All Forum Posts by: Joshua Fulenwider

I do a combination of both.  I utilize my operating company similarly to a property management company except, rather than do monthly disbursements, I disburse at year end to each property account.  It takes a lot of fine tuning for your accounting but once you set up your system it works pretty smoothly  That way I don't have multiple checkbooks and multiple accounts to balance.

Make sure not to hold any property in your operating LLC. That's bad for legal reasons.

I have not used Series LLCs because I am not to the scale where they make sense yet.  It was just another resource you could explore.

Kelly, I'm very interested to see how AirBnB continues to operate.  I have heard some municipalities are coming down on AirBnB rentals through zoning restrictions.  Essentially the argument is that you are now operating a hotel which requires commercial zoning, compared to the residential zoning that most AirBnB locations have.

That being said, I think AirBnB is just starting to scratch the surface of a new industry.  Already lock manufacturers are adapting to the demand of increase electronic locks for homes.  Additionally, property management companies are starting to build out a staff comparable to a hotels.  Overall, though I think most property management companies are not equipped to handle AirBnB.

One article I read years ago (prior to AirBnB) was about super-economic motel chains in Asia where each "guest" rented a recliner with a blanket and got a pair of ear plugs and an eye mask.  They could then pack dozens of guests into warehouse spaces.  The guests also had access to communal showers and toilets.  Could we see that here?  How would it affect demand to warehouse space and traditional hotel/motel accommodations?

One fad I don't see gaining a whole lot of traction is tiny homes.  I think they are great for young people for a few years.  But as soon as you add a child into the mix I think it wreaks havoc on the model.  Although, it would be interesting to see a tiny home community similar to an RV Park.

Robert, if you are experienced and comfortable putting in the offer yourself that is a way to go in order to save commissions or an attorney's hourly rate.

In my opinion I would recommend you use a competent agent.   Bringing one in will help make sure your contract is in order.  Additionally, they should help and advise you as you move through the closing process.  By bringing them in and paying their commission they become very motivated to work for you to make sure your deal gets done.

Jamie, I'm also from Greeley.  I'm an investor and a commercial lender.  

I think you are right on with the operating company. I'm not a flipper but that is how I hold my rentals. Each property has its own LLC and then for ease of management I have my operating entity interact with my property manager and the bank.

When getting loans you can have both entities co-borrow. That way you establish a history with your operating company while the actual title to the property can be held in a separate LLC.

Some states have easier ways to set up multiple LLCs. I believe the Delaware Series LLC structure is something that you may want to look into.

@Sam Stout I have only seen non-recourse loans on large multi-family.  This is mostly due the size, as a lender we are qualifying the building's ability to repay not your personal ability to repay.

However, if you have good income getting a regular commercial loan secured by the lot shouldn't be too big of a deal for a community bank or portfolio lender.  That would give you the cash you are wanting to do your next deal.

Bruce,

I've only every seen 1 LOC on an investment property and it was special circumstances and the borrowers had a lot of other loans and deposits with the bank. It's not unheard of, but it is pretty rare.

I do make commercial lines of credit secured against equipment and vehicles quite regularly but we like to see them paid to zero and rest for a few days at least once per year.  They do also require annual renewals.

@Jen O. I'm a commercial lender and we do this sort of financing a lot.  One of the ways we have gone about is to determine the proportional value of each  property to the collateral value of the loan up front.  Then as time progresses we can release one property by determining the proportional value that needs to be paid to us to release it.  You can refinance just the one lot by itself to pay us off or sell it.

Another option we have done is to re-appraise the part we are keeping and compare that to the remaining loan balance.  If we have adequate security we can just release it  Otherwise we  may need pay down still for the release.

If you are going with conventional financing I would recommend two loans.  Mortgages have funny rules.

http://reiguard.com/

This is not the best insurance company for homeowners but they insure just about everything an investor can throw at them.  They can probably insure you during the rehab and then you can look at getting insurance from somewhere else.

@Eric Lee make sure you account for all expenses when figuring out your cash flow.  Here is what I always consider:

• Taxes
• Insurance
• Management
• Maintenance
• Utilities
• Repairs (reserve for big ticket items)

Once you have accounted for those items then see if the terms you get on the loan are less than the remaining funds.  If so, you've got positive cash flow.  If not, try looking around for more financing options.  

If things work out and you still have positive cash flow after your planned refinance I would strongly consider it as a way to get cash out for your next deal.

Hope this helps.