All Forum Posts by: Joe G.

I just remembered what one of the terms of that contract were -- that the owner opted into the PM's online rent collection system where everyone paid online for free or paid something like $10 extra a month for non-online payments. I am sure that PM got a piece of that somehow, but it also allows for less people in the office and less manual processing work for your office staff. 

@Chad Blessing

I have a friend that received a discount in exchange for agreeing to exclusive / right of first refusal for future units in his portfolio. I think it also locked him into using the PM for add on lines of business like using their repair services or something similar.

This shows that you value the owner's business, but you want them to show loyalty in exchange for holding them in place. 

As a marketing guy (a short time a number of year ago), I might suggest that you make some copy print with 3 or 4 different levels of "partner" or similar deals. Regular, good, better, best. This would be around the better level with best having the owner 100% hands off with notifications and auto reports. Maybe have a minimum of doors for each level with the discount in place based on your scale of economy. 

Good Luck!

Are you on the hook for the liens or the seller?

Maybe try to get a statement for each property (adjusted to closing date) for the liens and have them paid out at settlement? If you do the footwork, the title company might see these as easier to work or you might need to offer to pay the title company more for all of the extra work. This is assuming that this is the reason they wanted out of the deal. Maybe you should be sure that is the real reason -- maybe they have outstanding legal cases with the seller. 

If the title fee estimates get a little crazy, maybe you have a close friend that is a title agent or attorney that you can work into the deal in exchange for them arranging settlement.

Just spit balling. Hope this gets your creative mind rolling.  

@Emily N.

Emily, not sure where you sourced your capital, but is the 5 year hit negotiable for restructure? Is the loan assignable where the new owner would be on the hook? 

Another aspect is that it may be time to review the performance of your on-site manager. Not saying that a difficult conversation is in order, but rather understanding their daily workload and activities. Do they spend 80% of their time "putting out fires" that could be handled with better policy and procedure (that they can help develop) or do they work crazy hard when you are there then watch reruns of Property Boss when you aren't around. I have a weird gut feeling reading about how tenants are leaving abruptly and the property manager can't find a solution to mitigate your loss.  

Also, I forgot to mention the "Birds of a Feather Flock Together" Promotion. If you have any tenants that are stars, reward them (based on something objective like number of months rent is paid on time) with a promotion. Let them know that you are looking for reliable tenants just like them and then make sure whatever you offer them is structured so that they only make out if the tenant is actually as good as them or better. Maybe a monthly credit for the first 6 months instead of a $200 up front fee. 

I justified selling my house to buy two as using the stacking technique. I sold one unit to have two. Also, I need the equity as I didn't have time to flip houses to build up reserves. 

Sounds like there is a different solution for you. Great to hear that you can make it cash flow. Sounds like a partnership is in the works for you and Dad! Awesome to work with family. 

@Nicole Heasley Beitenman

You might want to speak with your lender about having two FHA loans at the same time as it was difficult for me in the recent past. My understanding is that FHA doesn't like two of these loans out at once with the same signer as these are owner occupied loans. Again -- I am not an expert in FHA land for less than 6 units.

Have you lived in your current home for at least 2 out of the last 5 years? If so, you might be able to sell that home and take the proceeds (tax free capital gains exception) to reinvest into the duplex with another FHA loan. Since you didn't originally purchase your home as an investment you don't need to worry about 1031. It sounds like your single family is very tight as you focused on getting into the place and having your expenses almost paid.

HACK SUGGESTION: Almost all FHA loans are assumable for qualified buyers. This means that you can sell your house to someone that will take over your loan (and mandatory PMI probably). This is worth it to many folks because they will be locked in at yesterday's super low fixed rate. So, say your home value is $200,000 and you owe $160,000. You can sell your home and mortgage (they must be approved/qualified by the lender) for $200,000 and then negotiate the rest of the money ($40,000).

Maybe they have it in cash and will pay you at closing (tax free capital gains if qualified). 

