All Forum Posts by: Lori Williams

The numbers you posted do not look good. A $42,000 cash investment for less than $300 cash flow?

I'm getting a $1,300 net profit on a $20,000 cash investment. It's higher than some, but lower than others

Your net profits per month should allow you to put 10 to 20% into an account just to be used on maintenance and repairs.

an 8% return is pretty low.

The 1% rule should not be your rule but is starting point so that you can make a quick calculation on whether the house has the potential to be a decent renter.

In truth you should be getting 1.5 to 2%. That will allow you to pay your expenses of the mortgage, tax, insurance, property management if you need it, and putting aside that 10 to 20% for maintenance and repair and still make a decent profit, perhaps an excellent profit depending on what your tax and insurance are

I don't think that you can truly maintain any property for less than a $500 per month profit after your mortgage, tax come insurance and any utilities that you have to pay. And that 500 should absolutely be a minimum and not something you aspire to.

I have a rental in Ytown that I have to pay the water on. So I upped their rent by 100.00 over what I would pay (x 2 bc duplex) and then told them that I would pay the first 125.00/mo of water and trash, and they needed to pay their share of any overages monthly (based on number of ppl in their unit - so if they have 3 ppl annd the other unit has 2 ppl, they would pay 3/5 of any overage)

I hope making them somewhat responsible makes them more careful with water usage.

You have the rest of the year to figure out what you're going to do that could help minimize your tax hit on your gains. But the sooner you do it, the more benefit you'll get from it.

It's sooo important to learn the right way to invest in real estate. You do not have to join an expensive mentoring program. But you do need to read and ask questions. 

If you have any questions about long term rentals, which is a great way to build wealth and great for tax write offs, feel free to message me. That's my area of investing (I can answer some questions on other areas, but I'll probably be hit and miss)

Good luck :)

I use Zelle (preferred) and PayPal (with a 5% fee added to cover my fees)

Or they can take it down to my bank and deposit it or they can set up direct deposit

I don't do checks

 You aren't going to make any friends evicting the mother if that ends up being what you need to do. I mean, co-signing is basically the same thing so you could do that. But I'd def get 1st, last and security from her. 

And I would explain to the son that you would never rent to someone whose income was less than double the rent, but you're willing to do it for him if he will co-sign, and he needs to understand that if the rent isn't paid on time every month, you have no choice but to evict like you would with any other tenant. He needs to be clear that you aren't going to let her rent slide just bc he's paying rent in the other apt.

Wouldn't that also mean the first floor is paying the electric for the washer and dryer used by the 2nd floor? And what about the water? Is that on 1st floor's bill, too?

All you can really do is ask them, since they are on a lease and you can't raise their rent.

Maybe consider getting an electrician in there to separate the basement electric so that the light over their washer and dryer is their responsibility (and so are the utilities for their washer and dryer)

What is the woman's son's credit/employment like?

If he passes the tests, why not rent it to him and let him deal with his mother? I mean, don't even rent it to her at all. If his credit is good and his job is good, he can both afford to rent it if Mom can't pay and will care about an eviction on his credit. 

Make it a 6 month lease, renewable every 6 months. Get 1st, last and security.

At that point, I really don't think you'll have much of a problem, but if you do, it's a short lease.

For what it's worth, I rent relatively expensive rentals for professional ppl. But I rented a duplex unit to a young woman I never would have normally rented to. Single mother, works every day, 3 kids. 1/3 of her income is approximately 675.00/mo. She wants her kids to live someplace nice. And she was willing to pay the majority of her tax return up front that paid about half her rent and her deposits, leaving her with about 700.00/mo for the cost of the rent to pay each month. 

WOrst case is that she doesn't pay the monthly rent amount, it breaks the lease, and I let her stay until the up front amount is exhausted. In the meantime, I've give her a chance no one gave me when I was a single mom back in the day. And if she can pull it off, it will be good for her and the kids.

I would say that unless there are issues with the property that are major that came up on inspect, and you had an inspection contingency, probably not.

If the seller agrees to go down to the appraised amount , you're probably still on the hook. You overestimating the rents you could get is on you, not the seller. Meanwhile, you've kept it off the market for him when he probably could have sold it by now. 

The EMD is made precisely so someone doesn't take the house off the market and then just change their mind willy nilly costing the seller time and money

Each loan, each borrower and each property are different.

I would imagine if you're just loaning the rehab portion, or maybe just the cash up front/holding portion, those could be smaller loans. However, you probably won't hold first position UNLESS the buyer is buying the property in cash.

Even if you can't hold first position on 1 property, that doesn't mean you can't be secured with another property. Be creative and protect yourself.

Have a real estate atty draw up the contract (the borrower pays this expense or reimburses you when they pay off the loan)

Make sure you're listed on the insurance.

If you don't know the borrower well, you can have them sign up for myfico (.com) and show you their Fico 8 and their mid mortgage fico score. That gives you an idea of how they pay their bills (remember that sometimes a lower score is just carrying a lot of debt but their payments are made on time - one of the pitfalls to doing rehab)

If I was loaning, I wouldn't charge origination points. I would charge a processing fee that covers the legal costs and a bit for my time for reviewing the borrower's info, etc. I've seen some PL go nuts on origination points - one was talking about 13% yesterday - 13 points. But you have to ask yourself if you're looking for a one shot deal or if you want to build a relationship. Don't fee them to death. Just charge the amount of interest you want to earn on your money. You want good borrowers to come back to you, not borrow once out of need and then find someone else for future deals. 

I would loan at 15% -20%. That is more than HM lenders receive. And more than makes up for not receiving origination points.

Your processing fee could be something like $2500.00 - covers the real estate atty and your upfront time.

You have to decide whether you will receive interest pmts during the loan term, or at the end of the loan. Investors are often cash strapped bc everything is going into the properties. So you can get a little more interest if you're willing to let them pay off on refi/sale.

Ultimately, you want something that works for - and protects - both you and the borrower. You can make excellent money in PL without making it hurt them financially. And if you find a borrower who pays well and follows through, you definitely want them to come to you next time they need a loan. And repeat borrowers are going to be safer, because you'll know their track record so it's less risky.

Good luck!

 If at all possible, tell them you'll provide the materials from their material list, and their bid will be on their labor.

Do not pay until the work is done correctly. If they are roofers and you're buying the materials, they should be done in the space of a few days, then they can get paid. The 50% deposit that's usually required is to cover the materials, and you're already doing that.

You can divide the job up into tasks if they are doing more than one thing. Like, whatever tasks you have completed and inspected by the end of the week, you get paid for (like if they did all the skim coat, installed all the cabinets, tile the bathroom tub surround, etc)

If you are working off a draw system, be up front with them, and tell them as soon as the work is completed and inspected you submit the draw request for the payment (which also reimburses you the materials), so it's less than a week (usually) from request to payment. Most contractors understand how it works (and if you have the cash, it doesn't hurt to pay them a little up front after inspection and reimburse yourself with the draw funds)

If you find a good one, work to keep them, because good ones can be hard to find.