All Forum Posts by: Michael Garofalo

What does your lease agreement say about trailers or oversized vehicles? Do you have anything in there that expressively prohibits it, or requires written permission from you, the landlord? 

If it were me, and I didn't want the eyesore, I would politely say no and reference the lease agreement if you have something in there to justify the rejection. If there is nothing in the lease, then I would consider how good these tenants have been. If they have paid on time and not caused any issues, and you sense they might make for long-term tenants, I probably wouldn't charge anything extra. If they have been late on payments or caused other issues, then yes I would tell them there is going to be an additional fee. And I would make that fee somewhat substantial so that they have to really think twice about whether or not they need to have that thing accessible 24/7.

(apologies for double-post, something was acting up with my internet/browser when I submitted originally)

@Alex Verdugo, you'll need to have your parents or brother take out a HELOC in their name since you are not on title on their homes. The cleanest way to do it would be to setup an LLC, have your family member(s) open the HELOC and then have them issue a loan to the LLC. You could take 50% equity stake in the LLC in exchange for doing all the work, and your family member(s) could take the other 50% of equity in exchange for providing the capital.

As others have mentioned, you need money to be in this game. If you have no cash reserves and are planning to start acquiring by leveraging your parents' and/or brother's home, just understand the ramifications and risk associated with that decision especially if you have never done a deal before. You need to be able to cover yourself if things go south and especially as you grow, being over-leveraged will cause you to lose your shirt.

I would recommend shopping around and going with a different bank (local and one that does portfolio lending), as each one is different regarding the terms and conditions. 6 months seasoning is somewhat common but that is no hard and fast rule. I work with a local bank in DC and I was able to complete the refinancing portion of my last BRRRR in less than 45 days of when I had tenants begin their lease.

@Tom Murphy, this has been discussed at great length on BP, so I would recommend searching through the forums on more trafficked threads to understand all the nuances. In a nutshell, doing this will give the bank a right to call the "due on sale" clause, which could leave you in a bad position if you don't have the liquidity to pay the note off in full, should exercise it. 

Everyone has a different opinion, but I personally would never do this because if interest rates go up (and eventually, they will go up more significantly), the banks would have an incentive to exercise this right so they can re-loan money and achieve a higher rate of return. 

@Susan Shen, this is a tough question with no single right answer, however I will say catering to section 8 is a totally different ballgame when compared to renting to non-section 8 tenants. Also, SFR is different than multi-family in terms of the way it's managed and the overall expense structure.

For section 8, you should understand that there are additional regulations and things to consider such as how you get paid and the types of challenges you need to be prepared to deal with. I have heard horror stories of section 8 tenants, and I've also heard of instances where things could not have been more ideal. 

Personally I choose to stay away from section 8 because I do not understand that business model, and it's not the niche I want to be in. If it's something that you really want to pursue, I would highly recommend shadowing someone who has experience w/section 8 to understand what you might be signing up for before you make your own purchase.

@Benjamin Piecenski yes as a matter of fact, John Garofalo is my uncle! He has been an investor and in the loan origination business for over 30 years

I agree with @Brian Garrett. Go through a local bank for a commercial product, much more flexibility there. Terms won't be quite as favorable, but you'll get your money back and if you need to down the line, you should be able to refinance again to cover the balloon payment if the loan requires one, assuming your equity position is strong.

Hi Paul,

More paperwork and tax situation will be more complex if you form the LLC in VA or Delaware, but then collect revenue from a source within the District, as it would be considered a "foreign entity" which also needs to be registered with the city. It will also be more expensive from an operational perspective in terms of filing and ongoing maintenance fees for the entity.

I was in the same boat last year trying to decide where to set the entity up, and i ultimately concluded keeping it in DC would be the best option. Feel free to PM me if you'd like further details. Aside from entity incorporation there are a lot of other hoops to jump through regarding licensing and properly registering your property in DC you should make sure you understand.

The HELOC is one of my favorite tools available to real estate investors. I agree with @John Warren, your numbers seem solid given the limited information provided. 

My only other question is: would you be inheriting tenants? If so, be sure to perform solid due diligence on all of them, and understand why the seller is looking to unload this unit. If the tenants are royal pains and it would be difficult to get them out following closing, you may consider passing if this is your very first deal. Just because something looks great on paper doesn't guarantee it's a good deal, so just always remember to look at the entire picture when evaluating properties.