All Forum Posts by: AJ Leman

Hi Chris,

Congrats on the deal! Sounds like a good one!  I would not worry about the appraisal.  Since you are house hacking, you should be able to 'force' some appreciation and gain equity that way - even if the current appraisal doesn't show it.

When you are finished hacking it, you could get it re-appraised and pull out equity if needed.

Good luck man!
AJ

Hi Britt,

We finance all our properties through our LLC. We use a local bank that we have a good relationship with. There is less regulation when you go the commercial lending route. However, our bank will not do a 30 year fixed commercial note. Instead, all of ours are 5/25s, so fixed rate for 5 years, then resets to the current market rate.

This is a little riskier, but it has worked out well. Our current rates were in the 4.5% range last year and this year are in the 5.5% range. I think if you want a reasonable 30 year fixed note, it probably will not be through your LLC. This is just my experience and different lenders could be different.

Best of Luck!

AJ

Hey Roderick,

Sounds like it could be a decent candidate for seller financing.  Maybe ask for the financials first?  Just tell him that you can make an offer, but you need to see income and expenses.  He should provide those.  After that you can make an informed offer based on what is best for you!

Best of luck!

AJ

If the house is in great shape - then you might have a deal! We own a few in the Iowa City area that really don't cash flow (after repairs and CapEx), but they appreciate well, someone is paying down our debt, and at tax time we always take a 'loss.'

Buying those a few years ago allowed us to build up enough equity to refinance them and pull out cash for our next properties.  Your house sounds like it could achieve the same thing.

Hi Justin,

This deal looks OK.  A few things a I would be cautious about.

• CapEx on a house built in 1910 could be more than $100/month. I would pay close attention to the plumbing, roof, foundation, and HVAC. Any issues with those could wipe out the entire repairs and CapEx budgets. I would make sure you have some sort of reserve.
• It's in a college town so vacancy is probably not an issue. However, I live in a college town and (as I am sure you know) some of the undergrads are rough on the houses - just an FYI.
• I think the only way this is a 'good' deal is if that house is going to appreciate very well.  

Just some thoughts!  Best of luck!

AJ

@Kelvin Tam I rented out my primary residence in 2011.  In order to buy another house, however, I needed a down payment.  So I asked a few family members and friends for a loan.  Then, instead of repaying the loan, I bought another rental with zero down and converted all their loans to equity in the rental business.

That was the beginning.  We've slowly bought units ever since.  Some partners wanted to be bought out and others wanted to stay in.  Never planned on it - but its been great!

Hi Aviv,

We recently refinanced two properties which were held by our LLC. Our local bank had no problem with this and the new loans are also under our LLC (which owns the properties). We pulled out a fair amount of equity and did another deal with it. I think you should be fine.

AJ

Hey Nehemiah! Welcome to BP.  

I would consider partnering up with someone.  That is the route that I took.  Like you, we have a large family (six total), and like you we only had one income (teacher salary).  I did not think we could get into investing either, but that is what partnerships can do!  I partnered with a few people and we were off to the races!

Good Luck!

AJ

Welcome Tim! I was just in Austin/Round Rock over the holidays - lovely area!

I got started the same way as you did - rented out or old primary residence (which has never cash flowed that well - but as you say, someone is paying the mortgage!).  That led us to buying a few more rentals, and then a few more.  Its been a great ride.  BP has been instrumental in my process. Not sure if you are a reader, but here is a great list to get you started: BP Book List.

Best of luck!

I agree with @Account Closed. Once you sign a deal with a realtor, you have to use them.