All Forum Posts by: Greg Scott

Eric:

It is unusual to try to negotiate on home loan.  Usually people just shop around.

If you do find a bank that can provide you a longer amortization, you probably won't like the interest rates.   Why? The 30-year fixed loan that most people get is subsidized by US Gov agencies Freddie and Fannie.   If you get a non-conventional loan, interest rates will almost certainly be higher.

Painting brick turns something that is maintenance-free into something that must be maintained. The added expense drags down your annual NOI and therefore destroys value in your property. Most apartment owners I know dislike painted brick for that reason.

Is there another way to make it pop?   

Congrats on your acquisition.

Have you looked into getting a standard mortgage rather than a HELOC? Qualification may be easier.

Until I got into real estate investing I maxed out my 401K every year.   Now I regret it.   (I've been with my employer for 22 years so have no access to those funds, save a $50K loan.)   You can make soooo much more in real estate.

If I had not been so diligent about funding my retirement account, I WOULD ALREADY BE RETIRED!

William:

If you want to get wealthy, you don't want to talk to a CFP!   Most of them only know how to sell stocks and mutual funds.   Those are terrible vehicles for growing wealth.    You have no control, there are high fees (often hidden) and you get crushed by taxes.   Have you heard the joke about how to become a stock market millionaire?  "First, start with 2 million."

You have plenty of capital already to get started in real estate.    Take the plunge!    The water is fine.

Niko:

Here is how I have done it before:

 - Buy the property in your name

- Form and LLC

- Quit claim the property into the LLC

 - Record the deed

- Change your insurance policies to reflect the LLC as the owner.

Doing this you do run the risk that the lender will call the note because of the due on sale clause.  Realistically, it seems a very rare that it happens.

To avoid all the brain damage from the above, another strategy is simply to beef up your insurance coverage.   I have $500K liability on all my properties and a $2M umbrella.   Those two things are going to cover 99.99% of potential issues.

Chris:

Selling would create a taxable event for you.   Unless that property just makes no sense for you any more, it is probably not the best financial decision.

A cash-out refi will likely give you $1M or more to go buy more real estate and you won't pay taxes on the loan proceeds.  It is a far better solution.

It is worth noting that on a commercial loan the property finances are much more important than your credit score.  Actually your tenant's credit worthiness will likely be more important than yours.   I would see if you can get a 25 year Am to maximize cash flow.

Consider getting a cash-out refi on your personal residence too.   If you can borrow at 5% and earn at 20%+ it is a no-brainer.

Good luck

@Jonathan Roberts

Be VERY careful with Michigan taxes.  Historical taxes are NOT an indication of what you will pay going forward.

A few years ago Michigan passed a law that your taxable value cannot go up faster than inflation.    Over time the value of many properties has grown much higher than the taxable value would suggest.   When a property is sold, the cap is removed and taxable value will rise to the current SEV.    

So, be sure you look at the tax rolls.   Compare SEV to Taxable Value.   For example, if Taxable Value is half of the SEV, expect the taxes to DOUBLE.   If Taxable Value is about the same as SEV, then you won't see a large bump.  (In Michigan, SEV should be 1/2 of market value)  Of course if you pay way above 2x SEV, your taxable value may still go up at purchase.

The property taxes on my 24 unit were $24K the year after I bought it but the previous owner was paying $17K because he had owned it a long time.   Fortunately, we planned for that.

Jacob:

Congrats on taking the first step.  That is the most important thing.

We all make mistakes, but yours wasn't a big one if the property still cash flows.  Thumbs up for  having adequate reserves.   Time will solve that minor bump in the road and you will never look back.

A few suggestions.   1) Be sure to rehab the one you have vacant ASAP.  Don't try to do it yourself unless it is super easy and quick.  Time is money.  Hire a contractor, get it re-rented, and start cash flowing.

2) Learn as you go.  You may learn it doesn't make sense to rehab the 2nd unit in which case you can sign your tenant to another year.   Or, you may get such a huge rent bump, it may make sense to let your lease expire and do an even bigger rehab on unit #2.

Keep moving forward.   

Jonathan:

Congratulations on getting started so young and good luck!

In the commercial loan space BRRRR has always just been a cash-out refinance and very common. In Single Family it disappeared for a few years so is now "new again" so was given a name. I make this point because the SF business has some big differences from MF and you need to get educated on the differences before you really know if you have a good deal.

True MF properties (5+ units) are valued based on NOI. With the little that you've given me this looks like it could be a good deal. However you haven't given an estimate of NOI and are missing the most difficult component of a small MF property: the cost of property management.

Please re-post with more info or feel free to IM me for more specific questions.