All Forum Posts by: Jaysen Medhurst

@David J.-- Eye Roll

• 1st, the article is from 2011.
• 2nd, doom-and-gloom types are all over the place. They think the only "safe" assets are gold and silver.
• 3rd, by point #3 he's going on about the governments deception and hiding real inflation rates.

Give this guy a tin-foil hat and get on with your day.

@Brian Bonetta, each LLC doesn't need an LLC, but that maximizes asset protections. If they are all under 1 LLC, you probably can have fewer accounts. Check out Clint Coons on YouTube. Lots of good info there.

@Aaron Harris, are you talking about refinancing your home or the one you inherited from your parents?

@Cristina S., the "correct" step is highly dependent on individual factors. 

First, you may not be able to take out a loan under the LLC's name. As it has no track record. You may be able to put the title in the LLC's name, but you would be personally guaranteeing the loan.

Make sure you do your research on LLC's and how to properly set them up/run them. You can "pierce the veil" if you're not careful and lose the protections you seek. E.g. mixing personal funds and LLC funds.

Can't speak to Georgia state laws, unfortunately.

Lastly, think long and hard about condos. They can be very difficult to make work. Between HOA fees, special assessments, and rental restrictions it may not be worth the effort.

@Rick Turman, you're understanding it correctly. I suggest doing some more research into local banks/credit unions. Ask them specifically if they have a "seasoning period" on refis. Or just be straight forward with what you're looking for: 75% loan of appraised value once all units have been rehabbed and rented.

Hi @Spencer Brennon, I think you're missing some stuff here. Even if you manage yourself for now and cut the grass, etc., you still need to figure it into your expenses. Otherwise what is a pretty good house hack turns into a loser as a pure investment.

• Vacancy 10% (your unit included)
• Prop. Management 10%
• CapEx & Repairs look fine (I figure 7.5% each)
• Landscaping/Lawn care?
• Snow removal?
• Shared utilities, like porch lights?
• How much is it going to cost to put in the 4th unit? Is it even legal? Have you confirmed with the Dept. of Building?

Run all of your numbers again and be brutal. My back-of-the-envelope math puts you at $-65/month cashflow as a pure investment property. May be worth it for the appreciation, but remember, that's speculation, not investing.

@Christopher Derr, I like holding on to your equity so you can do another deal. $150/door/month CF is a good solid goal.

Will there be any renovation costs? You have to figure that into your numbers, as it will affect your return.

I suggest running an Internal Rate of Return analysis (tons on BP about this). It will give you a more sophisticated view than simply cash-on-cash/ROI.

Finally, I think your expenses look a little low. I figure 10% Vacancy; 7.5% repairs; 7.5% CapEx; 10% Prop Management.

@Amber Gray, yes, this is a good strategy. Obviously, start with the person who is behind on rent. You may want to consider offering "cash for keys." Renovate that unit 1st and the outside as well.

You can then have some conversations with the other tenants. If they're good tenants, you may not want to run them off. You can offer to move them into the newly renovated unit at the increased price and with a standard lease.

OR you can tell them that the rent is going up $50 every 6 months until it hits market and that you will be requiring a standard lease going forward. 

If they see the condition improving, they may well be happy to pay a bit more OR decide to move on their own.

It won't necessarily be an easy process, but you have a lot of options. As long as you've done your due diligence and underwriting, you should be fine.

@Haresh Melwani, congrats on the potential deal.

"An inspection" is vague. You want to check out every unit top to bottom to get a reasonable idea of how much deferred maintenance/repairs there are and what that's going to cost you right up front.

• If it's an older property, it may be worth while to have the sewer scoped.
• Check all of the water shut off valves, in the units and the shut offs TO the units. Make sure they're working properly.
• What about parking and common areas? Do they need upgrading?

As far as financing, if you haven't done a deal before, you're going to have a lot of trouble. This is a commercial loan (more than 4 units) and the lender is going to want to see experience AND cash reserves. Expect to have to put 25% down and show that you have the cash to implement a capital improvement plan, which the lender will probably want to see.

If this is your first deal, you will most likely have to partner with an experienced partner, which is actually a very smart idea.

Typically, a commercial loan is 20-25 years amortization and a 10-year term, but can vary widely.

Hi @Trevor Lofstedt, congrats on the property. I think what makes a property stand out to prospective tenants is that it looks and feels "fresh and clean." That doesn't necessary mean high-end features or lots of bells and whistles.

• Make sure the walls and trim are as smooth and crips as possible. 
• If something is showing wear (like a formica counter top) replace it.
• No cracked tiles or stained grout.
• New light fixtures if needed. And add overhead lights where necessary.
• How does the outside look? Is really needs to be neat and tidy. No overgrown bushes or peeling paint. This 1st impression will be huge.
• One great trick that I did in my own personal property is to replace all of the electrical outlets, light switches and switch plates. Use white, not beige. Amazing how much it freshens up the look of a place. This is very easy to do yourself.

Lastly, don't overlook spending your money where the tenant won't see it. If the utilities are shared, see what it would cost to split them out. This can be a huge driver of NOI.

Good luck!