All Forum Posts by: Jeff Kehl

I agree, just do a standard offer and stipulate it's subject to the existing financing. You close with little money out of pocket and continue to make the mortgage payments. The bank could call the note due but why would they? In a year or 6 months refinance out. Sooner if you can find a lender that will do it. Make sure it will still cashflow with the eventual financing you will have. Seems like kind of a tight deal to me especially if landlord is paying any utilities. Also make sure you have sufficient reserves to carry it if you have a lot of vacancy and or repairs.

For my 20 unit I pay 6% flat on gross rents no leasing or maintenance fees but I have quite a few other rentals with the same PM.

Hi Frantzces,

What size multi are you looking for? I was just reading the latest Marcus and Millichap reports on the apartment markets in Atlanta and I'd recommend them as a good way to start looking at an area. Atlanta is very hot right now so I wouldn't encourage you to jump in here. 14k units under construction and it's not enough to meet demand...  

http://www.marcusmillichap.com/research/researchreports

I agree with the 5-6% rate. I've done several like that for 5-6% recently. He is not taking much risk to hold a note for 10% of the value and he can't get a safe return for 5% anywhere else. I would counter at 5% interest rate.

Do it for 5 years if you can also so he gets his money quickly. Keep in mind that a $70k loan at 5% for 5 years is $1321 a month so that will really eat into your cashflow for the first 5 years. Same loan at 10% interest rate is only $1487 so if he's really set on that it might still make sense.

I owned a rental cabin in blue ridge briefly and then flipped it because it was very remote and needed completely furnished. I like it there but my impression of that area is that the occupancy and rental rates are not real good.

Excellent question. I've gone back to SFRs from multi-family 2-20 units because my experience has been the ongoing returns AND appreciation are much better in SFRs. The reason I went into multi-family was because it allowed me to scale to more units much quicker. But when I realized I was sacrificing return for scale I have gone back and am buying houses again. I'm probably going to continue in multi-families but very selectively for the best deals.

@John D. I agree $50k gross rents at a $200k price point is really good. The beach condos I have looked at in Florida are usually around $30k gross rent on a $200k price. I think there should be a 2%-like rule for vacation property. But since you can't use monthly rent I think annual gross rent is a good indicator because it takes into account your average nightly rate and occupancy. So the beach condos I looked at were $30k/200 or 15% and @Mike R. is getting around $50k/200 = 25% it sounds like.

Note I'm saying before all expenses. I'm also wanting to get a handle on what normal expenses look like on a vacation rental. Sure, you can do a lot yourself but you're still paying for that in your time instead of money.

I'd bet that instead of the 50% rule something like 70-75% is a good rule for vacation rentals. I base that on the fact that you have all of the same expenses as a normal rental so start at 50% and then add in higher management fees, cleaning, extra maintenance, owner paid utilities including cable, phone and wifi, consumables like paper products and higher wear & tear. Possibly also resort fees and high HOAs because of resort amenities like pools or hot tubs.

@Mike R. thanks for the post. 200 nights a year seems really good for what I'm assuming is a Ski Rental. I guess you get plenty of hikers through the non-winter part of the year?

If you don't mind me asking, what's the approximate value of the property and average nightly rental rate? I have been mostly looking at lower price condos but with really low interest rates it occurs to me that maybe higher value rentals with a low mortgage payment  because of interest rates might actually cash flow better.

You can also try to get the current owner to hold all or part of the financing. Landlords are more familiar with this concept and open to it. It's a good time to try that too because there are many landlords out there at or approaching retirement and they'd rather have a nice steady check coming in each month than have to deal with the hassles of the property.

If there is a note on the property then it would have been recorded with the County. How you access those County records is different from place to place. For my County, there is an online system you can use to access them that you have to pay a subscription fee for. Using that I can tell when the note was issued, for how much and sometimes the terms of the note. I use that to estimate the note balance. It's not possible to estimate it exactly because you don't know if the borrower made their payments exactly on schedule but you can get an idea.