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All Forum Posts by: Sarah Downey

Sarah Downey has started 3 posts and replied 55 times.

Post: are these good terms for dscr

Sarah Downey
Posted
  • Lender
  • Springfield MO
  • Posts 56
  • Votes 63

Hey Shawn,

What type of property is this? A Multi-family or SFR?

If this is an SFR the rate seems high with this DSCR but there are other factors I may be missing (property type, location, credit score, etc.)

Also, the origination looks higher than what I have seen out there. It looks like you have origination fee and a broker fee.

We help investors shop for the best private lenders and I think you maybe be able to get better. 

@Nate Herndon what are your thoughts?

Post: Weakening Rental Market

Sarah Downey
Posted
  • Lender
  • Springfield MO
  • Posts 56
  • Votes 63
Quote from @Billy Daniel:

Is anyone else seeing a weakening in the rental market?  I have vacancies on the rise and new tenants seem to be few and far between.  I know several markets have been experiencing this for some time, but our market is usually fairly resilient.  What are you seeing?

I have definitely felt it in our market. I just turned over 3 of our rentals and it took longer than normal. I also had to reduce our rents slightly from where they were last year to get them leased up. It seems like there is more rental inventory right now which is perplexing to me with interest rates being so high/purchase inventory low. I thought with it being harder for people to qualify buy it would strengthen our rental market. 

I’m still happy with our tenants and the cash flow we are getting but was intrigued by
the change in a year.

Post: Pet deposit to cover damages

Sarah Downey
Posted
  • Lender
  • Springfield MO
  • Posts 56
  • Votes 63
Quote from @Steve Tom:

So since my previous post, the tenants have moved out.

At the end, I guess I was being careless during the last day they were at the rental. Instead of focus on the walk through, he spent much time asking me questions and we just.. talked. Because it was the last day of the lease, he still had not finished fixing/touching up the house - wall, trim.. etc. He told me he had the paint and a brush, but there wasn't time to do it as it was the last day. Ok, fine. I told him i will do the touch up.

Bad move.

My wife was there and she noticed that after they had hired cleaners, the house was still not clean. There were cobwebs and dust on many surface, but they had the invoice from the cleaning company. So I asked and he told me his wife will clean up. They broke one of the Roman Shade, but supposedly had someone fixed it. We trusted them and didn't checked.

Since I worked at night, and it was already 3pm, we chatted some more. And i told him since there was only the $200 of pet deposit left, I will take money off it. We agreed that the new paint for the trim could be $20, for now, and I might deduct more if I needed.

We left and returned two days later. There were still dust and cobwebs; the Roman shade they had fixed was left on the kitchen island. Wife put it up but it wasn't functional.. it was because they just glued the back of the shade with one big sheet of fabric. Therefore, the cord and loop won't work. Basically it became useless and we had to replace it.

As we slowly walked through the house, there were a lot of spots and placed that need patch and paint over, not just touch up. So we had to buy two more different color of paints and more brushes, painters tapes.. etc.

All added up to $160.

Thats all right? Nope. We opened the fridge and discovered two of the shelves were cracked. Replacements costed $38.

We spent the next two days cleaning and patching up the house.. Initially i was going to hire a cleaner, but looking back I am glad I didn't.

On the fourth day, we realized we need to check the AC unit because we are in Texas.

We turned on the AC and let it run. After a few hours it wasn't cooling much, so I went into the garage and check the unit... holy moly, there was water leaking out of the HVAC unit. I turned it off and try to pull the filter out. The filter was literally disintegrating in my hands because it got so wet. Afterward I got a good look, the filter was so clogged and dirty, the air was not moving through it. (Also I think they have never pour vinegar into the drain pipe to clean it at all, so the pipe was clogged as well. As the result, coil froze and the pipe couldn't drain and water leaked.)

Costed me $50 to rent a dehumidifier, all day to clean and mop, and then $50 for HVAC tech to check the system.

I called and told him what happened, he insisted he had changed the filter regualrly and did so just two months ago. And that he is an honorable person and wouldn't leave the house in bad shape, and that he wasn't responsible for the broke old Roman Shade, or al of the stuffs we had to patched and painted because we did the walk through already.

I spent $300+, not including cleaning supplies, on the house after the tenants moved out.

Since we did the walk through before all these, I am not sure if I can even take more money out of the $200 pet deposit.

Lesson learned.


Oh man!! That is so rough. It sucks when you have a tough turnover. You will get through it.

A couple thoughts…

We don’t require our tenants to replace filters. We got set up on a service plan with our HVAC company for $100 a year to come out and check our units/replace filters. 

