All Forum Posts by: Austin Fruechting

Originally posted by @Ezra Okon:

@Austin Fruechting or others, how does the borrowing from friends and family work legally?  Is there anything you need to set up (business entity, etc)?  Contracting work with a lawyer?

How would the bank view this if you're using the money you borrowed from friends and family as a down payment for a full mortgage / what do you need to disclose to them?

 Document everything and have contracts that spell it out. Don't leave anything ambiguous or unwritten. You can work with a lawyer, or purchase some personal loan contract stuff from a site like legal zoom. 

Banks often do ask for a few months of bank statements and if the down payment isn't there, they may not like it or allow it if the loan is just is in your name. 

Originally posted by @Yer Xiong:

@Austin Fruechting Thank you for your advice! I also love your podcast show. It's incredibly inspiring!

 Thanks! If you have any interest in the Leavenworth & Lansing area (edge of KC) let me know. That's where all my units are at and I can help out there. 

Hi @Yer Xiong - the most important thing will be finding a quality property manager. Bad management can turn a good property into a loser. 

I don't think that's too uncommon for portfolio lenders when you have borrowed a certain amount. My portfolio lender requests those too. I have to send them in and the one larger partner I have on a package deal does as well. It's not that big of a hassle. I get an electronic copy of my tax returns anyways and just email them in. 

It's pretty simple math. If you're paying 5% on an investment loan, if you can beat 5% investing that cash by investing in other properties, then do so and leverage. Honestly if the only way you cash flow is by paying all cash, then you aren't really cash-flowing and you should put your money to work elsewhere (unless you know that the appreciation benefits will be large). At 20% down, if you don't cash flow more buying 5 properties at 80% leverage than you do by buying 1 property all cash, then you probably shouldn't buy it. 

And as previous poster said, buy all cash to get the best deal if that helps then turn around and refinance it. Best of all worlds. 

The claim that 2-4 unit buildings are not valued on their income at all (and only comps) is pretty funny. 

While it may not be quite as distinct as specific market cap rates for different classes of buildings, what do you think is driving the comparable sales prices of 2-4 unit buildings? It's the income they produce and the level of finishes/location (income & building class). So not really that different.

And what drives the specific market cap rates for commercial multi-family? Are those always stagnant and unchanging? Of course not. The drivers of those are what people are willing to purchase a specific income with those levels of finishes in that location (income & building class).  So again, not really that different.

Jay Hinrichs - for sure my special deals have come from being “VERY good” at what I do. I’m one of only a handful they do the special deals for. But everything else holds true with them. Since they service in house the loans process is very easy for any existing client, and on commercial or any investment as long as their DCR is above a certain point they consider it “self sustaining” and they’ll lend with no additional income required for the additional debt.

Smaller local portfolio lenders are a great option for getting around the waiting period. I'm assuming your broker was saying that because he is working with conventional lenders. 

The best lender for me was a local portfolio lender where there would be an actual relationship to be built. They have more flexibility on what they can do and how they do it than the conventional lenders do. The terms may not be as good at the beginning, but the benefits outweighed loan-shopping. BUT over time as the relationship was built and I proved myself, the terms kept getting better and better and they do some very special stuff for me. Now no one can touch what they do for me.

I did this in the same way I cultivated relationships with all my BEST anyone... find a win-win and always follow through on your side...

At the beginning I talked to several portfolio lenders about what I was looking to do as a first property along with what my plan for the future looked like. I found out what they like to lend on, their general loan terms for what I'd be looking at, options for as improved/construction loans, cash out refinance terms/seasoning periods, etc etc. Then I choose the one I thought fit best, and have kept going with them.

The loan process is crazy smooth with no application process. The only "application" process I do is I just send them my tax returns when I get them completed each year so they have it on file. Whenever I get a property or portfolio under contract I just send it to them and say I'm buying this for $xx and want to do this type of loan. Then they set everything up and then I go sign closing documents. 

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It's the same way I've cultivated other relationships wether it be flooring guy, painter, HVAC, contractor, etc. At the beginning I got several bids, talked to them about how many properties I have and my future plans. Picked the best fit, and just go with them. As long as things continue well and they give me quality work and good deals, I give them all my business and pay promptly.

Bumping up for tomorrow. I should be there.