All Forum Posts by: Clay Manship

Hey Indy folks-

Some of us have put together a Real Estate Investors in Indy Facebook page, that can be found/joined here: (Mods, if this is not allowed to be here, please remove. Thanks!)

https://www.facebook.com/pages/Young-Professionals-REI-Indy/401424023292007

Looking forward to meeting you all and doing deals together in the future!

Bump! Please help!

Hey all-

Currently have my first deal under contract. It was taxed at $65,000, but purchased for $25,000. It is currently tenant occupied, and will be until June 2014.

I spoke with some insurance guys today, and their quotes kind of surprised me. I was quoted $100/month for 100% of rebuild value, and $83/month for 80% of rebuild value.

My question for you all is: How much should I be paying in insurance, per month, for a home that I am spending $25,000 on? $90ish seems pretty high, but the guys said that anything under 80% rebuild value would be done on a "cash value" basis, or how much the structure is actually worth. Isn't this more of what I am looking for than a "rebuild" on a $25,000 home?

Please help!

Hey @Amy Solomon -

Not sure what your situation is like, but when I approach investors, I offer proposals for full recourse on the property, for a $30-40 K loan. $100K is a damn large loan, and I'm not sure my family loves me enough to risk that kind of money at 10%!

I have 5 year deals, interest only for the first year at 10%. Then refinance the note with a large commercial bank after one year of seasoning, at around 75-80% loan to value ($50,000 house would be refinanced at $40,000.)

Works well for me--get quick cash for fast deals and if you buy a property for $25K, spend $10K making it worth $50K, you can then refinance at $40K, reap a profit, and take equity out for your next deal, too. Win-win.

Shawn-

I am under contract right now with a turnkey single family house. The tenants were leased into the home in July, and have the home through June of 2014. Going into a property with tenants can be awesome and dreadful, so do one thing very well:

DO YOUR DUE DILLIGENCE.

Make the seller provide the lease agreement, proof of funds that the tenant was screened, how they were screened, proof of funds and payment, get a tour of the house, meet with them, do EVERYTHING you can to protect your livelihood given that they WILL be your tenants through the duration of their lease.

That being said, if the tenants are good, then you are probably in a good spot. My tenants are paying slightly below market rent, and were screened by a property management company who has been collecting their rent as well. So all seems to be good in my book. Only time will tell.

Hope this helps. Good Luck!

C

Hey @Alison M. -

I am looking for the same--buy and hold residential property pro-forma templates. Can you help me out too? Thanks!

Anthony-

If you DON'T feel this way, you are not in the mental state of mind in which you must be to be a successful landlord. Remember, this investment is your livelihood. You are buying a property for the betterment of yourself--something that the tenants of that very property had the same legal rights to do themselves.

I can see the ethical issue here if you feel that way, and my guess is that you will find others with differing opinions. However, in my opinion, strength, knowledge, and confidence are what separates good land lords from bad ones. Having the backbone necessary to not renew a lease or appropriately raise rents may result in a headache that is not worth the time of getting into real estate investments in the first place.

Andrew-

The lease that these individuals are on, whether its a one year lease (typical) or longer, runs with the PROPERTY, not the owner. Therefore, when you are to buy a home that already has tenants in it, you can't "kick them out" per se, but rather, you "inherit" the tenants upon purchase.

That being said, it is common for a buyer to negotiate a term with a seller to have the tenants out of the property at closing. As I understand it, this can only happen when there is a mutual decision to terminate the lease, the current owner buys out the lease, or the lease comes to a conclusion that the seller then will not renew.

Hope this helps.

C

Hey all-

My first deal is a single family home with tenants already in place. They are paying $650/month in rent, and have been paying and paying on time since their lease began in July of this year.

I was skeptical about buying a home with tenants already placed, however, the immediate cashflow and the condition of the home was enticing. What made me feel better was seeing that the tenants were screened and placed by a local property management company who has been collecting the rent as well.

Wanted to ask you veterans if you have ever run into this, and what you would do. I have been told it would be a good idea to get an estoppel from the tenants, and it would be a good way for me to introduce myself as well. Nobody likes change, including tenants--I get that. I just want to make the transition for them (and myself) as seamless as possible. Thoughts?

C

I'm aware of what an LLC is for. I was asking for the input of those who have been in the same boat, and want to provide a layer of protection should there be a lawsuit, etc.

Just don't know if forming an LLC for all my properties is worth it, seeing as it has costs associated with running it, is taxed the same (in Indiana) and doesn't ensure personal protection if the loan is to not be paid off for whatever reason.