All Forum Posts by: Lars Hasseler

@Curt Davis @Alex Craig thanks for your insight on Memphis zip codes. I've got two there, one in the 38127 zip code. Would you call that mostly C?

@Patti Robertson I've checked a few of those, and learned a bit more in the process. 1st Advantage said the properties were too far away to consider, though it does refinance for LLCs.

I went through the initial paperwork process with BB&T (now Truist), but it ended with me failing to meet all of these requirements: DSCR needs to be at 1.40x on 15 year fixed at 6.5%stressed for SFRs, the LLC needs to be a year older, the LLC needs to have more cash reserve, and they didn't like the distance between my residence (Virginia) and the properties (Alabama)- a property manager negates that in my book. I will keep them in mind for future refinances on other properties though.

I haven't found any email with Towne in it, so I dont think I tried them. I will, thanks!

Thomas Edison said he found 2,000 ways not to make a light bulb. I can empathize. I believe I have finally found a lender who will work with my unique situation. I am attempting to refinance a hard money loan for a

1) bundled loan holding multiple SFRs

2) in my LLC (I'll personally guarantee it, but I want the LLC holding the loan and building that credit)

3) with no minimum loan per property or else a minimum of $30,000 or less

4) for a fixed rate at least 20 years or at least a 5 year ARM with amortization over at least 20 years if not 25 or 30

5) to me a Virginia resident, so an out of state credit union or bank would need to grant me membership as a non-local person

6) for properties in Alabama, so willing to lend out of state if it's not an Alabama bank/credit union

7) and is not a hard money lender (their rates are too high, I want 5ish or less).

Needless to say, it's tough to find a lender willing to accommodate all of these conditions. If there is even one condition which the lender can't accept, it was a no. I googled credit union, federal credit union, Virginia credit union, Alabama credit union, military credit union (I'm a vet) and the same for local banks. I emailed about 50 of them. One credit union, though it couldn't work with my situation, recommended another credit union: Southeast Financial Credit Union based in Tennessee. Several emails and a phone call later, I'm starting the process with that lender as the agent believes he can accommodate all seven. Maybe we hit a roadblock later, but so far, it looks promising.

Meanwhile, I ended up with a spreadsheet of 50 lenders who, while not fitting my current situation, may help me down the road and may help other investors. With enough research and referrals, I think there is a lender that will fit most situations provided you have reasonable credit.

Taylor, about half the properties required some kind of initial repairs, even if only a few hundred dollars worth. Several of them ranged in the $5,000-9,000 amount, which I did not anticipate properly. So I have certainly learned to buy, if not turnkey, properties in much better shape.

The two properties in Memphis are cash flowing $300 and dead even if I discount the second one's initial rehab and eviction totaling $6300. That was a rough start but it's going well now and the second one somehow has appreciated 20%+ in the year and half since I've purchased it.

Cole, I weighed rent amounts, property values, and known information on property managers. I also used Roofstock, which operates in 23 or so cities nationwide. So I was somewhat limited by that.

Besides my 11 SFRs, I joined an LLC with three guys who specialize in BRRRRs. Extremely low inventories may force us to pivot to buy and holds, whether SFRs or multifamilies, but we have done a few successful flips. It is interesting to compare this return (big but only once or twice a year) vs. the return on SFRs buy and n holds (initially two years has been negative cash flow total due to much high than expected repair costs). I spent just shy of $50,000 in repairs this year on 11 SFRs. So obviously that is not sustainable. I've owned each for between 10 and 21 months, so some repair cost is to be expected, especially in high return areas. So I'll count it as lessons learned and move forward.

I managed to refinance four loans into one using a hard money lender for a terrible rate. It got me back below 10 Fannie Mae loans so I can buy another personal residence and rent out the current one. That will total 12 SFRs and one primary residence. So the business is positioned to take off in 2021. We shall see.

My fourth city for SFRs is Montgomery, AL. This may be my favorite. There is a ridiculous rent to monthly mortgage ratio, and I'm flirting with a 3:1 on the second one ($925 rent, $311.37 mortgage). I use AHI as a property manager, and after bringing over the three properties in nearby Birmingham, they cut my cost from 10% to 8%. One is Section 8, which in my experience can work out great. There is an annual inspection with Section 8, which I find positive. Tenants don't always report needed repairs, but I would like to keep properties viewing ready and better than just livable. And Section 8 requires the tenant to pay their portion to maintain eligibility.

