All Forum Posts by: Jerry Jenkins

I have been investing in real estate for 30 years, am a licensed Realtor, and have a 800+ credit score but have never done a Private Money loan so wanting to know what is normal for rates and terms. Situation is that I have a 99 year land lease titled 4plex that I purchased in 2009 for all cash at $180K and have put another $20K in for remodeling and maintenance.  I bought with the intent of converting title to 4 separate condos since over 50% of the community has converted 4plexs to individual units and that would raise the market value of the units.  Currently my 4plex as a 99 year land lease started in 1977 should be worth around $250K but the individual units are reselling for $75K making mine worth $300K.

My goal is to sell, place the cash in a 1031 Exchange account and then buy 3 to 4 condos in a high rise using private money loans with 30% down payment on a 30 year fixed amortization but a 5 to 7 year balloon.  This would give me better monthly cashflow and higher appreciation.

My first worry is that the 1031 Exchange has a time limit to repurchase like kind investment property and I do not want to be forced to buy 4 condos in that limited time. Also what would a note for this investment look like as far as interest rate and points?  I am only looking at private money because banks are not lending on condos in my market.

The other note question I have is would be possible to get a note on the land lease 4plex now while I am negotiating with the HOA board and the county to get the retitleing done so I can pull some; maybe 50% LTV of the equity out and start buying a condo or 2 so I have less equity to reinvest during the limited 1031 exchange period? If so what would the terms and rates be for this note?

I have called several local banks and credit unions and have a meeting setup for Monday where they re willing to loan at 80% LTV on a. condo but are wanting 7.99% interest and 3 points for a 30 year fixed rate and a 5 year balloon. Will be asking about loans on land lease at the meeting but am wanting some comparison numbers before sitting down with them.

The FIRST step about LLC being worthwhile or not is to consider your STATE laws and costs. Each State is different so what makes sense in one state will not be the same in another. The costs of an LLC are different, the risks owning rental properties are different, the cost and time for evictions are different so talk to a good attorney in your state and then you can decide what and when it makes sense to add an LLC as an additional layer of asset protection. If you are just starting out and do not have a large asset base then your risks are less but again it goes back to state law.

I wish that I had started asking questions at your age!  At 56 here is the advice I would start with.  First read books starting with Richest Man In Babylon and The Wealthy Barber.  Next, you mentioned that you live with your parents, do they have any income ,credit, what is their living situation?  A girlfriend is risky to invest with because it will put more stress on the relationship and as a first time investor there are more risks due to lack of experience.  The first investment property should be one you live in so loans and down payments are easier and study house hacking on here you might find an different way to invest.  Maybe find a 4plex that your parents can live in 1 unit, you in another unit, and have 2 units for rentals?  Or live together in 1 and rent 3?  

What do your parents do? Can they manage rentals?  Also you can research crowd funding to see if there is a safe way for you to invest the funds you have now and have them earn a higher rate of return while you build knowledge , find your first deal that works, and develop a plan on where you want to go.  Good Luck!

One thing not mentioned that I think a lot of new landlords miss is to factor in the eviction laws and procedures of your state and city.  Here in Las Vegas, NV I can evict for non-payment in 12 days.  Lease states rent due on 1st of the month and late with late fee on the 5th.  If rent is late, I post a 5 day Pay Or Quit Notice and if tenant has not paid by the 10th I can get Sheriff to evict 2 days later.  So my risk and cost of an eviction is a lot less than another state where it might take months to evict a tenant.  I had a property manager tell me a story that in New York he had a client that took 23 YEARS to evict a tenant in court.

Know your costs to evict and let that guide you on borderline applications.

Guru Courses......let me ask you a question....IF the Guru can make the money they say they make using the material they teach then WHY are they spending their time and money to market the material and selling the courses? The only logical answer I can come up with is that they make MORE money selling the tools and education than they make using the tools.

Next question.....would you without ever playing football; try out for the Denver Broncos?  To be good at anything, you must first learn to walk before you can run and what really worries me is your post stating "we're getting closer to our target retirement age so we don't have time to learn as we go ;)".  if you do not have time to learn now it will only get more risky and more expensive later.  If you feel stressed now using your own money, how will you feel when an investor is breathing down your back wanting his money back?

I have a friend trying to flip 10 houses a month and after years in the business with 85 subcontractors on his crew; he loses money on about 20% of the flips, breaks even on 40%, makes a small decent profit on 20%, and hits a homerun on 20%.  Take your time to ensure that you have estimated the cost for repairs accurately, analyzed the market correctly, managed the project efficiently , and build in a large enough surprise factor on the one flip you are doing before you get too many irons in the fire.  There is time ramp up volume after you get the process streamlined but going too fast is almost a guarantee to losing money.

