All Forum Posts by: Jeff Kehl

@Howard Yang interesting questions for sure. But you shouldn't let liability concerns affect your investment decisions. You can easily solve most of these problems with the proper corporate structure. Hold the MF or commercial property in its own LLC.

If that LLC gets sued you can declare bankruptcy and fold it. I'm saying this from the prospective of an owner not an attorney so I'd recommend you talk to a good asset protection attorney not me but hopefully this is helpful.

@Naimah Lewis I think a HELOC is a good idea to jump into rentals. Just keep in mind that any costs from the HELOC should be assigned to the rental properties. In other words, you are borrowing 80% of the rental property cost from the bank but you are borrowing another 20% on the HELOC. It is very tough in this market to make a rental property pencil out if you are borrowing 100% of the cost.

Let me give you an example. You buy a rental property for $100k using a 80% bank loan at 6% interest. You borrow the $20k downpayment plus $5k in closing costs and $5k in rehab costs from your HELOC also at 6% (note $5k in rehab costs in nothing so the house better be newer and in great shape).

Let's say you rent the property out for $1000/month and using the 50% rule you have $500 in expenses each month.

Your mortgage payment will be $480/month. So you're positive $20/month cashflow right? well what about the HELOC? You will owe $150 a month just in interest on that. So you're negative $130/month on this property.

Do that 100 times and you're in real trouble :)

I don't mean to be too negative. If you have really good deals especially if you're doing value-add/rent raising HELOCS can be a very effective strategy.

But realize you are borrowing 100% of an investment which is inherently very risky.

@John Chen Gun to my head with only those to choices I would pick the Popeyes.

Assuming both leases are solid and there isn't something hiding in the lease as mentioned above.

Why? 

1) Building is newer

2) Rent escalations are better

3) Chicken > Beef health-wise

4) Better Cap

5) Outlet model off a major highway is fairly proven

Having said that, if you're buying NNN why in the world buy in California? That's about the last state I would look in and with NNN you can easily buy anywhere. My preference would be the sunbelt in the path of progress. But if you want to pay nosebleed cap rates why not buy in Long Island City, New York or Crystal City, Virginia?

@Don Konipol thanks for sharing that info about dollar stores. I think people buy those dollar stores sometimes assuming the store will be in that location forever and I've seen them several times move a few lots over and just rebuild. Especially because they'll put them all over in some fairly rural locations. Caveat Emptor. 

@Raleigh Lewis is this your first investment property? If so I would move on because, just based on your brief description, I would bet this is going to be a challenging property. If it was easy to get it rehabbed and rent ready it is likely someone else would have done it already. 

Also, yes they are only asking $50k and you need another $40k to rehab it, but understand that no banks and probably not many others will loan you any money on a deal like that. So you need $90k in cash IF your rehab numbers are correct.

Where does the $40k estimate come from? Make sure at least a few contractors you trust have looked at it.

@Mary M. Seems like you're in a great spot and we're close to the top of the market so my first advice would be to be cautious. But the fact that you posted makes me think you want to expand so I think you should pursue that as well but only on a small level. 

Look out over the country and find a good market and start investing in a small way in a new market. 

If it goes well then you can expand there.

@Rebecca Graziano just to be a bit of a cynic... Have you looked at the numbers with 0% rent growth for the 7 years? I know it's a bit heretical to say this but rents do not always go up. 

@Prolet Miteva I just use my initial investment in each syndication.

@Jacob Breazile Looks pretty good to me. My daughter is trying to do the same thing in the Washington DC area now and having trouble finding anything close to that good. 

One very important, kind of subtle point, people often miss is the condition of the property. Built in 2015 you should have very low maintenance and capex numbers for the next 5-10 years. So the numbers are actually better than you see. And you can save and invest that money in the mean-time.

And when it comes right down to it, if you can house-hack for less money than you pay in rent it's a good deal.

Good luck to you.

@Steve Oswald the 5/20 terms are very typical with commercial loans above 5 units. Ironically you can get 30 year amm financing for 1-4 units or for anything more than $1 million via Freddie Mac. But in between you actually have to find a deal that performs with 20 year amortization. 

Oddly that provides an opportunity for good deals in that range. 

So, if you have a good deal I wouldn't let that stop you. But you're not looking for something that matters so much on the loan terms. Rather it's about the property growth prospects.

For instance, if you find a property where the rents are $200/month below comps because the units have 1970's decor in an area of high rent growth and the owner is an older retiring individual you may have something even if the current numbers don't work.