I used Northpointe as my lender. At this point I had to use a commercial loan since I had hit my 10 with Fannie Mae. The loan is 5.25% for five years, and can go up 2% per year for five years after that. It totals a 30 year loan. Fine enough for now, but I do need to work out a refinance soon.

Going forward, I will continue to invest in Memphis (awesome property manager) and Montgomery (awesome returns and stability between tenants and property manager). I think I'm doing with Gary (high risk between tenants and property manager) and Birmingham (unreliable tenants so far, though that could change).

So that was 11 properties in 12 months. Pretty excellent, though I nearly sapped my savings. I'm more of a grey squirrel type investor, wanting lots of streams in case one or several go bad. So this became a five part intro based on the four cities in which I invested and then part 5 doing BRRRRs with a few other guys.

After six SFRs between Memphis (TN) and Gary (IN), I discovered Birmingham, AL. Its extremely low property taxes and decent rent-to-price ratio spurred me to buy three properties there. It's been interesting to say the least. I changed property managers after one year. I'll name them not to tarnish reputations but simply to detail my experience. Under management with GK Houses, repairs took weeks if they ever happened, and I had two of three leases break in the same week. Catastrophic issues (kitchen ceiling caved in on one) combined with no repairs in sight created an impossible situation for renters. I let two move out, breaking their lease and keeping their security deposits. Not everyone would have done the same, but it was exclusively the property manager's fault. I changed to AHI and have had great results since. This summer I spent over $10,000 repairing the three of them.

That reminds me, I purchased all 11 SFRs through Roofstock.com. Great company in a lot of ways. You can view inspections before buying, they have minimal closing costs, and they are very responsive. One down side, they sometimes wildly underestimate repair costs. That was an adjustment for money allocated, as I quickly learned to keep more on hand that I had initially planned.

Same lender, Northpointe.

After two SFRs in Memphis which are both great cash flowers, I bought up four SFRs in Gary, Indiana. I was lured by the high returns on paper, and in some cases, they are accurate. Of my 11 total SFRs, the top earner is currently a Gary property, averaging $330.16/month in cash flow after all expenses. I would heavily caution all perspective Gary inspectors that success there, in my experience, is heavily dependent on tenants. Especially in a year of covid, rent may dry up for months on end. So if you don't have the stomach for riskier business, Gary may not be the place for you.

I stayed with Northpointe as a lender, who starts with loans as small as $30,000. Great experience with them so far. The lowest rate they offered at the time was usually 5.00%, though for one property I somehow got 3.375%. Still unsure how that happened, but I'll take it.

Property management is not great in Gary. I use PropertyBoss, and I have had mixed results with them. I've heard another name positively regarded, Vilgar, though I haven't worked with them.

I started investing in real estate in Memphis, TN in March 2019. It's been great. Since then I've expanded to three other cities, which will each get their own post, but Memphis remains in my top two. I have two SFRs there and they are both cash cows. One was initially over $5000 in repairs and included an eviction that year. But since then, it's been great. It helps that of the four cities in which I've invested, Memphis has the best (in my experience) property manager. Reedy is a hard nosed (in a good way) property manager which I don't have to ever badger. One down note with them- they hold the rent a full month. So if December rent comes in on December 4, I don't get it until January 12 or so. Other than that, I highly recommend them.

I financed it from savings I had and by taking small mortgage loans from Northpointe bank (based in California). The properties are in my name (which I don't love), and the interest rates can be bought down to 5%. That's not the best rate I've heard, especially in 2020, but it got me in the game, and for that I am grateful. Northpointe required 20% down, which was fine with me. The first house was $50,000, which I negotiated down from $52,000. I didn't know much at that point, and I wish I had bargained harder. EMD, inspections, and closing totaled $14811.47 to initially own an investment property, with a opening mortgage of $373.15 and a rent of $750 (Section 8, $263 was subsidized, $487 from the tenant). Escrow adjustments have since dropped the mortgage to $339.97 (annual property tax of $1,000 is helpful). In this specific example, Section 8 has been beneficial to me because it has encouraged the tenant to pay on time or risk losing Section 8 eligibility. So to new investors wondering if they could ever afford this, $15,000 can get you going. And I'm sure other people out there have done it for far less. I would like to pivot into multifamilies in Memphis, but I know I need to get the finer points of deal-finding and deal-making down. I'm quite behind in the Bigger Pockets podcast, but I'm listening to #167 with Kevin Woods and his experience on multi-family buying. Thanks Kevin, you've already saved me thousands.