All Forum Posts by: Account Closed

 There often aren't deals with sufficient margins. 

 Whoever has the lowest rate.

The future value of a property or rent will not rescue you from a foreclosure if the present rental income is insufficient to cover the present mortgage and expenses and you do not have sufficient extra funds to cater to the deficiency. 

This is the fundamental problem in markets like LA where cash flow on many of the rentals have a ways of being negative. 

If you are an investor in LA with multiple properties (not just buying a personal home), having to spend (or set aside) an extra $2500 to $3000 per investment/unit every month and for years (or however your holding period is), because rental income was insufficient on each of the multiple rentals can become a problem.

The LA market is the way it is due to forces of demand and supply and what some spend $300,000 or almost $400,000 on in LA, some in many areas wouldn't touch with a 10 foot pole.

If you are analyzing any investment (particularly a real estate investment), at some stage you have to be aware of what your holding period of the investment is to make any sense of the investment. Not knowing your holding period isn't a good sign --as it often also means not knowing your exit strategy and will likely spook any anyone trying to fund a deal.

From an FHA standpoint, 3.5% compared to 20% for down payment may be good (less hit to the wallet) but also may be moot in terms of getting a deal to make sense for a noob investor in LA. The grittier matters of concern is likely to be your mortgage rate and consequently your monthly payment and other monthly expenses and to what extent these expenses are completely covered from rental income (think debt service coverage).

When researching, you of course want to look into the FHA loan limits on a multifamily as it applies to you and where you are able to buy in/at per the limit. Reserve requirements and debt service coverage are also things you want to look into as if the numbers don't make sense from a debt service coverage requirement perspective, why the headache?

Remember, this isn't an issue of whether or not properties appreciate in Los Angeles. 5.8% per year is the historical average there. 

Typically when/if you do business in multiple states, each state may require the LLC be incorporated there also. You have to be aware though what the yearly cost of maintaining the LLCs are in each state.

For estimation purposes, 12% may be the rate on a hard money loan although it may get up to 15% based on the lender and background of the rehabber. Terms may also be up to 12 months (cringe) but they typically plan on having the rehab sold within 6 months. The dog sends his regards and a bark.

 Assume they plan on using 'hard money'. If they use a cheaper financing source the feasibility of the deal isn't disrupted.

Check with a number of banks in the area -- see what they offer.

 Are all your planned investment activities in Indiana?

The investor also told you that buying houses this way could be extremely risky correct? The LLC may have countless undisclosed liabilities that could erase the value of the houses in the LLC.