All Forum Posts by: John Daley

Matt, I had that exact same conversation with myself a couple of years ago. After going over the pros and cons for some time, I decided that, at my age, I needed to preserve my available cash by keeping my rentals leveraged at 70-75% so I can continue to acquire more properties. I am extremely conservative by nature and would love to pay down and pay off my properties, but in light of having a couple of decades before I need that bump in passive income to retire, I decided to keep my cash out, continue to get great ROI, and grow my revenue by continuing to acquire cash flowing properties. At some point I may let them ride and continue to pay down, but right now I need the cash for continued growth. Hope that helps.

I have found that almost no lender wants to finance in the name of your LLC alone without some sort of personal guarantee. Most commercial lenders are happy to finance or refinance your property in the LLC name, but unless you have a very solid history of a profitable LLC and a lot of equity to back up your loan, they are going to require that you be on the hook personally as well.

If you're willing to look around a bit and/or have a good personal relationship with a bank, you should be able to get financing in the 5% range.  I've heard of rates in the 4's, but this is rare and usually only an option if you do a significant amount of business with that bank (borrowing close to $1M or more) and they are making money off of you in multiple ways with various types of loans on different assets. 

Rates are actually somewhat negotiable, but you have to be attractive to the lender.  The more assets, equity, and income you have, the better your ability to negotiate an excellent rate.  It really is a case of the rich get richer as the more you have, the more you can borrow and at lower rates.

You're at the right place.  Happy hunting!

Curious to hear what areas piqued your interest...

Unfortunately this does seem to be the norm with wholesalers.  The problem is that the true market value can never be accurately predicted before the actual marketing and sale of the property and is, therefore, open to interpretation.  Even an official 'appraisal' can be wrong, and you will probably get as many differing appraisals as you have appraisers if they don't have a written contract as a baseline.  It's their best guess, an educated estimate and not something you can always rely on.  What this means is that an amateur or biased party can give you their opinion with a straight face and be completely convinced of what they think (or hope) is true.  And that is apart from any intentional misdirection or misinformation. 

The bottom line is that unless you have a relationship with a trusted professional or wholesaler who has a track record of being 1) competent and 2) honest...do your own due diligence.  And even then, double check their numbers.  But there are a lot of people out there looking to wholesale that will waste your time using erroneous information or making erroneous interpretations of the data. 

I may be the exception, but I have found that with a commercial type loans I can refi 70-75% of the appraised value as long as 1) the rehab is complete, and 2) I have a tenant in place.  This is how I've been able to buy, rehab, and hold multiple rentals each year with no money out of pocket.  I know others who do a similar thing using private money, much like Ori did here.  It's nice because you can skip the refinance a year down the road and put that money back to work immediately. 

I'm always happy to hear someone's success story, thanks for sharing!

This is a fairly tough market to just be getting your start in wholesaling.  Inventory is tight and there are many wholesalers out there beating the bushes.  The name of the game is to find deals that no one else knows about.  If you can do that, the buyers will come to you.

That is high, Bryce.  Even State Farm and other 'retail' insurance companies could probably do better than that.  After many years, I have found there is no one 'best' insurance company.  The relative rates for each company are constantly adjusting.  The best thing you can do is compare them annually.  I don't do the cheapest insurance, but I do want the best value and have used Travelers, Lititz Mutual, and a couple others in the past.  Rates also change according to the type of property you have.  It could be that USAA simply doesn't want to insure duplexes and raised the rates accordingly.  Find a company that wants your business but be wary of the bargain-basement priced carriers.

I read an article not too long ago on BP that explained why there is no such thing as an 'investor friendly' real estate agent...I wish I could find the link now.  Basically what seems to simple to an investor is a huge turn off to an experienced agent.  Experienced (and knowledgeable) agents hear that term and actually think 'someone who wants me to do their homework, be expert in all neighborhoods, run comps for dozens of properties, and make multiple lowball offers until something sticks'.  While a novice agent might be willing to take that on because they are looking for any business from any source, an agent who actually has experience and the knowledge the investor is seeking will avoid it like the plague because it is generally a huge waste of their time.  I'm not saying this has any reflection on you or what you are wanting, Zachary, but that is usually the perception from the agent's point of view.

Since this is true, many of us investors obtained our own license so that we aren't relying on others and can 'waste' our own time using the real estate tools first hand to help ourselves and others.  This way we become our own experts in the niches or areas we care about...and sometimes can make a buck helping others out as well!

Sorry if this isn't very helpful, but there it is.  Happy hunting!

You may be right.  I seem to recall my insurance agent calling my insurance a 'fire policy' on some of my single family rentals.  I bet that's the same thing.

I'm just leery of insurance agents using fear to sell extra insurance programs to gullible individuals.  With rentals, every penny you can save goes straight into your pocket.  Things like additional insurance coverages, home warranties, etc, all seem like good ideas but I've actually used some of these things and they never pay off in the end.  I do, however, pay extra for quality insurance policies that do not prorate needed repairs based on the age of the item getting repaired.  My insurance is a replacement policy that replaces whatever is damaged with a new one and they take care of the whole bill (less the deductible).  In my mind, those policies are worth paying a little extra for...especially on older houses.