All Forum Posts by: Jesse Smith

@Joshua Davies I forgot to tag you in my response comment.  See above.

We got 5.125 fixed for 30 with no points.  Most others were at 5.375.

@Joshua Davies  That's my understanding - That the 4-mortgage limit is a tighter restriction imposed by some national lenders on the 10-mortgage limit from FNMA.  

Do you find the rates with lenders, who don't impose the 4-limit, to be competitive with those who do?  In my recent round of rate shopping, B of A and Wells Fargo crushed the others on rate, and I was able to get the fees down significantly.  I just don't want to end up costing myself 50-75 basis points on a long-term primary mortgage loan, because I got into the "beyond 4 mortgage" territory.  

@Caleb Heimsoth - Thanks for your response.  I've also read about the 5-10 mortgage rule.  However, we are mainly looking at conventional financing, because the next loan would be for our new primary residence.  Seems that most national lenders draw a hard line at 4 financed properties.

We plan to live in the new residence for a long time, and it will be our largest loan to date.  I would really prefer to lock in 30-yr, fixed rate financing, instead of dealing with the 20yr am/5yr balloon loans being offered by our local lenders. 

My wife and I have three conventionally financed properties (including our primary residence).  We are in the process of purchasing a fourth, with a fifth identified.  As I understand, conventional financing is generally limited to four mortgages, unless you work with a portfolio lender.  Here is my question:

If we use our LLC as the borrower for the fourth property and personally guarantee the loan, does it count toward our 4 mortgages? Will big banks like B of A or Wells Fargo make conventional loans like this to business entities?

bump

@Ray Harrell Thanks for the reply.  I believe what you're describing is just the process of adding another meter to the property.  As I've heard it described, sub-metering can get as specialized as metering the consumption of a single appliance.  That's not what I'm trying to do in this case, but I believe it's possible to continue to use the main meter, but track consumption more specifically.

I've read quite a few posts about sub-metering water and power for a large home that was converted to multiple units.  However, I feel like I may be misunderstanding how it works.  I've contacted a local electrician and the power company to ask about sub-metering for power, and neither of them seemed to know what I was talking about.

I'll explain how I picture it working, based on my understanding.  Please correct me if I'm off base:

Property Description - Large house converted to three units (A, B, & C), with a common laundry room.  The set up currently has only two electric meters and two water meters.  

• Unit A has its own meters and its own breaker panel.
• Unit B, C, and the common area are on a single meter for water and one for power, with a single breaker panel.

My Understanding of Sub-metering Power - An electrician should be able to install sub-meters to measure the separate power usage from Unit B, Unit C, and the common area.  I would pay the full power bill from the electric company, and then bill Tenant B and Tenant, based on their individual consumption.  I would cover the common area.  

Is this how it works?  If so, where do the sub-meters fit into the system? 

• Breaker Box --> Sub Meters --> Actual Meter?
• Breaker Box --> Actual Meter --> Sub Meters?

My Understanding of Sub-metering for Water - Similar to the power solution.  I understand that the city water utility (or a plumber) would install meters to measure the water usage individually for each unit.  If it's too cumbersome, I may just cover water and raise rents slightly.

This seems like a relatively simple solution, but I've gotten nowhere with the local electrician or the power company.  I haven't reached out for the water yet.  If you've used this solution, please advise.  

• Who did you call to set it up?  
• What does the set up look like?
• How do you read the sub-meters and translate that to a bill for your tenants?  
• What sort of cost should I expect for adding sub-meters?

Thanks in advance!

@Antoine Martel  Could you provide some specifics on how you structure packages that you propose to investors?  I'm considering this option to fund a few purchases locally.  I have a finance background, but I've never structured a RE deal for investors.  How do you set up the terms?  Thanks!

Thanks @Aaron K..  I'll definitely be consulting with a local property management company and my inspector during due diligence.  I'm not afraid of walking away if the basement will be a deal killer.  Although, if the top two units are rented at a market rate, the property is still cash flow positive.