All Forum Posts by: Michael Lee

Your suggestion about your partner getting the mortgage solely in his name might work. May take some additional maneuvering tax-wise but your CPA can prob figure that out. Big picture-wise, does this still resolve the issue that the property is in this partnership, all proceeds/benefits are split 50-50, and yet you still do all the work? If not having your credit tied is worth it, could be the solution.

@Will Gaston I don't have any specific experience in splitting a deal or joint venture; but to me, an obvious place to start is to talk to your friend/business partner about it and see what he says. Maybe if he knows the specifics on it and know that you completely deal with it on an everyday basis, he will offer to put in more for either the down payment or cap improvements? So it's still 50/50 but on the front end, he's putting in 70 to your 30.

Or maybe you split it 50/50 all the way but you, personally, take a management fee out of the monthly cash flow for your efforts. Is this something that's been discussed before?

@Will Gaston Interesting...appreciate the response. I'll def be doing more research into my options if/when I do the refi

@Account Closed Thanks! That's a great question re: the loan. I think I initially went with a commercial loan bc I have a relationship with a banker who mainly does those. Plus I was told that the underwriting requirements are less stringent for commercial. The property and mortgage is under my LLC but I had to be the guarantor anyway (not sure if that clarifies the issue). Basically, I just wanted to get the deal done and went with what I thought would give me the best shot at closing it.

As for the refi, I'm not sure at this point. I will say that my knowledge of financing and dealing with banks is one of my weaknesses right now. So any insight/advice specifically on this would be great!

@Hardik Patel Thanks! This one was actually on the MLS. If I remember correctly it got listed on a Fri, I went and checked it out that day and made an offer by that evening. The seller received multiple offers over the weekend so I had to re-submit my highest and best...but my offer ended up getting accepted the following Wed.

List price was 119k and the offer that got accepted was for 123k.  After the due diligence period, it was negotiated to 118k which was the closing price. I've gone back and forth whether I overpaid but if so, I believe it was only 2-3k. Given the situation and how it was my first one, I feel like I went about it correctly. But maybe that's just me rationalizing it in my own head haha

@Will Gaston Thanks for your response.  I think it's worth between 160-170k right now.  My goal is to buy more so appreciate the feedback on refinancing.

Hello all,

I'd like to share some info/details about my first buy-and-hold deal that I recently completed to get some feedback on not only how this one went but if I should follow a similar gameplan moving forward to property #2 (and beyond). Firstly, as background on myself, I currently have a full-time job as a management consultant and plan on investing mainly as a way to build additional income and long-term wealth. My job is fairly decent in that in addition to obvious benefits (good salary, health ins, 401k), it is flexible enough for me to pursue outside interests, i.e. RE investing. Prior to this, I worked for two years as a PM for an experienced investor which gave me a great, hands-on exp at managing tenants and dealing with contractors. Two years is nowhere near enough time to learn everything about being a LL, but it did give me a lot of confidence to go out and do my own stuff.  Now for the numbers on the property:

Property Description: Duplex with 4BR-2BA total, in a good area within 2 miles of local, large state university; exterior condition is good as it's brick with new metal roof, windows, metal siding on trim; interior has hardwood/tile floors, new ceiling fans, lights, appliances, and paint

Purchase Price: $118,000

Down Payment: $23,600 (with closing costs credit from seller, final number at closing was right at $24,000)

Loan: Commercial loan 15 yr AM, 5 yr balloon, 5.0% interest

Mortgage: $750/mo

Taxes: $200/mo

Insurance: $80/mo

Rent: $2,100 (rented to four college students as one group; tenants pay all utilities)

Est maintenance/repairs/cap ex: $300/mo

Vacancy: $100/mo

Projected cash flow: $670/mo or $8,040/yr (est. $4,200/yr in mortgage principal reduction)

Amount spent on repairs: $15,000 (majority spent on new HVAC/duct system and appliances)

CoC return: 20.6%

I think that covers most of the relevant numbers. Apologies for the long post and thanks in advance to those who read through it all! But yeah, any feedback on this and whether I should repeat the formula would be great. I am considering doing a cash-out refinance as I believe the value of the property has increased due to the improvements and for how much it's rented currently. This way I can take the same initial investment and use it for property #2 (like the BRRRR strategy). Is this a good idea??

Thanks!

Jon, thanks for your response.  I completely forgot to mention that we did evict the tenant earlier this week after going through the formal eviction process.  Does that change anything?  We've already taken the steps to clean it and re-rent it (getting some activity already as well).  And, I do think it's best to move on but this is more for my own education and experience.  I will follow through with some written communication to the tenant -- that sounds like a good idea.

Issac, thanks for your response.  That sounds like a good way to go and I will definitely look into it.  I'm all about having systems in place and making things easy.

Hello, I'm a brand new member and this is my first post on the forum.  I'd appreciate anyone's advice/guidance on what my options are regarding a tenant who has skipped out on the last few months of the lease.  I manage mostly college rentals in SC and this particular unit is a 1BR studio apt.  The total amount outstanding is right around $1,700.  Luckily, the amount of money is not so significant that we're too fired up about it but I mostly want help for the future if/when it is one of our larger, more expensive rentals.  Do I need to hire an attorney and get a judgment filed against the tenant? Send his information to a collections agency and/or credit reporting institution? Anything relevant info to get the ball rolling would be great.  Thanks!