All Forum Posts by: Allen Fletcher

@Mitch Larrivee

Depending on how many people want to give you money and the quantities you may have a major issue with the SEC. Before you accept any money sit down with a lawyer and accountant to discuss the legal ramifications and filing requirements.

As for the rest of your questions, it really depends. For example, you can borrow the money from your investors (thus paying them a set interest rate) or you can make them shareholders/partners and give them a percentage of profits.

If I were in your shoes I would start an LLC and then create a basic loan agreement that you can use to borrow money from each person using the same contract. (Make sure that this is allowed in your state and check the regulations). After you have done this tell your investors that they should have money ready for quick loans. You find a deal and then contact your investors asking for loans to make the purchase and rehabs. Those who want to supply the cash sign the agreement with you, transfer the money, and await for you to fulfill your side of the contract. After the property is sold, you then return to your investors and pay them all the principal and interest. Rinse and repeat. This strategy may seem like a hassle, but it is far less work and less expensive than having to file with the SEC and have them poking around looking for ways to fine you.

Good luck,

Allen Fletcher

@Samantha Klein

I would look into why the apartments are rented below market value, the property may need some work before you can raise rents. Also, be prepared to have move-outs once the rent goes up, unless the tenants know they are getting a good deal I would expect them to move once you increase the rent by nearly $200.

After you have done the leg work to ensure that the apartments really can be rented for $200 more raise the rent on one of them at a time, this will give you a little more flexibility if the tenant moves out. Also, I would get a longer term lease, month to month leases can lead to turnover problems.

Regards,

Allen Fletcher

@Jay Bhatt

These guys sound pretty good. If they turn out to be a good team can you post the company information I would like to look into them myself.

Allen Fletcher

@Jay Bhatt

Ask them if they charge a fee if you decide to go to another property manager.

Ask them how they deal with repairs.

Ask for a copy of the property management contract.

Ask how they communicate with property owners.

Ask to see there tenant screening process.

@James Jones

In order to get an answer, you need to share some information.

1) Was this home your primary residence?

2) Have you lived in the home 2 out of the last 5 years?

Note - If you answered yes to both of these questions you can receive a federal tax exemption for up to $500,000. This value is higher if you are married.

3) What is your income level?

Note - This determines your Federal capital gains rate.

4) What are your plans with the proceeds after the sale?

Note - If you are looking to invest the proceeds you could look into a 1031 exchange will defer all Federal taxes to a later date and allow you to purchase another property with the proceeds.

The best thing to do in your situation is to do a little research and talk to an accountant. The cost and time you spend doing this will be well worth the money you save on taxes.

Good Luck,

Allen Fletcher

@Holden Smith

Now that you have stated your long term goal, I think you just answered your question when you said, "I cannot justify paying off loans at 4.5% when a long term rental I buy will have a higher interest rate." Let me point something out on this statement, if the rental property you purchase is cash flowing (after expenses, insurance, cap ex, etc.) why would you pay that loan off faster? If you are worried about covering the debt service when the property is vacant then make sure you have sufficient cash reserves to not only cover emergency repairs, but several months of debt service and you will be in a good situation. If you are sure that you have a good deal that will cash flow, keep the debt and do not tie up your money in equity, remember equity is cash that is locked in a vault that you cannot open without either selling the asset or getting debt to unlock it.

Regards,

Allen Fletcher

@Miles Stanley

The one thing that I think you want to start earlier in the process is finding the funding. It always a good idea to have at least a couple of options available while you are out looking for a deal so you can move quickly on a good deal. I would get pre-approvals starting on day 1, this should reduce stress when you are under the wire later in the process. Otherwise, go for it!!

Regards,

Allen Fletcher

@Holden Smith

The real question is what you want to accomplish and when. What are your short, medium, and long term financial goals? Why are you thinking of lowering your student loan payments? If you answer these questions you will probably find the answers you are looking for in the process.

I personally prefer to have loans on things that cannot be qualified as assets gone as fast as possible. Student loans are a gray area, but I lump them in with the other category because they do not in and of themselves produce income. With a total of $41,000 of student debt left, you can eliminate that in a single year if you really put your mind to it. Then all that monthly debt service can be opened up for your use to invest.

Regards,

Allen Fletcher

@Ken Colville

Before you buy, go talk to a real estate lawyer or any lawyer that specializes in evictions. Ask them what the laws are, what the process is, what are the pitfalls for investors, etc. If you feel comfortable with the process outlined then you can buy the property, but do not buy until you know what you are getting yourself into. I would hate for you to have a horrible experience right out of the gates on your first investment.

Regards,

Allen Fletcher

@Robert P.

Talk to your attorney, keep copies of all correspondence, do all you can (keeping a written record) to be a dutiful landlord and take care of your property. It would not hurt to have the property treated for bed bugs (I assume that you have cash reserves), but make sure she knows this is a courtesy and will not be repeated on your dime. If your tenant continues to be an issue alert her that her lease will not be renewed (in a calm professional manner) and just baton down the hatches and hold on till her lease is up. When she leaves, put lots of effort in to give the property a thorough cleaning and spraying and continue on.

I also suggest adding a clause to the lease about bed bugs/insects. You may want to have the property sprayed 1x - 2x per year just to protect your property and mention that tenants are responsible for spraying for bed bugs.

The most important thing to remember is to keep a record of everything and learn from this experience.

Good luck,

Allen Fletcher