All Forum Posts by: Jesse Aiken

Absolutely! That is one of the major things I would do differently if I could do it over instead of starting with a duplex. 400k seems high but I don't know your market. I know it can be a little nervewracking if you don't have any experience, but I wouldn't worry about that because  you will learn just the same with 4 units as you would with 2. As long as the numbers work, it will be to your benefit to secure as many units as possible with that cheap 30 year traditional financing while it's available to you.

I'm looking a a 4 unit right now that's almost identical. 4 one bed units. It's turnkey with one unit vacant but rent ready and currently used for storage by the owner's niece rent free. I would put in the contract that the unit would have to be cleared and cleaned before closing so I can fill ASAP. The rents are a slightly lower (with a little room for increase), but overall numbers match up the same. 

My max offer is 100k to ensure cash flow with vacancy and expenses. Owner is free and clear on the building. Owners seem to be less concerned about vacancy when they don't have a mortgage. Is that the case with your deal? I have already brought up the idea of owner financing and hope to buy on terms. Seller is currently getting numbers together and I plan to contact early next week to hopefully begin negotiation.

@Joseph Back Hard/private money would definitely be one way to do it. Assessment value of the buildings could be tricky to accurately predict due to my market and that makes me shy away from hard money. Strong cash flow is my main goal. Another possible solution would be to make a seperate discounted cash purchase on the single and leverage the equity in that building either as a HELOC and/or as part of the down payment for purchasing the other 2 buildings. I would have to see what I can negotiate with the seller and what the lender would allow. I'm brainstorming and trying to think of a way that I could keep one building free and clear in this type of deal in order to have equity to use going forward without a refinance. Nothing is in motion at this point, just trying to explore possibilities. Thank you for your input Joseph.

I'm re-visiting a lead that came across my desk a while back. I was hesitant originally because I was looking for more equity in order to help me scale. I thought of something I hadn't considered before... 

It would be a 3 building purchase of a 4plex, 3 unit, and a single. I am wondering if it would be possible to obtain financing for the 2 multis that would cover the cost of the single and walk away from closing with the single free and clear without having a mortgage on it. I could then get a Heloc on the single that would basically replace most of the down payment and purchase costs for the deal.

Seems like something like this would be unlikely because I wouldn't actually own the building in question prior to closing. I don't know if it would be possible and would need to talk to lenders of course.  

I'm trying to find a way to preserve capital in order to scale. I'm just brainstorming and wondering if anyone has any experience with something similar or has any ideas. I appreciate if someone could share some experience or ideas. TIA!

Thanks for your input Mark. I was thinking anything less than 10 years doesn't allow for much equity build-up. I don't want to go too far out and miss some good potentials though. It would just take some more work to scrub the list. Maybe I should just suck it up since I'm already doing it the hard way. It's a bit of a crap-shoot anyway because there will be no info on loan structure or secondary financing to help indicate equity amount.

It's good to hear from a next door neighbor as I'm in Erie PA. I was born and raised south of Buffalo in WNY. I hear good things are happening in Buffalo.

I'm working on getting a property list from the county to scrub and create a mailing list. I'm unable to specify an equity amount to pre-filter the list through the assessment office, so I plan to filter by last purchase date. I'm curious if anyone has a rule of thumb to use for a minimum number of years from last purchase date? For example: last purchase date 10 years ago or more? I want there to be a better chance that I'm marketing to owners that have equity.

I charge $36/month and I am in an inexpensive market. Im sure your market would tolerate a higher charge. They are regular machines and the water cost  is negligible for me. If you decide to try it, I recommend getting inexpensive machines that are in decent shape. Any potential profit will be killed if you have to replace a machine within the first couple years.

I have had some success with providing a washer and dryer for a flat monthly fee in one of my duplexes. It is something I will offer to good tenants as an added amenity and to make a little extra money at the same time.

I have one unit that I installed a used set of machines for a cost of $250 for the set and have been collecting $36/month for the last 15 months. $540 collected so far has paid for the machines and added a few extra dollars to my cash flow.

I have considered offering a similar arrangement for window AC units but doubt it would be worthwhile due to the seasonal nature and added labor cost for installation and removal each year.

I think that offering a washer and dryer is a nice amenity and can make a little money in the right situation (either from a laundry fee or as additional rent) but I doubt that the added cost and maintenance of coin operated machines would make it worthwhile in a 2 unit building. I consider it more of an amenity than an income generator.

Disclaimer: I am not an attorney and none of what I have written is legal advice. It is my personal understanding and opinion only.

Forget tax implications regarding rental properties purchased within an LLC. They are negligible if any at all. Not sure how this became a discussion about taxes.

The main reason would be to separate and protect your personal assets from your rentals by purchasing property under an entity vs. In your own name. The idea is that it creates a layer of separation so that in the case that you get sued or go into foreclosure, your personal assets are protected as long as the cooperate veil of the LLC cannot be pierced. If the veil is pierced, then your personal assets are not protected anyway.

LLC's are a good idea (especially under certain circumstances, ie: purchasing property with a partner, a larger multifamily, or high risk scenarios) but not necessary if you don't have a bunch of assets and are purchasing a rental property with 4 units or less on your own.

The main thing I would be concerned with is that it is difficult to obtain conventional 30 year financing for a property purchased in an LLC and you will probably need to go with a commercial product with a shorter term and slightly higher interest.

In my opinion, it is better to purchase your first few properties in your own name in order to obtain the more favorable financing terms. Some would disagree, but it depends on the amount of personal assets you have to protect and your level of risk tolerance. This only applies if the properties are 4 units or less. If it is more than 4 units, then you will most likely have to go with a commercial product anyway so might as well go ahead and create an LLC.