All Forum Posts by: Edward Peugh

@Steve Slomski, Without knowing enough about your specific numbers two thoughts come to mind. (I don't mean this in harsh way, so sorry if it feels that way.)

First, You probably are not getting a significant enough margin on your properties.  Which means they may be rented for under market value.  We look to hit a 10% Net Cap, of at least $200 per 100,000 invested.

Second, If they are rented at market value, then you probably over paid on the purchase price.  If I were in your situation, I would liquidate all four properties capture the equity and look to reinvest at a better cap rate.

Happy to discuss specifics if you would like to share them, or give a private opinion if you want to MSG me.

BP,

I am a seasoned investor with a number of rental properties.I have used many forms of financing to include standard “conventional” financing, to more creative forms like Seller Financing, and Lease-Options.

As a result of the large number of transactions we see, we have invested most of our liquidity, to the point where I am looking for private investors for the first time.

I have spoke with a number of "Private Lenders" some have been interested (in fact we are closing one of these deals in about a week) but I have been surprised about one specific category of responses. Many leaders blindly looking to loan at the "20% down / 70% LTV" rule without really understanding the numbers.

I am curious about the take of the BP community, so please allow me to expand my point.

I will be purchasing a Buy-and-Hold in Charlotte, NC for ~$26,000 with very solid ARV of $65,000 (two comps sold in the last 90 days with 4 and 12 days on market).I was able to purchase this property for such a competitive price because of the significant legal work that was required to remove the legal "encumberment" on the property. I have been offering a first position note of $30,000 at 12% interest only for 24 months. All closing expenses will be paid outside of funding.

After I walk through these details I get the response something like "oh, you want 100% financing, aren't you going to have some skin in the game?". My response (with a little irritation) is normally something like "You mean other than my $30,000 in equity?, Yes, I want 100% financing at 50% LTV." I then go on to try and explain that I could simply "create" a larger down payment, by simply increasing the amount borrowed as shown below (See Alternative Scenario 1 & 2).

Preferred Scenario: Borrow $30,000 @ 12% Interest Only, 0% Down, 24 Months at 46% LTV

Borrower proceeds at closing: $4,000

Alternative Scenario 1: Borrow $34,000 @ 12% Interest Only, 10% Down, 24 Months at 52% LTV

Borrower proceeds at closing: $0

Alternative Scenario 2: Borrow $45,500 @ 12% Interest Only, 20% Down, 24 Months at 70% LTV

Borrower proceeds at closing: $10,400

At this point I get a response something like, “Well we would never be able to lend on a deal like that!”.

Sorry about the long winded post, But now to my question.  Isn’t the “preferred scenario” above the most secure investment for an investor?  

Just follow the legal process. When in court just simply describe the exact timeline that you have laid out here. 1) You recently bought the property on xx date (Bring recorded documents from purchase) 2) You then went to speak with tenant on XX date and were provided with the lease (ensure you have a paper copy) 3) You suspect that the lease has been forged 4) When you confronted the tenant about this suspicion they stopped communicating. 5) You provided a rent demand letter on XX date (have a copy of this in hand) 6) No rent has been paid to date The judge will then ask the tenant what they think they owe in rent. I would like to offer two other comments. First, ensure you have an understanding of how much rent you believe the tenant owes. This should be prorated from the date of you purchased the property through the date of the hearing. Second, some judges are having a hard time recently with the Service Member Civil Relief Act Affidavit. Ensure that you fill this out completely. I have seen judges through out legitimate claims because this wasn't done correctly. As I operate in NC as well I am pretty certain this will go well based on those elements. If you have questions, feel free to msg with questions.

@Tyrell Yerby  Hey love to see the passion.  As a young investor the best thing you can do is just get out and network.  

My friend @Alex Franks says, even if you have to setup table or get water glasses or whatever, just be present with as many people as possible.  (Check out his podcast at http://goo.gl/DJs2ED).  Get to every network meetings early and plan on staying late.  As you are trying to get to know as many people as possible, you should be the last person to leave an event, after you have insisted on helping in anyway possible.

Ask questions, and keep notes.  Every time someone uses a term that you don't understand or does a deal that doesn't make since to you, is an opportunity to learn.  After the discussion approach the person and ask for clarity on the terminology they used, or why they structured a deal a certain way.  Most will openly discuss these questions.  (Some people won't and that's ok too..)

Lastly, start reading!  Like today.  You should be able to have a book read a week. (Audiobooks count here too..)  I suggest 10x Rule as a great start!

See ya at the next Hobby Millionaire meetings!

Ed