All Forum Posts by: Nick Berard

Congrats Phil on your 2nd 4plex! 

It seems like you have 2 things to consider before making any decision. 1 - liability/risk     2 - financing

1. Liability/Risk - What I have been told by attorney's in WA state is putting your investment property into an LLC limits risk to your personal assets in the event there is a suit against you. Your personal attorney should be able to give you advise on how to manage your personal risk & manage that with your LLC structure. Example I've gotten: someone in your 4plex gets hurt & sues you. If you have the property in your LLC, your risk is limited to the assets held in that LLC (that specific 4plex, and any other assets held in that LLC). If you QCD the 4plex back into your personal name, I've understood that your personal savings, retirement accounts, other investments would be at risk for a suit to come after. Your umbrella policy should provide extra layer of insurance protection, yet if the 4plex is in your LLC, then that risk will still be limited only to the assets in your LLC.

2. Financing - pulling equity out of your 1st 4plex might not require you to QCD property 1 back into your personal name. (I'm assuming you (maybe w/ spouse) control the LLC 100%). Your lender should be able to help you navigate your specific financing requirements on both deals. Unless you are otherwise limited to the loan program to get a better deal by QCD back into your personal name, you may be safest to keep your 1st 4plex in the LLC.

Hope that helps!

Investment Info:

Small multi-family (2-4 units) buy & hold investment.

Purchase price: $699,000
Cash invested: $140,000

Duplex - I bought last year & moved in 1 side with my family. Seller was occupying 1 side & marketed pro-forma rents of $2300/side at a 6.5% cap. The other side was rented for $2250 (util included). We fixed our side up & after 8 months bought another single family home & re-rented our side out for $2,495/mo + utilities. Our market cap rates have continued to compress & low 5%'s (even high 4%'s) are selling. Based on 5% cap rate I have increased my value in the property almost $60K in 8 months.

What made you interested in investing in this type of deal?

Rich Dad / Poor Dad - my wife and I read it together after our anniversary in July 2018. We decided our primary residence was a liability vs asset and made the goal to have all of our expenses paid by 'passive' rental income in the next 5 years.

How did you find this deal and how did you negotiate it?

I'm a realtor & let my local network know I was looking for multi-fam for myself to live in. Another agent in my office let me know about it. I originally passed it over because it was only a duplex & I was looking for a 4 plex (or triplex).

How did you finance this deal?

With owner occupancy loan - 20% conventional.

How did you add value to the deal?

Improving my 'owners' unit so it's a higher end rental for the area.

What was the outcome?

I was able to raise pro-forma rent from $2300/mo (utilities included) to $2495/mo + utilities.

Lessons learned? Challenges?

There was more room to negotiate up front with seller (another agent in my real estate office), however numbers made sense & he gave us flexibility to renovate before we closed. My wife agreed to the deal if we could renovate (carpets, paint, bathroom sub-floors, paint) before we moved in. I continued updating w/ new doors & trim throughout, tile kitchen backsplash, and finished 1 garage bay into 5th bedroom / office.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

As a realtor myself, I was my own agent on the deal. If anyone is interested in investing in the PNW (north of Seattle), specifically around Bellingham, WA I'm happy to chat/collaborate/assist in any way about your strategy or your next deal.