The answer depends on what state the property is in and what the eviction laws are for that state.  Why works here in Nevada where I can evict in 12 days will not work in California where it might takes months to evict someone.  This goes back to knowing the laws of your state and being prepared for this situation before it happens so you can limit the rights of the tenant.  Asking the question after you have the problem is bad business practice and should have been factored in to the logic and economics before you purchased the property. The best advice I can give anyone is to call a local real estate attorney and have him handle the eviction.  It will cost you more money but he can show you the proper paperwork and process so the next time you have the same problem you might be able to handle it yourself legally. 

I agree 100% with Dave Foster; in fact I used t have a friend from Salt Lake City who before he passed away had a company he named HAB; Highest And Best.  He would find a lot and determine what the best use for the property would be and then decide which company would benefit the most from that location.  If you ever drive north on I-15 towards Salt Lake and see the huge Carbella's on the east side of the highway that was one of his projects.  He taught me that the end of the block was more valuable than a lot in the center of the block and that a stoplight at an intersection made the corners more valuable.  He would buy an option on a lot for development then petition the city for a stoplight and then resell the lot for higher valuation.  Commercial is a lot different than residential so determine what the best use of the lot and then that should determine who you should market the land to.

Aaron Hunt

I’m not even sure there’s a single neighborhood in Las Vegas that is 90% owner occupied? Haha

What I meant was that 90% of current LOANS are for Owner Occupied purchases, not that neighborhoods were 90% owner occupied.  The reason for pointing that out is that this should lead to a more state ownership base. During the crash, most foreclosures were for financial reasons and voluntary. People who bought at the top of the bubble and were cashflow negative based the purchase for appreciation when we had neighborhoods going up 30% in value per year.  When this ended and markets started to fall, these "investors' were losing monthly cashflow and seeing the value of their property decline so they quit making payments and in some cases mailed the keys to the banks.  That was part of the reason Las Vegas had been the #1 market in the nation for growth during the boom and the #1 reason for leading the nation in falling prices.

Now that we have tighter lending guidelines, more owner occupied loans and sales, we should see a more stable ownership use and when the next decline comes it will bless volatile and not as steep as the last one.  That is a good thing AND a bad thing.  Good for the typical resident but will make a less valuable opportunity for investors riding the waves up and down in this market.

I own a 4 bed 2 bath pool house as a STR on Airbnb and it would lease for $1300 a month and my loan payment is just under $1200 month so the cost to operate as a leased unit versus owning is about the same on a month to month basis. The differences I see in the business models are that when leasing a property, you need the landlords permission to quickly address repairs for appliances or you are buying appliances and doing repairs that will save the landlord money that you might not be able to recover. Also my listing generated $37K in gross income with expenses roughly $2K a month so the profit for the year was around $13K last year but appreciated 18% for the Las Vegas market. $220K prior valuation with 18% gain means that for the year I had equity increase of $39,600.00 not counting the loan pay down amount.

In the past I have rented 3 of the rooms by the room and it was too much labor for little profit.  Renting the whole house requires less time commitment but the profits from the rental income are only 1/3 of the gain from equity increases currently.

I am now in the process of selling a 4plex in an HOA, putting the sales proceeds in to a 1031 exchange account, and then buying condo/hotel units for STRs that should cashflow better but the real purpose is to own and control more units and watch the appreciation curve until the market tops and starts slide again. When the market starts falling then I will sell the condos and find another market in a different phase of the real estate cycle.

McDonalds built a huge company but Ray Kroc always said he was in the land business and not the hamburger business.  The hamburger sales was just a means to pay for the land on corner locations and the real money was made from the land and not the hamburgers.  Do you want to build a business flipping hamburgers as in leasing, furnishing, renting, and then renewing the lease or moving and storing furniture or do you want to build business of owning property?

The real question is how does your listing compare to other options a guest would have in your area.  I would run a search for your type of listing in your area, see what the others offer for amenities, what their price points are, what their occupancy is and ask yourself if you were a guest which listing you would book first and why.  Do this Airbnb, on VRBO, on Homeaway and then decide if adding a tv will increase the odds of you getting more guests than your neighbor.  Also ask yourself how long or how many reservations will you need to pay for any amenity that you are thinking of adding.  For most Hosts the best return on investment is having professional pictures taken after the house is professionally staged.  Professional not meaning that you have to pay high dollars but should have someone with a good decorating eye walk thru the listing and add accent pieces to give color and flair to the space.  Give guest the things you would want or expect if you were coming there for vacation.  I also advise Hosts to stay in their listing for a couple of days when it is vacant to really see what the guest experiences, what items you missed, and what things you want to add when the budget allows.