner wants to leave/cash out? How would that be executed?

-How do you manage a partner who can't pay their share of expenses in the event of a large unexpected repair? 

-If a partner is married when they enter into a deal, what if they get divorced and their spouse has a portion of that deal? 

There are a lot of conditions that would need to be clearly outlined if you are going to expand on this model over multiple properties and multiple friends. Just my $0.02......

@Alicia Marks Like many of the other respondents, a multi-tenant property providing diversified income and reduced impact of turn-over, and everything being in "one place". For me in particular, I like the commercial space. You don't have to worry about landlord-tenant laws like you do with residential, there is less "emotion" when enforcing leases and dealing with problems since you are not dealing with someone's home, and operating expenses are covered with NNN leases. (Not all the time of course, some may be Gross Leases, but if we are dreaming......)

@Greg Rementer Yes, if you have a full NNN lease agreement, things like landscaping and parking lot maintenance (cleaning, snow removal, repairs, etc) would be included in the NNN charges as they are common area maintenance (CAM).

@Andrew Judy Welcome Andrew! Sounds like you have a solid start to your real estate portfolio and have the right mindset - use your income from healthcare to buy property and build true wealth. 

@Steve Sauro I'd recommending getting in contact with your accountant for that. The IRS can be sticky about renting and hiring-out to entities that are the same person/closely related. 

@Stephen Duncan Definitely shop around. Investment rates are typically higher than primary residences, but currently not that high. Recently locked in two commercial re-fi loans, one at 4% and the other at 3.95%. Contact a mortgage broker like @David Kelly for sure. Be mindful however, that typically the lower the rate, the higher the prepayment penalty should you re-fi or want to consolidate into a portfolio loan later on as you acquire more properties. 

@Chris Webb Not currently doing a BRRRR but doing a second residential unit rehab in a year. On the first rehab we were held up by windows (4-6months out - which we have postponed replacing), cabinets (3-4 months), and having a few of our contractor's workers and subs move out of state causing extended timelines as help is not easily replaced at the moment. On the second rehab (currently in progress) we've taken lessons learned from the first and have adjusted accordingly. Fortunately the lumber requirements have been minimal for these projects, but costs are certainly sky high. Just go to Home Depot and try and buy a sheet of plywood. Still a very difficult time to get anything done in a reasonable amount of time, for a reasonable cost.