Maybe they can give you $10,000 and you can hold a second note on the house for the remainder ($30,000). Remember holding the note has tax ramifications. 

Maybe they have a free and clear home that would cash flow well or make a good flip for you.

What other terms would support your goal of getting into the duplex? 

Maybe you will hold a $30,000 note and sell it on a note network after 6 months of seasoning (for around $25k). The monthly payments might pay for the unoccupied side of the duplex for those 6 months while you do the repairs and get it rented out. Then the $25,000 from selling the note at a discounted rate can pay for all of the repairs on your side as well. 

Just spit balling some creativeness.

Good Luck!

@Matt Inama don't get side tracked about the account numbers here. Cash offer is different than financing. Cash offers are literally you have cash in the bank and you want to swap it for a property. It is standard to ask for proof of funds for a cash offer. 

I would suggest that you continue to grow your network of lenders while also finding out if you are "Bankable". Ask specific information about their lending criteria so that you don't waste your time or theirs. Also helps to avoid having your credit pulled ahead of time.

Having an understanding of what capital to use and the cost of that capital while you are getting into your niche will allow for you to be prepared when the deal presents. 

To understand lending a but more, I suggest clicking on the Product Sheet @ https://www.11capitalfinance.com/

I suggest this specific one because it is lengthy and helps people understand the different types of lending products and their criteria. Lending criteria that is matched with your niche and how much you have out of pocket lets you focus on where you want to be. 

Good luck!

Borrowing capital from a credit card is dangerous unless it is a short-term plan. If you can manage the web of interest rates it might be for you. However, I would caution you against it. Maybe if you needed a small EMD amount. But read those fine print terms because usually if not paid 100% in full at the end of the grace period there is interest added to the statement from day one. So if it is a 6 month period, if not paid 100% off at 180 days (or sometimes even the statement date which might be sooner) then you owe 6 months of interest calculated month over month.

Now, I do use a Home Depot store card to fund projects. I think of it as a vendor line of credit that MUST be paid back when the unit is placed in service. They usually have 24 month zero interest terms and if you sign up for a pro account you can score more discounts and deals.

Good luck!

I analyse using cash flow as the goal for rentals. Not exactly what you were asking, but I wanted to give you a little of my perspective.

I wouldn't model using the Zestimate, as it is very possibly not accurate for a home in that price range. If you have lived in that home for at least 2 years of the last 5, you could sell and any profit might not be taxed as a capital gain. This would mean that you could take the cash from the sale along with your $50,000 and purchase more than one rental. Possibly a quad that you can live in one unit as well. 

My suggestion is based on diversity. If you are renting your home and you lose the tenant, you are at 0% occupancy. If you purchase a quad and live in one unit, you will never be lower than 25% and most likely will be 75-100% most of the time.

Using the cash to qualify for loans on the new property means you would probably only need 25-35% down including closing costs. This will allow for greater cash flow while only tying up the down payment -- you can use any other money for additional cash flowing properties keeping diversity of occupancy to mitigate risks. 

A few thoughts:

Are managing remotely or do you have a property management company that can give you some insight to what may work in the area to improve rents? Where are the good tenants renting in the area and why do they go there? You might have a neighborhood stigma issue. 

In properties which there are many tenant problems I have heard the suggestion to get some local boots on the ground to understand exactly what the issues are that can be fixed. It sounds like this property is the go-to for folks that are bad tenants. Where are the good tenants? Why are they somewhere else? This might help you to figure out what improvements are appropriate for the property.

Maybe focus on one building at a time to get them out, make improvements (that are appropriate for the market), then get them rented at the higher price. I have used this approach by painting the exterior of the building, changing signage (including telephone number), and improving landscaping at that building only so when new folks come by they understand they are getting the "premium" building and that is why it is a little more costly than their friend that lives in the soon to be improved building. First item is moving the rental office setting the stage for all residents that there "is a new sheriff in town". Time to double down on energy on the property and review your property management plan. Sounds like a lot of work --- but doesn't it sound so exciting!?!

Good Luck!