All Forum Posts by: Guy Yoes

Yes. They all want to offer commercial with a 5/1 arm but will carry for 30 yrs. And at I'm sure at a higher rate. 

I have one offering commercial at 6.5% @ 5/1 arm. The other is conventional  at 5.75 but will need 5 closing @ $3800.00 per closing.  That's another $15K over commercial costs. It would be better to forgo commercial now so save interests later, but it gives me less equity in the note.

My numbers are roughly 500K with 200K down. With taxes and ins. in escrow it runs about $2450.00 for the payment. Management is another 600 per month. Net comes in at $2950.00 I would put back $450.00 a month until I get %5K in reserves for repairs and upgrades. They all have long term tenants and rent will go from $600 to $625 the first of the year.

Looks good on paper, but two of the structures will need a new roof within the year. That will be close to 15K (includes new trim boards and painting).

Thank you for your comment.

I have an opportunity to buy 5 duplexes for 500K (5@100K each). I plan to 1031X two of my current properties (225K total) to make the purchase. I have talked to several lenders and am not sure the best route to take for financing.

Issue 1. If I buy all 5 at once lenders are pushing for commercial loan at higher rates. This would save money on closing costs. If I buy one at a time (close same day on all) I can get better rates but would have 5 closing costs. I think closing one at a time will save money in the long run as the rate would be 1-1.5 less. Any thoughts?

issue 2. My current two properties I plan to 1031X are in my LLc. To go conventional I would need to put them in my name and out of the LLC. This will take some time and more costs. After the closing I would want to put them back in a LLc which would cost more money again.

Option 1. Go commercial and put the 200K down across all properties at 60% LTV. I plan to go 30 yr as this is going to be cash flow for retirement.

Option 2. Buy 1 property out right for 100K and the other 4 @ 25K each. I could do conventional and get better rates but would still have the LLC issue.

Option 3. Go with a private lender, do all 5 at once, keep the LLc and try to buy down some points.

More info:

The person selling the properties manages his and about 25 others. Part of the deal is he will continue to manage them. I'm good with that as they are long long term renters and he has a good history with them. We will move to the area in about a year (I live in Ok and the properties are in MO.) Eventually, I will manage them myself. This is a private sell with no RE agent involved. Is there a way I can get comps for the properties without going through a RE agent?

I appreciate any comments or questions!

Those are good places as far as schools and quality of life. However, the property taxes and insurance costs are higher. They also do not offer as high a return on investment (in my opinion).

You might consider Sapulpa, Glenpool or Sand Springs

, They are working class areas and are more affordable for most renters.

My Jenks house is 1950 SQ FT cost $210K and rent is $1500.00

My Glenpool house is 1235  SQ FT cost is $115K and rent is $995.00

They are 4 miles apart.

I would recommend Shane Vernon with Twin Cities reality. He also has a management company. He can help you find good deals on houses and manage them as well.

It depends where you are in life and where you are in you REI experience. Most people starting out cannot pay cash for their first property. Leverage is good if you are young and can manage the risk.

Owning properties outright does have advantages. Two of my properties I own a 100%. I am now negotiating a 1031X using those two properties to buy 5 duplexes. That is how I use leverage. If my money was spread over 4 SFRs  I would not be in a position to do the 1031X. The two properties were 2 of my first 3. I learned a lot by growing slowing and managing them myself. I used my cash flow wisely and can now jump into multi family properties. this will allow me to retire completely and have enough equity to pursue another great deal when it comes along.

To me it is all about the numbers and my time frame. I started REI at 51 and am now 57. I made a plan when I started and where I wanted to be in 10 years. I'm now and ahead of where I planned to be at this point.

When to leverage and how much is one of the most contentious issues I have seen on BP. In the end, the decision is your, choose wisely.

I have an opportunity to buy 5 duplexes for 500K (5@100K each). I plan to 1031X two of my current properties (225K total) to make the purchase. I have talked to several lenders and am not sure the best route to take for financing.

