Real Estate Investing School Podcast - Episode 228: REAL DEAL: Duplex Dreams and Family Partnerships

Host: Real Estate Investing School
Guest: Tyler Miller
Release Date: January 17, 2025

Introduction

In Episode 228 of the Real Estate Investing School Podcast, titled "REAL DEAL: Duplex Dreams and Family Partnerships," host Joe welcomes Tyler Miller, a seasoned investor and a returning guest. The episode delves into Tyler's recent real estate deal, offering an in-depth look into his strategies, partnership dynamics, and the lessons he learned along the way.

Finding the Right Team

Timestamp [01:59]
Tyler emphasizes the importance of assembling a competent team. Post the Cash Flow Conference, he and his wife realized the need to focus their real estate strategies. They decided to concentrate on two primary approaches: midterm rentals out of state and high-income strategies close to home in Utah.

Tyler Miller: "There's so many ways to make money that it's hard to focus on, like, your way. So my wife and I kind of honed in on two strategies." [02:23]

Identifying the right team was pivotal. Tyler connected with Mindy Templeton, a Kansas City real estate agent with an exceptional team. Mindy facilitated introductions to a property manager, buyer's agent, designer, and other essential professionals. Within two to three weeks, the team identified a for-sale-by-owner duplex deal, aligning perfectly with Tyler's criteria.

Structuring the Partnership

Timestamp [06:19]
Facing a dilemma with a 9% cash-on-cash return, Tyler sought to optimize the deal's profitability without over-leveraging his home equity line of credit, which hovered around an 8% interest rate. To enhance the deal's attractiveness, Tyler proposed a partnership to his father, offering him a lucrative arrangement.

Tyler Miller: "I decided, well, maybe I could partner with someone and make the numbers look a little bit more lucrative for me." [05:09]

He structured the partnership by having his father provide the down payment and hold the loan, while Tyler handled furnishings and property management. In return, his father received half of the equity, passive income, and significant tax benefits through cost segregation.

Tyler Miller: "We're going to do a cost segregation, and I'm giving him that cost, that bonus depreciation from the cost segregation of year one." [06:19]

This arrangement allowed Tyler to maintain a more favorable return on his investment while offering his father substantial tax savings and a secure, passive income stream.

The Deal Details

Timestamp [09:50]
Tyler provides a detailed breakdown of the duplex acquisition:

• Purchase Price Negotiation: Initially listed at $230,000, the purchase price was negotiated down to $222,000 following a home inspection that revealed foundation issues.

Tyler Miller: "We were able to negotiate roughly $11,000 off of the purchase price, which covered the cost of the foundation work." [10:19]

• Financing Strategy: The duplex was purchased in cash to strengthen the offer, with plans to refinance shortly thereafter. However, Tyler encountered challenges with refinancing due to new seasoning period rules implemented by Fannie Mae and Freddie Mac, which require a 12-month holding period for conventional loans.

Tyler Miller: "In the spring, Fannie Mae and Freddie Mac changed their rules to where on a conventional loan, you have to hold it for 12 months before you can refinance." [11:03]

To navigate this, Tyler discusses alternative refinancing options, including DSCR loans with a six-month seasoning period and delayed financing, which allows for cash-out refinancing under specific conditions.

Lessons Learned

Timestamp [07:49]
Tyler shares two critical lessons from this deal:

1. Understanding Partner Values:

   He initially hesitated to partner with his father, perceiving a 4.5% return as inadequate based on his focus on cash-on-cash returns. However, he realized that his father's priorities—security and tax benefits—differed from his own.

   Tyler Miller: "Don't project your criteria or your values... Let them have their own values." [08:46]

   Host's Insight: Joe echoes this sentiment, highlighting the importance of recognizing and aligning with a partner's unique goals and values rather than imposing one's own.

2. Refinancing Nuances:

   Reflecting on the refinancing process, Tyler regrets not structuring the purchase price to account for repairs separately. By doing so, he could have maintained the higher purchase price for refinancing purposes, thereby accessing more capital.

   Tyler Miller: "I wish I would have kept the purchase price at the 232 and then made an addendum... that's how you can refinance at the whole 232." [12:17]

   Host's Insight: Joe underscores the flexibility of leveraging seller credits and loan structuring to maximize refinancing potential, emphasizing the importance of meticulous deal structuring.

Final Advice

Timestamp [17:11]
As the conversation wraps up, Tyler offers valuable advice to fellow investors:

• Clarity and Teamwork: "Get some clarity, find the right people, and let them go to work for you."

• Creativity in Deal Structuring: "Be creative on ways that you can make a deal better than just a decent deal."

Joe further elaborates on the importance of understanding lenders' varying requirements and designing deals that align with their preferences to ensure seamless financing.

Conclusion

Episode 228 of the Real Estate Investing School Podcast provides an insightful exploration of strategic partnerships and deal structuring in real estate investing. Tyler Miller's experience underscores the significance of aligning with partners who share complementary values and the necessity of flexible, creative deal-making to optimize returns. This episode serves as a valuable resource for both novice and experienced investors aiming to enhance their investment strategies and partnership dynamics.

Notable Quotes:

• Tyler Miller: "Don't project your criteria or your values... Let them have their own values." [08:46]

• Joe (Host): "Find the person that needs the side that you don't need, and then it's like, cool, let's combine." [09:50]

• Tyler Miller: "We're going to do a cost segregation, and I'm giving him that cost, that bonus depreciation from the cost segregation of year one." [06:19]

• Tyler Miller: "We were able to negotiate roughly $11,000 off of the purchase price, which covered the cost of the foundation work." [10:19]

This comprehensive summary captures the essence of Tyler Miller's recent real estate deal, highlighting key strategies, partnership insights, and actionable lessons for investors.