All Forum Posts by: Aaron Mikottis

Congratulations dude. I'm a licensed architect, just got my stamp this February, so I can confirm that the salary we get isn't much to shake a stick at. Looking forward to joining you in a few years!

@Jerry Puckett - we may have. I thought that the fake check thing was funny, not annoying, and I might have called them if I actually had credit card debt in need of refinancing. But my perspective on this comes from sending out direct mail myself and seeing this letter for what it is. It sounds like prospective sellers probably would not share this attitude.

Today I got a piece of mail that had a little window in the envelope. Inside, it said, "Pay to the order of: Aaron Mikottis" and then it listed my address like a paycheck. I was perplexed but definitely intrigued. I open it up to find that it was a piece of direct mail from a credit union offering to refinance my debt. 

Has anyone ever tried something similar in a direct mail campaign for real estate? I thought that it was gimmicky but it also would probably have a very high open rate. I think that the handwritten font is gimmicky as well, but it works so I do it.

Hi BP. Tomorrow I am closing on my second no money deal! This was one of those "I found a good deal, now I need to find money" deals, proving the old adage right that if the property is good, the finances will follow,

Unfortunately, some of the terms between me and my private lender still need to be worked out. The seller and I have a trusting relationship, so we are going to resolve this through the terms of an LLC that we are setting up after closing. My partner is providing the cash for the purchase price ($59k) plus up to $9k in additional funds for rehab. The agreement is that $35k of that cash will remain in the LLC as my partner's equity, the other half is a short term loan. My plan is to pay him back with a cash-out refi in 6 months.

 Here are the terms of our agreement as they stand:

Roles in the company:

Aaron acts as the asset manager. This involves:

• Running marketing campaigns for deals
• Studying local markets
• Understanding rehab costs and ARV
• Making many, many offers on new properties
• Negotiating with sellers
• Negotiating with banks and private financiers
• Networking with other investors, contractors, aldermen, etc
• Managing the closing of deals
• Calling the shots on value-adds and rehabs to existing assets
• Keeping the books
• Creating quarterly reports
• Setting up systems to help automate tasks
• Acting as spokesperson / point man for portfolio

Unnamed partner acts an equity partner. This involves:

• Providing capital in a timely manner for pre-approved deals.

Ownership is allocated in the following way:

• The asset manager owns 20% of each property.
• The other 80% is owned by those who provide the financing for the deal, with no distinction between leverage and cash.
• Partner’s percentage of interest in the company is the net percentage of capital contributed across all properties, multiplied by 0.80.
• When new assets are added to the company, percentage of ownership is recalculated.
• If cash infusions are required for major improvements not covered by reserves, we recalculate percentage.
• Distributions are paid quarterly based on profits, on the 1st of the month, based on a percentage of ownership.

Now here comes the question: 

If I cash-out refi the property, is that my capital contribution, or his? I was thinking that it was mine because I will be personally on the hook for the loan. But the property is collateral and he owns part of the company. What is a fair way to structure this?

Thanks for the input!! 

I've been keeping very busy with my real estate investing (Two more properties under contract!) but the downside is that Rockford is just too far away now. Thanks for the invite - we will have to catch up sometime soon.

Cody L. The point in searching for people with high equity is that we can provide a lot more options for the seller. If, for example, you have a highly motivated seller with a run down house and only 10% equity, what can we offer? In order to take the property off their hands they may need to bring money to the closing table if we were to hit our business number. (Typically 70% ARV - rehab costs) However, if they have a huge spread of equity in the place, we can buy at a price that is reasonable. Or, they could provide seller financing.

@Kayla W. comes in to save the day. Thanks for clarifying how this works, your customer service is one reason why I chose to use Cozy when setting up my first rental. 

One big reason I enjoy using Cozy is that it's easily scalable. They notify the tenant when rent is due, and I get emails letting me know how my accounts are doing at the beginning of the month. Everything is in one place. I don't have to worry about transfer limits like I would from venmo, and I can even get my tenants on autopay. (Huge peace of mind!)

Do you have this property in an LLC? I don't recommend lying to tenants, but thankfully if the property is in the company's name, you aren't the owner. The company is the owner. In any case, you can just introduce yourself as the resident manager and you don't need to offer up that you are ALSO the owner unless they directly ask. Having that layer of separation is extremely useful, especially in situations where the tenant will put you on the spot and ask for favors. Needing to run things by "the company" is a great buffer, allowing you to do some research and come back with an answer that will be fair to both parties.

@Aaron Vaughn  - Fair enough on Englewood. Neighborhoods like Pullman tend to give me much worse vibes than Englewood although the area around 59th and Carpenter is still pretty sketchy. I had heard about the Whole Foods going in and I know of a couple wholesalers doing a lot of work in that area. I just threw out that neighborhood because it seems to be stuck in a lot of people's minds as being very dangerous. In fact, it does still have a very high homicide rate despite all the new businesses you mentioned going in but I can see that improving very quickly and major congrats on your success! 

The point I was trying to make was this:  First, Chicago's population decline has little to do with violence because the people who experience the violence on a daily basis are by and large trapped in a cycle of poverty and don't have the agency to move. I think that it has a lot more to do with high COL, (have another tax raise) poor public schools, and the state's financial crisis. And second, the point I was trying to make was that as a typical person visiting Chicago, you're not going to find yourself walking around in these violent neighborhoods, so the city's image of "if you go to Chicago you will get shot" is a lot of hyperbole. 

What do you think?

Dale Stevens is right in that the city of Chicago has a declining population, but that is not necessarily true of the metro area as a whole. Look for suburbs that are growing and invest there. As an aside, I kind of have to roll my eyes when I hear people talking about violence in Chicago. Unless you are looking for drugs or abandoned buildings, you will never find yourself in areas like Garfield Park, Englewood, or Austin. It's a world class city and is perfectly safe to visit.

I think that it is possible to find a low or no seasoning lender if they keep the loan on their books. Probably more likely if you already have a big portfolio loan with them. But what you say is true, it is extremely difficult to find such lenders. One clarification on your statement, though, is that I've found people willing to do an immediate refi, but it's based on the purchase price + rehab costs, not just purchase price.