All Forum Posts by: Mitch Coluzzi

Absolutely pay your HOA fees. Some associations are better then others so a verbal communication can often get things done. If you haven't got feedback after 11 days, it's time to go formal Formally notify the HOA management and/or board members IN WRITING of the persistent issue. Do it matter of factly and non-confrontational, highlight the date/time you noticed the problem, when you originally communicated it, and who you communicated it to on that date. State any action so far to date. More often then not, the PM of the HOA is just slow to react... the board needs to be aware of that. In my opinion, this is the right way to bring it to their attention.

You inherited the tenants, so you also inherited the lease terms. This is the perfect opportunity to get your documents (likely better than whatever you inherited) into play. Regardless of the term changes, I feel much more comfortable with my leases than anyone elses... So, in this case I would say absolutely execute a new lease IF the tenant meets your requirements. If not, keep in place both parties on the existing lease / terms so you have another liable party.

It is all about your comfort levels and growth goals. You are absolutely leveraging yourself, but using someone elses money (the banks) will allow you to make more for yourself with what you have and expand further, faster. 80% LTV on rentals is higher than I personally prefer, but that is a decision for you to make. My suggestion would be to set growth goals and stick to them. Utilize your rehabs to build cash reserves while you build your passive rental foundation. Live within your means regardless of what your bank accounts show. When you hit your growth goals, reassess your reserves before making new goals. You may find that having enough liquid to pay for a year of mortgages / holding is your preferred comfort level. As an investor, I keep 8 months of "if the bottom falls out 100%" money saved up. If 50% of my rentals stay active, that gives me well over a year to figure out a solution. I keep my rentals leveraged between 50 and 70% so I stay relatively recession proof. I personally like to be prepared for the bottom and... if a crash comes I have extra liquid / available equity funds to keep buying (assuming my doomsday predictions are overshot). My new investments get added onto more aggressive amortization schedules. My goal is by 2035 to have 102 free and clear units...

Did you get a home warranty when you purchased your home?   Depending on your plan's deductible / terms, there could be a very simple solution.   Else, a plumber can quickly/easily make the repair.   

Unfortunately, things do break, that is part of home ownership.  Two months after occupancy it could be the same hot-water-heater but a different joint.  Whatever you decide, please get it fixed quickly and determine whose fault it is, after it is repaired.  Gas leaks can quickly escalate into a dangerous situation for you AND neighbors.

Yes, it is occurring monthly and a bit more organized than before so communication isn't such a big hurdle.  Here is a quick link to our Meetup page.  It occurs the third Thursday at 6:00 PM at Ingersoll Tap now!  Our next meetup will be September 21st.

@Account Closed

@Kyle Stephenson I can toss you a recommendation for a bank who would be glad to work with that scenario. They are well versed in both Ag land and REI. Feel free to reach out!

Our line of credit is established through a commercial/investment bank. 

Towards the little to no money down piece, going to use an example from earlier this year.  This will give you a mindset to approach banks with in your quest to find the right fit.   This is an extreme example, but did occur (will include a link to the "after" remodel at the end of the post). Purchase price of $13k,  rehab estimate of $90k (hard cost $13k+$90k=$103k), appraised After Repair Value of $135k.  Bank gave us a construction loan for $92.7k  (90% of hard cost or 70% of ARV whichever is less) to get through the project.  From this, they funded $13,609 at close to purchase (purchase price, closing fees minus tax prorate). Leaving us with roughly $80k to cover our forecast repairs: materials, labor, subcontractors.  The difference between that and your actual is your out-of-pocket forecast.

This is where the "sweat equity" comes into play... $90k rehab is a reasonable forecast (broken up over all the trades - we use licensed subs for mechanical / electrical and we are a licensed plumbing company). In other words, to the bank and the appraiser $90k is what one could realistically expect to spend rehabbing this project.  For example, if you end up hanging the drywall, painting, laying flooring, etc yourself instead of hiring someone else, maybe it costs you half of what you would have forecast.   You can turn in for your materials (but not your time).  Bankers stay happy, job still completed it just cost less money.    So, that $92.7k loan to get $103k of work done is doable.  Meanwhile, you only have your time/labor out on the project.

