All Forum Posts by: Austin Fruechting

Yes, leases in most states transfer with the sale (and I would assume all states) 

Security Deposit: In Kansas the way it technically works is the old owner will reimburse the tenant with the security deposit held by them, then the new owner will do a walk through and collect a new security deposit.  I say "technically" because that rarely happens and the security deposits usually just get transferred and credited to the new owner at closing. 

No, it was just a LOC. Had I been able to get a HELOC though, I would have used that as well.

If it's a rental with positive cash flow, it should ride out a market downturn.  Your only real concern would be if rental rates take a huge plummet and you can't cash flow with a payment any more.  

The biggest part of the equation is how are you coming up with the $105k value?  Is that after the windows are done? What else other than the windows would you have to do if the tenants moved out to get it market ready?  Since they've been long term tenants I would imagine some painting, maybe some flooring, and other miscellaneous repairs would have to be done, but that's just guessing. 

Couple ways to look at this.  Not enough info or direct market info to really say, so I'm just spit-balling here:

Let's say it's worth $105k as-is.  Attribute 6% to realtor fees and maybe 4% in other concessions.  Your take away is $94,500.  

Say it's only worth $105k after the windows and other repairs to get it market ready. $6k for windows and maybe it takes another $3-4k in other repairs now you're down to $85k.  

You aren't that far off of the $80k in the second scenario.  The bird in the hand and non-hassle of the work could be worth $5k because maybe you get in and have to do a lot more than $3-4k of additional work and it eats up even that $5k.  

If it would fall in between there, you could sell it to them for $90k and carried back $10k.  

If you could sink $15k into it and sell if for $125k then go that route.

Regardless, at $600 a month rent I would sell it in one of those ways because you could do a lot better moving that cash into other properties. 

Few points of consideration: 

1) your efforts of putting the deal together and the effort of running it moving forward should be worth a certain equity percentage even without money.  Maybe you put in equal cash as two other partners and you go 50/25/25. (you get 50%, 25% for cash and 25% for efforts)

2) if you go with that structure the way to set up the operating agreement is you are managing member.  Set up the "major decisions list" as requiring 51% vote.  (these are things such as selling/refinancing/expenditures over say $25k) 

If it's 3 people maybe you have it 40/20/20/20 You could set it as requiring 61% vote. 

In both scenarios, no "major decision" can be made without your vote so you're protected. At the same time they are protected because you still have at least someone else agreeing to the "major decision"

Thanks for kind words! I'm glad it's helpful!

I agree with this a LOT!  I had opportunities of people coming to me with money wanting to partner early on in my career, but it would have only been for something the size of a duplex.  There are quite a bit of headaches, concerns, possible disagreements, etc that aren't worth it for $100-200 a person a month.   

Now I have a few cash partners on larger deals, and I've never sought out these partners.  After my years of smaller deals on my own, I had the proven track record to where now instead of people coming to me with $5-20k to partner on a deal, they are coming with $100k+.  At that mark the splits become worth the extra work, but they are just cash partners. So I find the deal, put it together, manage the manager, make the day to day decisions etc.  They are only involved in a small set called the "major decisions list" in our operating agreement.  Other than that they just get their quarterly reports and distributions. 

**The ONLY way I would even consider starting small with a partner is if I planned to build a long term business with this person and building an empire together.  That would have to be exactly the perfect situation with the perfect partner.

 Hey thanks for checking out my blog!  You are well on your way!!!! Especially if you checked out the Exponential Power of Real Estate Investing you've done incredibly well and are right at that corner to explode.  Congrats again on all your success!

 That's awesome man.  If you keep it up you'll have your ultimate goal and could even just volunteer your time as a pastor.  Or be making enough to fully support a missionary or two on your own.  We've hit our passive income goals for the life we want to live, but stuff like that is what keeps me going and acquiring is the thought of how much good we could do with all the extra. 

Congrats @Joshua D. !   

I'm sure you've seen it ramping up at a faster pace over time.  Keep cranking and you'll be a baron in another 5 years!