All Forum Posts by: Ronald Perich

I used a 401(k) loan for the down payment and we had about $7K dedicated to the business. Actually had a little left over at closing. We put the entire first year's worth of cash flow back into the place plus another $20K of personal funds. 

Received bank funding from a local (but big enough) bank where I knew one of their VPs in commercial lending. 4.25% with 5 year balloon amortized over 20 years. 

The 401(k) loan is getting paid back with a combination of my own funds (instead of contributing to the investments, I'm using the same amount to pay back the loan) and cash flow. Why did I stop contributing to the 401(k)? I consider this an investment. But let's not hijack this thread with that discussion.

All together, we put a little over $70K of our own money into the property. Just completed the refinance with the same bank at 75% LTV (they would have done 80%). I could pay off the 401(k) and return back the $20K of personal funds and we'd still be ahead by mid-five figures. Were I to sell the property, I'd get back another $75K at closing.

I will admit, there were times when the checking account established for the business got awful low. I think I have an entry in the ledger where the balance was under $50. I always had personal cash reserves, but I want this investment to stand on its own. 

Mine is a story about putting it out there and "making my own luck." 

In early 2015, I committed to myself that I was going to get in the game for real after about a year of study. Come June 9th, I officially made my first mailing to about 100 probate leads. It worked! I got two calls and one appointment off one mailing. But I didn't end up with anything. I stopped that marketing because I was simply too busy to work it (ready why below).

The one person wanted to give me six properties (including four empty lots), all I had to do was pay taxes. But the area was over 50% foreclosed and is really depressed. I wasn't ready for that. The second person wanted too much. They ended up listing and it sat on the market. I followed up, but no dice. They then did some light rehab and ended up selling on MLS for more than I thought it would go for fully rehabbed. That taught me a lesson. Good area will get you more money with less work. I should have offered more or different options. Never mind, cause I still got what I needed.

The second part of my marketing was to call agents. Naturally, I started with the ones I knew best. On my second call, the agent told me she just picked up a listing that hadn't hit the market and the bank was really pressuring the owner to sell. She was facing foreclosure. Oh, and she owed a lot in back taxes.

I ended up purchasing two fourplexes, one of which had a studio apartment attached to it. Got a great deal on it, but I needed to seriously update both the residents and the residences.

Closed in August of 2015. We just did a cash-out refinance this month and pulled all of our initial investment out. We haven't made a dime on it from a cash flow perspective because that's how we paid for all of the renewal activities.

From this point forward, our cash flow pencils out at $1200/mo+ after all expenses and mortgage payments. We still have three units to renew. The cash out refi gave us plenty of extra money to cover that CapEx and to look for our next opportunity.

Take Action! Make your own luck!

@Derek G. - You made my day. Although I would never thank Satan for anything, I thank you for this amusing anecdote!

Get an accountant. And call me or some other investor you know. It sounds like you need to talk this through with someone.

If you decide to call me, you have to promise you will get a CPA first. I'm more interested in helping you with your goals and objectives of your investments.

The challenge with Shiloh is the base itself. I firmly believe it will survive any BRAC, but you can never tell. I thought the National Geospatial-Intelligence Agency was going to choose the Illinois side. That would have been a game changer. There is the new hospital being built down there and it is a very nice community.

One reason to use an LLC is if you are going to have both passive and active income real estate businesses. You don't want mix the two or the sale of long term buy and hold could be classified under taxes as active income. So keeping passive property in one corporate structure and active under a different one could be useful.

http://www.creonline.com/irs-definitions-real-esta...

In your lease, do you have a clause that states service to one is service to all? Serve pay or quit. When he says quit, you have it all legal like.

Let her know, obviously, but the service was legal.

Insurance is critical regardless of having assets in an LLC. The real question is who you are dealing with from a banking perspective. Perhaps the state, but almost every area has smaller banks that will lend to investors who keep their assets in an LLC. You just have to look around and make some phone calls.

It might help if you asked other investors, your CPA, etc. for their recommendation. Your CPA will likely know who other investors they serve use for their loans.

I was going to tell you about that. I know the Granite City sub-chapter of the Metro East REIA just had a meeting on this last month and took the group through how it works. It can only be used for SFH. That gives you the $6,000 homestead exemption. In my case, my personal residence's taxes are reduced by $632/yr (based on my taxing districts). Most homes will see a reduction in property taxes by a similar amount.

I don't know how the owners actually get their people to follow through with it. Come to the January MEREIA and find out. I can try and hook you up with some of the people who use it.

 Owner/manager must live within 20 miles. It's a law that on the surface makes sense. But has negative consequences that aren't as apparent.