All Forum Posts by: Julie Falen

Hi Anthony.  How has it been going for you?  have you gotten that 1st property yet?  

Are you still looking for MF properties and maybe partners in some? I agree with Kristofer that it is best for rentals to hold them on your own for SFR but for MF better to have investor/partners.

Hope you are well on your way!

YOu might want to check into Sub-Prime lenders that are out there in bigger numbers all the time. THey are institutional i.e. private banks and generally really solid. rates are between hard money and conventional but they are a good option when in a spot such as yours.Try doing a general search in Scotsmans Guide.  Be aware you will not get most of your capital out, it will be a refi with Some cash out,

@Upen Patel  Thank you for the correction.  As I do not do those loans regularly anymore I am not as up to date.  i just had a client 6 months ago who came to me because he had  10 financed  properties and the bank told him he could not do a cash-out refi because he exceeded the limits allowed.  When I checked wtih his lender, I was told the same thing.  Ah the speed of changes!  

@Colton Joseph - You might want to talk more to Upen Patel as he can probably tell you more about seasoning than I could also as far  as taking cash out of a completed building.   I recommend you also look into doing a 1031 tax-deferred exchange when you ell your property. I think you would ave 60 days to put that money into a new property. No capital gains, smaller tax.  

As a lender and an investor, I have found it is much easier to receive a loan for a rental property, especially if it is already leased. Of course I do quicker, easier "subprime/Non-QM" loans that are a little higher in rate than bank loans, but think the concepts are the same. If the building and lease can service the debt of the Principal, Interest, Taxes and Insurance at 120%-125% of the total payment, (DSCR 1.2 - 1.25) you are very well situated and not much personal income comes into play. In my field, we do not even ask for proof of income, which is why rates are a little higher but well below hard money rates

That being said, there is a BIG caveat to be aware of! Fannie Mae and Freddie Mac and FHA keep changing guidelines, but right now you are limited to 4 govt-backed (or bank loans) at 1 time. If you have MORE than 4 properties, even if you only have 4 govt-backed loans (Fannie etc) - you are Not Allowed to take cash out from any of your properties using a Fannie or Freddie loan.  Something to consider or keep in mind. That means you are not going to have >4 loans right now that are in the 3%-4% range.   I don't know what you were calculating your cash flow on, but I suspect it is close to those rates. 

@Daniel Toshner  Congrats on your investing!  I love that market also and know it well from having lived there for 5 years, and have family there and 5 properties there as well.  I get amazing returns even on 12% loans.   Selling 1 house now, turnkey, with over $500/mo net CF.    I would love to help you if you want on any KC stuff or other info on the market or loans.  @Eric P. if you are buying a newly renovated SFR or 2-4 unit, you should not have to worry about CapEx for a long time. Get a 1 year warranty from seller, too, on appliances and HVAC.  

 Also in KC market, renters expect they have to provide their own refrigerator, and perhaps window AC. That is market norm.  If you ARE worried, get a home warranty after 1 year for $40-$50/month and figure you are covered for major appliances, plumbing and HVAC.   Cheap at the price.   

A Hard money loan (or even soft money loan)  is generally any loan that is outside the government and conventional loans. It can be money from a private lender, like a friend, relative, colleague or stranger; or it can come from a broker who has many people who are private lenders, looking to put money into a loan that earns them a good return, or money from insurance companies, hedge funds and the like.  Loans are priced based on how low or high the risk is to the lender of losing $$.    A private lender reduces their risk by having a decent equity position, meaning they want the borrower to have a 20-35% down payment (or equity, if refinancing). so in case the borrower defaults on the loan, the lender can take back the property and sell it to get their money back. 

Typically, "hard" money is quick,  requires less documentation, has lower credit requirements, can be for 6 months, 1 year or 30 years, and many use it to close as if they have cash and no loan contingency.

I like to describe hard money rates as being like ordering a car. The more options you want, the higher the cost. If you want the money in 3-5 days, it is going to cost more than closing in 15 days. If your credit is bad, that's ok but the risk is higher for the lender so the cost goes up. If is based on an after Repair Value (ARV) that is another option on the "car" so the cost goes up, a 3 or 5 or 7 year or 30 year fixed rate is an option with a cost; if you do not want to prove any income, that costs more than if you DO show income, and on and on. Rates are higher, but can still be as low as 6.5% for a longer term loan. Generally rates for a short term loan are on the area of 8-12% interest-only payment though. hard money generally also has a cost of 1-4 % or points, to get the money quickly. A point is 1% of the loan amount. Most hard money lenders want the higher rates for a shorter term. A broker can find you the longer terms and lower rates.

You could also do hard money, which is quick compared to someone else who is financing via conventional loans.....

From a lender's point of view, How many units in the complex are rentals?  I ask because often a buyer or an owner cannot get a new loan or a refinance, especially for cash-out, from Fannie Mae, if the same person or group or entity owns more than 2 units in a building with 5-20 units; or owns 10% or more of the units in a 21+ unit building.  

There are other restrictions for FHA (more lenient) and Freddie Mac but it is often something to take into consideration.

That being said I agree with @Sam J Mrofcza that you will get a better CCR using leverage of a loan - and get better tax treatment as well. that sma amount of cash could be used to purchase 2-3 additional properties - somewhere else outside that complex and increase your overall CCR

HI. I'm not a lawyer either so this is not legal advice, and I have lived in KC KS and KC MO and invest there as well.

First - if you only have 1  member of the LLC, there is no protection to speak of.  A single member LLC is considered to be a pass-through entity and attorneys can pierce them easily.  (Ask me how I know)  A trust like a revocable living trust gives you the same protection.   If there are 3 or more members in the LLC, then you can have some protection but my understanding is only if all are equal in managing authority and shares but check with an attorney on that. 

I prefer using a Land Trust, with an LLC as the beneficiary of the Land Trust. That way, you are NOT doing business as a foreign corporation ANYWHERE,  as your properties are titled in the Land trust (whose name should NEVER indicate your name of the property address!)  and a trust is not a business corporation - and no one knows who owns it.  You can form as many Land Trusts as you like for almost no cost. Then you can open  or create LLCs in states like WY, DE, IL and others where is only costs about $100 to create.   And you do not have to pay the CA  $800 Annual fee to the CA franchise tax board for keeping it registered as well as filing a tax return for the business every year (CPA expense)  or the City of LA tax board for money earned in the city.  Santa Monica is no different.  Check out some experts on land trusts and get lots of good free info to look at first. 

As for investing in the area, in my personal opinion I would stay away from KC Kansas except for certain areas near KU Med and south of I-35  The better areas are in Johnson County, but they will be higher priced. KC MO has some very good cash-flowing properties for lower price points, and if you have a good property manager you should be ok, but again there are pockets to avoid. @Kim Tucker can guide you on those.   Lots of investors own in KCMO so I think it is better for cashflow than for appreciation in MO. KS will probably have better appreciation.

I would also add that you should seek out a good RE agent for your team that is willing to ACTIVELY help you find distressed properties and/or motivated sellers - although usually direct contact is best with a seller. 

Also, do you have any kind of web presence?   Always good....