Issue 1. If I buy all 5 at once lenders are pushing for commercial loan at higher rates. This would save money on closing costs. If I buy one at a time (close same day on all) I can get better rates but would have 5 closing costs. I think closing one at a time will save money in the long run as the rate would be 1-1.5 less. Any thoughts?

issue 2. My current two properties I plan to 1031X are in my LLc. To go conventional I would need to put them in my name and out of the LLC. This will take some time and more costs. After the closing I would want to put them back in a LLc which would cost more money again.

Option 1. Go commercial and put the 200K down across all properties at 60% LTV. I plan to go 30 yr as this is going to be cash flow for retirement.

Option 2. Buy 1 property out right for 100K and the other 4 @ 25K each. I could do conventional and get better rates but would still have the LLC issue.

Option 3. Go with a private lender, do all 5 at once, keep the LLc and try to buy down some points.

More info:

The person selling the properties manages his and about 25 others. Part of the deal is he will continue to manage them. I'm good with that as they are long long term renters and he has a good history with them. We will move to the area in about a year (I live in Ok and the properties are in MO.) Eventually, I will manage them myself. This is a private sell with no RE agent involved. Is there a way I can get comps for the properties without going through a RE agent?

I appreciate any comments or questions!

My plan would be to 1031X the property to save not paying taxes. I would find a property that I could put the 50K in and would cash flow well. Then I would put everything into it to create equity and/or appreciation, while i studied up on the area and found a great deal. At that point I would refi, HELOC etc into another property.

I would not over leverage on more than 1 property if I didn't have the funds to make repairs, sit out vacancy or be able to act on an opportunity that required quick action and some cash.

I don't mind a little risk, but I avoid "going all in".

@Leopoldo Vazquez We follow Dave as well. We were blessed to have good jobs and debt. We lived off my income and put all my wife’s income into our properties. There weren’t any properties close We wanted so we bought Notes. We kept the equity in and used the rent to diversify. Now I found a great deal on 5 duplexes and have the equity in two properties to 1031 them and not pay capital gains. I could not do this if I had leveraged myself as some people encourage you to do. I will have 60% ltv when done and cash flow 3200.00 a month. This will be our legacy to our children.

I guess everyone develops their own plan. I knew nothing about REI when I started 6 years ago. I didn't know about BP and all the strategies. I bought a SFR with some saved money and a HELOC. I put everything back into it and then some. I paid the house off in 18 mo. I found another and with a HELOC and rent and some extra money paid it off in 14 mo. I was learning to manage properties and growing. I bought an auction house and rehab it and put everything into it (2 rents and extra cash) paid it off in 12 mo. I had good cash flow and decided to put it into first position notes. three houses is all I could manage and work full time. People here told me I was stupid to keep 100% equity in my houses.

I retired last year and recently was vacationing at a large resort area. I met a man needing to sell 5 duplexes quickly to cover medical bills for his wife. they appraised at 638K total. He wanted to sell all 5 at once and we agreed on 500K. Because of my equity in the properties, I can 1031X two properties (200K down into 5 duplexes (10 units) and triple my cash flow. 

At this point I am retired with 6 years REI experience and better prepared to manage more properties (all on the same street) and build our dream home on a lake 3 miles from my duplexes. 

Also, as soon as I close the deal, another duplex owner in the area wants to discus with me managing his duplexes (3) on the same street.

I did not take the path of conventional advise (low to no equity), but slowly grew my business and believed that my equity would allow me to take advantage of a great deal somewhere in this journey.  In 6 years, I have acquired 3 properties worth over 300K debt free and 150K in first position notes all from a 75K HELOC and 25K in cash. 

It may not be the way you would do it, but it worked well for me. 

The properties are all on the same street within 2 blocks of each other. Makes it more attractive. The person that owns the properties manages them. He needs to cash out quickly but is willing to lower the price to 500K if he can still manage them ( manages about 30 units in that area).