All Forum Posts by: Matthew Enos

As a general rule, I would not rent out to family. You may be solving one problem but you are opening up a whole new can of worms on other potential problems. What would you do if they paid late? Would you evict? 

Screening out your tenants is a great tool to eliminate many problems. Everyone over 18 fills out an application and pays an application fee. Many people use tenantreports.com  the cost is around 28 and we charge 30 for the application for each adult over 18.

A lot of tenant headache can be minimized also by the property itself. Are you buying the cheapest house out there and  the rent the house can command is also the cheapest? Well then you probably will be getting that grade of tenant. Many people make a lot of money in the lower income rentals but understand that there will be new issues there also.

@William R. Matthews IV I set up mine with the LLC address as my personal address. I was required to have a physical address and we didn't own an office or another physical location

@William R. Matthews IV Depending on the rules on your state/county, if you change title to the LLC you may trigger a transfer tax. If you have a mortgage and change title to LLC, understand that you may trigger the due on sales clause.

Some of my fellow investors transfer to a land trust and make themselves the beneficiary. This may eliminate both potential side issues. Additonally if you ever sell the property in the future, you can just change the beneficiary and avoid the transfer tax

I would never have the rental as the business mailing address. Is there a reason you wouldn’t use your own mailing address or PO Box?

@Nicholas Lohr That is an interesting question. I'v never had it happen but I thought of a few things below. I'm sure there are holes in some of them, but the goal is not to have a  bulletproof means but just a means that is effective in easing the prospective tenants concern.

Show tax assessors website showing who the owner of the property is and then provide ID. If in your personal name the Drivers License, if in Entity then operating agreement, certificate of good business standing.

Previous tax return showing that the unit has been rented in the past by you.

Occupancy permit issued to you or your entity.

Rental Inspection completed by a gov't official issued to you or your entity.

Are you registered locally with any chambers of commerce, etc. Show them you are in good standing.

If the rental is in high demand (you have multiple prospects) remind them that they don't have the apartment until a deposit and lease are signed and that other tenants are interested.

@Burt Gourley I don't see getting three loans impossible. I would seek recommendations for a broker or good VP at a bank. A good bank should look at the property first, the business second (if titled in an entity), and your personal as the third.

I had found myself in the past not doing certain things similar to this because I had questions about whether the bank would or would not do this. In the end, only the bank can really answer the question and the bank doesn't know your question until you ask them, so just ask them. If you find the right bank they should be glad that you want to do repeat business with them. I wouldn't want to establish a relationship where the bank told me "we are only going to do one".

Do you already have the other units you want to buy? Your question also sounds like you would be getting three simultaneously but in reality it would probably be a refinance (30 days or less), close on the first multi (30 days) and then close on the next multi (30 days). Depending on if the units were vacant or rehab was needed, this could be longer or shorter. Nothing eats up some money like 4 of your 5 units vacant. 

I’ve done both. In the beginning when money was tighter I did them myself. This was also a rental. Now I make sure when I put an offer in on a house, i have reduced my purchase price by the amount it takes to pay someone to do all maintenance. The deals are harder to come by but my stress is lower. I think this was the transition from being an employee in my my business to being a business owner.

Post in local forums (facebook) or REIA groups in your area. The flippers know who is the best and at good prices

In my experience all things are never equal. I would challenge you to dig deeper and see other potential differences that may impact your decision. for example

Age of property? is one going to require more repairs because its 100 years old vs 20

Deferred maint? How good did the last owner maintain the property. one furnace is older than the other. One roof is older than the other. 

Appreciation? are the neighborhoods developing at faster rates

Purchase price discount? if you are buying one at a 10% discount and the other at 25%, that is a difference of 15% that you made as soon as you bought it. That is a lot of "pre-paid" income

How much of your own capital? can you refinance your capital out of one sooner

Which one would you like to live in more? are the units up/down or side by side. Does the duplex have a yard to be shared by two but the fourplex has no yard or is shared by four. impact on vacancy rate (vacancy is huge eater of income! especially with property management)

What is parking like? Does the duplex have a driveway and the fourplex is offstreet parking that they need to fight for?

Are the current rents at max value?

And the last question (most important): If they are both good deals, then why not buy both? Find a way to buy both! 

Seller financing is an option. If you are looking at homes with ARVS of 100K and are looking to net about 20K per flip, then you are probably looking at homes around the 30K range or less (that would give you 45K budget for rehab).  Sellers at that range may have a tough time trying to sell their house to a conventional buyer because a mortgage company probably won't finance a house in that condition. Seller financing could be where they act as the bank (note and mortgage) or could be subject to (existing mortgage remains in place).

Hard money is an option. They will generally fund a large part of purchase and rehab. They will also be protecting their interest so if they do fund you, then generally the deal has also passed their criteria (ie. profitable).

If you have an LLC, then you may be able to get bank financing on those type of properties. Commercial underwriting is easier than residential underwriting and may be able to add a construction loan as well.

You could also do profit splits with the seller, he provides the house you provide the rehab and split the profits

You could wholesale, make a few thousand with no money

How do you plan on finding your deals and have you managed contractors in the US?

We write our own addendum when not using real estate agents

Clearly state that it is an addendum at the top referencing the original purchase and sales agreement. In the body clearly reference the clause it is modifying and the actual words used should be similiar if not identical as in the original purchase and sales, just with a different closing company.

Who is holding the hand money/earnest money? Make sure that the old closing company is willing to transfer it especially if its sizable

Sounds like you have a great goal. My experience is that I manage a pool of capital. My job is to effectively deploy that capital and then get the capital back in the pool. The shorter the lifecycle, the faster i can ramp. The capital can return to me monthly (cash flow) but i find the fastest way to do that is refinance. The key is to find a property at a great discount. If you revisit your model but make an assumption that your cost basis for the property (cost of purchase and cost of rehab) remains under 75% of the property value then how much quicker can you achieve your goals?