Sidenote:  This was a burnt down house that sat vacant for several years.  It needed literally everything... On the finished product, we ended up classing the house up significantly more than initially planned and did go over budget quite a bit.  Added over $10k in landscaping along with staging / upgraded finishes. Sale price was over $180k...  appraisers are historically conservative with their estimates, as you should be as well.

Here is a 3D tour of the interior finish

Congrats on the success you are having!  It's great to hear when people are making things happen in the RE world.   Love the eBay plan piece, never even considered it.

If you get into tract housing for rental (or even resale), look hard into tax abatement opportunities.  The property taxes can make or break it from the rental side and absolutely make the property more marketable if flipping to homeowners.  A lot of developing cities encourage large-scale development by giving 3, 5, 10 (or more) year breaks on the taxes.  If your does not currently, ask what it would take!

We love value-add projects and have recently transitioned into new construction development (again) for the rental markets and entry-level housing.  Everyone here wants to build 250K+ while we are marketing to that entry level, first-time buyer.   Mainly have 3 bed/2 bath plans, have not been brave enough to venture a 2/1 plan yet.  It's an interesting mark that I might explore further.  Thanks again for sharing!

@Ricardo Funk Hernandez - this really depends on your financial goals, your current financial picture, and your personal ability to perform.  For some folks, partnerships provide structure and a much needed push to excel. 

I'll address your questions individually to the best of my ability.  It could make sense, it depends on your situation.  In this scenario, you are giving away 50% of the equity and 50% of the profits for 50% of the relatively low buy-in.  

1) Financing is possible as a percentage OF HARD COST or APPRAISED ARV value, whichever is lesser. So, you can hypothetically get into these properties, through a standard investment bank, with little to no money down if you have an established game-plan.  Basically, you can utilize sweat equity (if you have the skills) to make the down payment up.

2) Some people open LLCs for each and every property. This is a cumbersome in my opinion; but you will want to keep a separate operating agreement / LLC for each set of partners you work with, if you proceed with the model proposed. The operating agreement will help from either party getting greedy over time and renegotiating terms.

3) There are creative ways around it but... safer for you both to be listed as guarantors.  I do not know any commercial banks that are going to forego a personal guarantor without significant commercial assets in the entity...

4) Yes.  Buy, Rehab, Rent, Refinance.  You can do it... find a commercial bank that isn't going to make you "refinance" every deal though.  

For me, equity partnerships do not make sense and never has.  I can pay a bank much less money than most creative financing models AND retain 100% of my equity.  We got started doing pure flip and sell until we could afford to hold onto a few (this was possible with savings + a W2 job to back up my funding).   Then we transitioned into blending the models (flip some and a modified value-add remodel to hold on the rest).  We were patient and grew the hold portfolio over a few years time while maintaining significant capital growth via flips.  I have been full-time investor for several years now, never looked back and glad I patiently waited without partnering...  

Present day: Here's what we do... we simply add each property as collateral against our overall line of credit. The available line of credit keeps growing monthly as we make payments against it that cover interest plus an amortized amount of the total loans. This allows us to maintain a very flexible financial model, if we want to buy a property... we have enough available on the LOC to purchase it outright without a financing contingency, appraisal or otherwise. The property closes, a trivial mortgage for intended value is added secured by a $1.00 note. Then we can have it appraised (if necessary) and our line of credit is expanded. The note is adjusted as needed internally... mortgage is what secures lien-hold rights for the bank.

My laymans (not a lawyer but have been playing the property manager game for awhile) understanding is that... You can go but it won't likely do you any good without additional steps and a hint of luck. The FED you filed presently was based on non-payment, and the notices you provided the court were related to that for the same purpose. You will unfortunately need to file an FED request if they stay-over, with new proper notices and whatnot. You MAY be able to amend the submissions and request a motion to keep court date date. Judge will decide... worth a shot... run it passed local counsel though. worst the judge can say is... resubmit!