All Forum Posts by: Daniel Dietz

@Macie Moore we are working on a 'non family' deal like this with current loans on it right now. Can you share how much (either dollars or just percentages) is mortgaged compared to what the purchase price would be and the value by appraisal would be? I could explain how we are doing things better if I had that info.

Also, are you trying to do a long term fixed rate deal with the plan being to hold them for the long run?

Dan Dietz

Hello All, 

I took another look at their website and was trying to understand the difference between the individual Notes and the Funds.

Am I correct in my thinking that ONLY Accredited Investors can do the Note Funds, while Individuals can do the individual notes? Where do Sophisticated (and what is that technical definition?) fit into the mix?

I KNOW I am not up to Accredited.

It seems to me to be "backwards" thinking that there is LESS risk to a 'novice' in a FUND since the risk is spread out over many Notes and professionally managed, whereas an Individual Note seems like it would carry WAY more risk, especially picking the 'right one' for your investing goals, budget, etc...? 

Am I missing something here?

Thanks, Dan Dietz

Here in WI, we can get commercial loans for residential properties all day long with 20% down, 5% interest locked for 10 years and a max of 1% per year raise after that up to 11%. Amortized for 25 years. This is through a small local chain (maybe 6-10 locations - NOT a chain bank). That let's us cash flow about $100 per unit all day long and build equity fast.

Dan Dietz

@Ivy,

This, https://www.biggerpockets.com/calculators/shared/6...

should show you a copy of the worksheet that we used from right here at BP Rental Calculator to give out Lender what they needed.

Even more than cashflow, what they wanted to see was that we had at least 20% down, whether that was ALL our funds, or a combination of our funds (at least 10%) and a second position note for 10% or more. 

The other thing that is pretty critical is the "Debt Coverage Ratio" of 1.2 or more. What this means is that after expenses, we have 1.2 times as much left over as what it takes to cover the 'debt'. Meaning if the mortgage is $1000 a month, there needs to be at least $1200 coming in. 

The cash flow 'happens' to be almost $100 per month per unit, but the more important figure to me is the "Annualized Total Return", which is the same as saying the "compound rate or return" (similar to how stocks are reported) on our original cash investment. THAT is averaging over 20% per year over the first 10 years - VERY hard to get in stocks for the long haul. 

The Apartment Association is the local group that is similar to a Chamber of Commerce but it ONLY deals with Landlords, Renters, and Service Providers such as Trades, Lenders, etc.... 

Dan Dietz

I think ours run about $600 if memory serves me right. Pretty cheap for peace of mind and we just figure it into our cost of doing business.

Dan Dietz

We have a mortgage written up by an attorney, which is recorded as a 'lien against the property' (I believe that is the right term) so they are secured by having the right to foreclose on the property. To me, the closer the person is to you the more you need to get it in writing ;-) I have seen too many families torn apart from 'misunderstandings'. 

This goes for whether it is a First Position (primary) or a Second Position as part of a down payment. 

And absolutely the appeal of OTP is huge :-)

Dan Dietz

There is also the theory to keep your personal home 'highly leveraged' in case of a lawsuits or personal bankruptcy.... that way, there is 'not much equity for them to go after'. 

In my case right now, I am in growth mode so not paying ANYthing down faster than needed. When the time comes to do so, I think it comes down to just 'running the numbers' and seeing which one saves you the most between interest rates and loan term length and how far you are into the amortization schedule. 

Dan Dietz

Ours actually found US! :-) We belong to a 'landlords association' that covers a big portion of the rural part of our state. We are about a 90 minute drive apart. They did a mailing, as did several others, stating they were 'investor friendly' and looking to lend. 

I would recommend checking out such an organization in your area.... if they are active there, they are at least interested to a degree in working with investors.

Dan Dietz

@Chris Ruoff,

I think it must all depend on your bank and the deal at hand.

We are working on two different deals somewhat like this right now, and working with a small regional bank. 

Their rough guideline is that we need 20% down, they'll do 80% LTV, fixed for 10 years with 1% limit after that and a 25 year amortization and 5.125%.

On our current ones we are working on purchasing, they are willing to go with US doing 10% down, the seller carrying 10% (or more if they want to) and the bank doing 80% LTV or less.

They are by far the lender with the most favorable terms I have found. 

Dan Dietz

@Mike Williams, I dont think we are supposed to 'promote' particular people or services here on the forums, but shoot me a message and I can fill you in more. 

What I WILL say is that I talked or emailed extensively with I think it was 4 of the professionals who post/contribute on here a lot. I think ANY of them could do a good job, and most of them a great job. After talking with them, and getting and CALLING references, it was clear to me who MY best fit was..... yours may be different. 

I also liked the idea of supporting a business that is very active here on BP giving away FREE basic information to help all of us. Kind of like Karma.... what goes around comes around :-)

Dan Dietz