All Forum Posts by: John Matthews

Hey All,

Thanks for the great responses! Before I respond to you all, what are most people seeing as far as returns? In Philly I can get 2% properties (though realistically most are in the 1.5% range) and I usually don't settle for anything that wont' at least pay for itself with 0% financing at 75% ARV (ie. for a $100k property, I'd have a loan for $75k and the property would service all expenses and debt service plus some). Am I dreaming if I want to achieve the same goals in SD?

@Kenneth Ho - I'm looking to buy SFR or MFR but as a strict investement property. My wife won't let us do MFR owner occupied - we're sick of sharing space with people. Even now we live in a condo, but with our nut job dog and lovely building politics (which honestly, aren't so bad anymore) we're ready to have our own space. I'm not too worried about "less desirable" as long as I can understand it, the people, and what I'm getting myself into. I've found that most people are decent people, they just look scary. But I'd definitely like to trend towards nicer areas as my financial situation allows for it and as I get older. Just a smaller headache factor.

@Laurel G. - Congrats to your daughter. Where did she match? I've been considering investing remotely in places like Iowa, but the not having boots on the ground / people I trust scares me (and Philly has a pretty good purchase price to rent ratio so I haven't had to yet). Did you live there previously or did you invest remotely from the start?

@Jacob Terrell - Yes, that's my concern. I like my properties to have equity built in when I buy them with as much debt as possible (ideally 0% in with the BRRR strategy) and still have it cashflow. I'm hoping I can continue that here, but based on what I've seen in looking very briefly, it doesn't look likely - but then again, I don't know the area at all. Always happy to talk RE. Let's touchbase when I get to SD - ideally by June 22.

@Kevin Fox - Thanks for the invite. Yes, I'd definitely like to participate in one of your monthly meetups. I'll put in a calendar event to reach out when I get situated there.

@Don Johnston - Thanks for the heads up. I'll definitely look into that one though it seems like @Justin R. thinks they're not too great?

Justin - Definitely looking forward to meeting you all if possible. Do you mind if I reach out when I get there?

@Weiwei Gao - Awesome. We are looking to rent first while we get the lay of the land. I'm actually a firm believer in the buy where it makes sense, and rent where it doesn't strategy, at least right now. I've never owned my own primary residence! Which is usually strange when I'm applying for another mortgage for an investment property, haha. That said, we're a bit particular with where/what we want which might pose challenges - detached house w/fenced in yard somewhere in City Heights (wife's clinic) and North / NW (I don't have a job yet, but it seems like most medical device jobs are up in Carlsbad (I'm an engineer for a medical device company). That said, I'd definitely appreciate being put in touch with your friend. I haven't started looking too hard at rentals yet since I don't know where I'll be working and I'd like to split the difference btwn our jobs, but once I start looking I'll definitely reach out.

@Joy Mondala - Best of luck to you as well. I'll definitely reach out for rental advice and I'll try to update here or on another thread how things go for me. Let me know if you've got any questions about managing multiple rentals yourself, particularly from afar! I've got some systems in place so I plan to manage my places myself. I made a relationship with a contractor (after lots of bad contractor), who's now my maintenance team. I gave my tenants his number directly, so they call him for maintenance needs. Anything over $200 he gets permission otherwise he fixes it on the spot. For leasing I've been working with a leasing agent who's been helping to rent out my units. Most everything else is handled by phone call. I do have two property management companies I've been working with / vetting that I like, so that if I need to I can transition my portfolio to them. As of now I plan on having my contractor update me with pictures of the properties as he can / whenever he goes to the properties, and I intend to visit at least once a year myself. I do have a colleague as well who will be buying into two of my properties and I intend to lean on him if necessary as well.

@Curtis Bidwell - Congrats to your son. That's a great tip on the doctor loans. When we're in a position to buy we'll definitely look into that, looks like an awesome deal.

@Jarred DeArmas - Thanks. Also thanks for the traffic tips. Definitely won't let traffic dictate where to invest, but it'll help decide where we end up landing ourselves!

@Paul Timmins - Thanks! We'll see on the private money front. With all of her debt + she's really into helping the needy. I joke that I make the money and she gives all of our money away. Interesting that you're from Boston. I grew up there and I've been telling my friends about my success in Philly and their response is "yeah, but you can't do that in Boston" to which I say "maybe not the same way I'm doing it, but I guarantee it's possible to invest there". How has your experience been? Also can you PM or share your email for the Market report?

