All Forum Posts by: Adam Giles

@Casey Maib Interesting. I had read that SF was bad, even requiring licensing etc. It sounds like that foolishness found its way up the valley.

@Robin Boyer Interesting, we should talk. We are also interested in adding some short term rentals. We are evaluating lake/golf properties in the Midwest, lake homes in New England, and wine country. It looks like you are pretty south but you are still much closer to Napa than I am.

Ha....13%, I wish. Its closer to 1.6% (5k/305k), which is great for this area. Our current focus is growth so we have no problem remaining at a true 70-80% total ltv across our portfolio. If there is equity sitting in a property, that's more properties we can buy. Eventually we will begin converting over to an equity focus.

My partner and I were finally able to close on an off market 8 plex we have been working since December. We offered creative financing however the sellers ultimately wanted to wash their hands of it completely, and were willing to take a lower offer to do it quickly and without marketing/brokerage. I am posting this to share a couple of key points that continue to prove true on our journey. The first being that this deal never happens without the “team” that we built. Relationships are critical to being successful in real estate. I have a local agent with whom I have a great relationship, and they brought this deal to me. The deal basically breaks down as follows:

January of 2015 the property appraised at $440,000.

We offered $305,000 and it was accepted.

Gross rents are $60,000

Expenses are $22,000

NOI is $38,000

The second key point that I wanted to make was that we found out that the unicorn does exist. We had been speaking to another local lender that was very interested in doing business with us, and they approved 75% LTV on a new appraisal. Previously we have been dealing with the seemingly ubiquitous standard of "lower of appraisal or sale price".

New appraisal came back at $405,000

Because we were able to stay at 75% of the appraisal, after the tax credits etc on the HUD, we walked away from the table having purchased a well maintained, fully occupied, 8-plex for $3200 down.

This is, by far, the best deal we’ve ever executed.

Feel free to ask if anyone wants any additional details on the deal but I just wanted to mention it for the following points again:

1 – always be building relationships, even if you aren’t making deals yet. You never know which one will produce your best deal.

2 – If you want something, don’t stop looking for it. I have been looking for someone who will do 75% ltv on appraisal and after 3 years I was beginning to think it was impossible. I ended up finding it in my own backyard. It just took persistence and the right deal.

Talk to portfolio lenders. I specialize I this price range and have notes on properties ranging from 25k to 79k. You absolutely can get financing on a property at that price. You will likely get 75% ltv (might have to do 70%) and they will go 5yrs with a balloon, amortized over 15yrs.

Out of curiosity, do you know what the joist look like under the subfloor? I've seen older homes with as much as 24" OC spacing. If that's the case I would definitely lean toward making sure you have the full 1 1/4".  

sorry for the errors. I'm walking and on my phone ;-)

This is how I am structured. It works great by providing that secondary layer of asset protection, and taxes are as simple as a 1065 and a pairof K1s. If you want to limit disbursement or any other cash distribution, you may want to spell that out I your operating agreement. who can do what, when, and in what about, with what permission from what % of members. It helps avoid confusion of anyone decides they do want to take money out. Owner draws make no difference tax wise. You taxed on the profits each year regardless of whether it stays as retained earnings or goes in your pocket.

I agree with @Jeffrey VanGilder. It sounds like an audit is a good idea for many of the reasons mentioned already. Even if you do end up spending the 6k, you will want to fix all of the contributing problems (poor air circulation, insulation, leaking, etc) while the work is already being done. 

I just refinanced an REO property (rehab) last month with a local lender that I work with frequently. They allowed us to effectively cash out 80% of the property once the rehab was complete via a blanket loan. We also did not want our capital tied up in the rehab so we found our next deal and did a blanket loan for the two properties....the new deal and the existing rehab. We had an appraisal done on both properties and went up to 80% LTV on the two appraised amounts. Due to the equity in the rehab, we purchased the new property with no money down and walked away with about 12k in cash, which we then used as a DP on a third property.

There is more than one way to get your cash back out and you will likely find that LTVs and other criteria change based on how you structure it.