All Forum Posts by: Chris Coleman

@Joe Villeneuve what do you mean by "the analysis is for the first year ONLY"?

Isn't it each year after year until you have recouped your initial cash investment?

If not, then what are you calculating starting in Year 2?

Thanks

I've purchased multiple SFR's across several states using the same Lender. They are a national mortgage company, but I've worked exclusively with one office located in Florida, and I'm located in Virginia, and I purchased properties in completely different states. Feel free to PM me if you want the contact. They're not Portfolio, so not sure that they could help you with the commercial loans, or non-Freddie/Fannie loans. But could be good for your SFR's up to the first 10 loans.

Shay Bond Buy and Hold Cash-Flow calculations also typically include an annual Vacancy Expense of 5% of the Gross Rents. That's to account for any months during the year when you may not have a paying Tenant.

Look at the numbers from a total Portfolio perspective. If you take $200K-$240K equity out of the Arlington property, what will your ROI be on the new investments in Richmond? And what will that new P&I payment do to your current ROI on the Arlington property? Together, what will your total ROI be as a whole? If you sell the Arlington property, what do you expect your ROI to be on the new $300K investment in Richmond? More or less than the above scenario? And don't forget the tax implications of this option, unless you do a 1031.

By the way, you said you are not familiar with a loan that has a Balloon in 5 years.  In simple terms, this means that after 5 years of paying the mortgage (like you would normally on a 15 or 30 year term), you will either have to pay off the remaining balance of the loan (i.e., balloon payment), or refinance it.

The risks -- First, assuming you refinance rather than pay it off, interest rates may be higher in 5 years when you go to refinance.  Second, what if the value of the property actually drops? Then you may not be able to refinance, and will have to pay off the note or lose the property.

Hope this helps...

Your post says, "I was told that my investment is secured by the property that is tied to the LLC."

If that's the case, then you need to confirm the value of the property.

But very importantly, please be sure that you understand how this investment works. Just from the info in your post, its hard to really understand exactly what this is. What does "tied to the LLC" actually mean? Does the LLC own the property completely? Is the LLC an investor in the property? Are you investing in the LLC? Lending to the LLC?

I'm not trying to imply that its not a legitimate deal, or even a good deal.  Hopefully it is.  But please make sure you fully understand what it is and how it works before investing.

I think it was Buffet that said, "Never invest is anything you don't understand".

Have you checked with any Portfolio Lenders, rather than traditional banks? May be an option. I agree with Greg Leach in that ROI you mention looks good. But I probably would not do all cash on this deal. At 20-25% down, you could likely purchase at least 3-5 properties with that $109K, and realize a better ROI overall.

In my experience its a hybrid.  The PM does certain bookkeeping, and you also have to do certain bookkeeping.  You then have to combine the two for the overall financial picture.  

All of my SFR's are professionally property managed, and I have several PM companies due to my properties being in various states. As both @Fred Heller and @Robert Gilstrap described, my PM's do provide Income/Expense reporting for the things that they are involved in and know about.  Income is simply collecting the rents...which they do.  Expenses, for example, are usually maintenance costs, as well as their PM fees.  All of these things they manage, they know about, and so they account for.  They send me a monthly statement with an Income/Expense breakdown, as well as an Annual Statement and a 1099 for tax purposes.

However, there several expenses for which the PM company does not know, and therefore do not account for. For one, mortgage payments, taxes, and insurance. My PM's also do not pay HOA dues. Additionally, if I have to fly to Dallas to meet with my PM and check on a specific property, then they are also not going to have those travel expenses, etc.

So its a hybrid.

@Jenifer Levini 

Can you please elaborate on your last statement, "And, its definitely an interesting idea to set up real estate holding companies as layered entities. I set up mine that way to give investors different streams of income from the appreciation and the rental income, and to protect each asset from the other's liabilities."?

I understand setting up layered companies between those that are performing service work and those that are holding assets, etc...as well as forming contracts between various LLC's for services, etc. But what do you mean by giving investors different streams of income from the appreciation and the rental income, and to protect each asset from the other's liabilities?

Thanks