Thanks @Michael Lee I've actually been pretty active on BP for the past year or so, but I'll never turn down advice, so thanks for that!

Hey all,

Been investing in Philly for the past year, purchased, rehabbed and rented out 8 properties, but my wife just matched for residency in San Diego, so we're making the move in June. I'm looking to stay active in Philly, but also looking forward to seeing what San Diego has to offer. Definitely a different market, so any assistance / tips are appreciated.

Can someone point me to any good SD REIAs?

Thanks!

Agreed. That said, I can confirm with 100% certainty that some community banks in this area will do Lines of credit using your real estate (commercial or otherwise) as collateral, including PFCU. So no it's not technically a HELOC, but it acts just like one.

@Joe Martella - I don't know your area, nor do I know banks in your area, but call every credit union in the area. I have closed loans that are less than $50k with commercial lenders in Philadelphia, so I would venture to guess that they can there as well.

Keep calling around!

in situ - in the medical field?

Glad that you're realizing the need to take action. Just remember that, the timing will never get better, but it will likely get worse, so find out what's holding you back and find out how to make that a non-issue!

Best of luck

@Ron Perry Some hard money lenders will charge you an application fee to get in their system, though in Philly, only 1 does out of the 4 or 5 that I've spoken with.

That said, they will want to run your credit, they'll likely want to see past taxes, paystubs. Some will ask for bank statements. They'll likely need SSN and EIN, and tax returns and that's "it".

The only fees you should pay before the deal closing are appraisal, inspection and potentially an application fee. I'd definitely ask around if anyone has worked with them before, and get referrals (and call!) if not to substantiate their existence. 

@Andrew Jervis Yes, you deduct the interest as an expense against your business income, as you would depreciation, maintenance, insurance, property taxes, etc. This then gets put on your personal taxes as either a net loss or gain. I don't know the rules fully, but my understanding is that you can deduct up to $25k against your earned income, anything after that you need to be a real estate professional.

As for the loan difficulty, I'd get in touch with a lender or two first. In my experience, just getting started last year, they're most concerned about the property's ability to service the loan. After that, they do want to make sure that you'll pay yourself. I haven't found that many issues with being inexperienced, as long as you don't move too quickly. I have run into issues growing too fast, and having lenders be worried about that, even if the numbers are good. Note you'll almost certainly still have to be guarantors on the loan in this scenario.

I don't have any experience on partnering in another type of structure though, maybe someone else with that experience can chime in? (And perhaps with more than "just do an LLC, it's better" - we like the "why" part here on BP!)

@David Vitarelli So I don't know much about your specific situation, but how many banks have you been to? If you haven't been to any / many local / community banks, I'd recommend you give them a shot. Philadelphia Federal Credit Union has worked well for me, if you're interested I can put you in touch with the business loan officer I've worked with in the past.

That said, I do know that most banks don't like to be secondary to someone else's 1st position loan. Basically if you default on the 1st position loan, they can foreclose and essentially wipe out the 2nd position loan, and the only way to stop it as a 2nd position lender is to buy out the first position loan. So you may have to refinance to work with another lender. I know PFCU does business lines of credit on their own loans. 

@Andrew Jervis I'm not sure what the downsides of forming an LLC for tax reasons would be. I'm far far far from a tax expert, but my understanding is that an LLC is a passthru entity. You'll have to file a few more documents at tax time, but one of the docs you file (a K1) goes to each member, to apply to their personal return. So if you both own 1/3 of a partnership, which earns $10k net in 2015, you'd report $3,333.33 on your personal tax return. It should be the same as if you just owned it jointly, with the added benefit of liability protection.

That said, if you do get an LLC it'll likely be harder (more expensive) to get a loan. The way it'll work is you'll all likely need to be guarantors, and you'll likely find loans to be a max of 20-25 years (most are 20, though I have found 1 that'll do 25 year amortized loans). Secondly you're looking at 1% higher (about) APR.

I don't know much about getting a loan over just the three of you, but my guess is that they'd count as co-borrowers (for example if you had lower than acceptable credit or income requirements), but I don't know if there's a limitation to the number of co-borrowers.

With all of that said, you can structure the partnership however you'd like. Personally, I'd keep it simple, especially for your first one. Whatever you decide to do get it in writing, and pay to have an attorney help you get it setup. If you can't afford to pay for an attorney to help you in the beginning, you can't afford to get into (this kind of) real estate (yet).