We also have an investor friend that writes in a quarterly walkthrough requirement into the lease agreement so that he can go through and replace the filters/check for damages.I think we are going to update our standard lease with that clause with that to give us the ability to check-in more. 
 

Maybe just some ideas as your prep for the next tenant.

Post: First Post: New and Learning Seeking Guidance re: Deal Possibilities

Sarah Downey
Posted
  • Lender
  • Springfield MO
  • Posts 56
  • Votes 63

I love the idea of this as a STR. That budget seems very reasonable, too.

@Greg Downey , what are your thoughts on this one?

Post: First Post: New and Learning Seeking Guidance re: Deal Possibilities

Sarah Downey
Posted
  • Lender
  • Springfield MO
  • Posts 56
  • Votes 63

Hi Nikki,

I think this has potential! Are you thinking STR or LTR? How much rehab are you thinking you will need to invest?

Post: TX LLC, Vacation Home, Need to Register in KY

Sarah Downey
Posted
  • Lender
  • Springfield MO
  • Posts 56
  • Votes 63

Hi Kimberly,

If your client plans to get financing on this property, they will most likely need to register it in KY. Most lenders want the entity registered as a Foreign entity in the property state. 

I would recommend having them do it since it is a pretty easy process. 

It looks like it only costs $90 through the KY Secretary of State website--HERE IS THE LINK

In KY, it is called a Certificate of Authority. Your client will want to make sure they have a digital copy of the articles of organization and a certificate of good standing (called Certificate of Fact in TX) from Texas Secretary of State before they register. You usually have to have those items to complete the registration.  

I hope this helps! 

Post: LLC as disregarded entity

Sarah Downey
Posted
  • Lender
  • Springfield MO
  • Posts 56
  • Votes 63

It is really easy to apply for an EIN letter online. Just make sure to select "download as pdf"; otherwise, the system will only show your number, and they will mail you a letter. 

https://www.irs.gov/businesses/small-businesses-self-employe... 

If you are a single-member entity, it will pull up language stating that you are considered a disregarded entity. 

Post: Using an LLC as a Guarantor on a Commercial Loan

Sarah Downey
Posted
  • Lender
  • Springfield MO
  • Posts 56
  • Votes 63

Hi Kim,

You should be able to use one of the LLCs mentioned without having to make a new one. Since this is a purchase, it should not matter if the LLC has assets or not. You will just need your basic LLC paperwork (Articles, Operating Agreement with any amendments/addendums, and an EIN letter).

It seems like you are already going the route of having an LLC for each property, though, which helps keep all the assets separated. I am assuming your attorney recommended this method. If you use the Asset Management LLC with no properties currently in it, that would keep things clean. But if you are using that for any other income/expenses, you may not want to throw a property in the mix.

The new holding company LLC with one other property could be an option, too. Maybe you could start putting 3-5 properties in an LLC together instead of creating a new one each time. That could keep your cost and paperwork down.

When starting out, the method of an individual LLC for each property doesn't seem too daunting, but once your portfolio starts to accelerate, it can turn into a lot of paperwork to manage.

I am sure you are feeling that now with 17 LLCs.

Best of luck with your purchase!

Post: Long term investing

Sarah Downey
Posted
  • Lender
  • Springfield MO
  • Posts 56
  • Votes 63

Hi Justin,

There are lots of great turnkey companies you can look into using. The first rental we bought was through Midsouth/REI Nation in Memphis, TN. In most of the top markets, you can find companies like them. They purchased the property, rehabbed it, and now manage it. We just received a check each month.

From what I have been seeing lately, some of the hot markets are Indianapolis, Philadelphia, Denver, Milwaukee, Charlotte, and Columbus, Ohio. 

What markets are you looking into?

Post: LLC structure advice...

Sarah Downey
Posted
  • Lender
  • Springfield MO
  • Posts 56
  • Votes 63

Hi Jonathan,

If it were me, I would set up a Master LLC- Family First Hideways LLC to cover to overall business activities and then continue to create individual LLCs for each property. That way, you have it separated out from the projects you are running with different partners and are not blurring the lines together.

It would require more paperwork for each entity but I have used websites like Legal Nature to create operating agreements/corporate resolutions. It is super easy and I know there are others out there like it.  

You could create Family First Hideways LLC (100% owned by you and your wife) and then have the others branch off it.

Ex: Property 1- (title owner) 123 Main Street LLC- owned 80% by Family First Hideways and 20% Partner 1

Property 2- (title owner) 456 Cherry Lane LLC- owned 80% by Family First Hideways and 20% Partner 2

You will still have to work through whether you want to set up individual bank accounts for each property/how you want to manage your accounting for each. 

I have seen a lot of investors doing this, and I think if you are bringing on partners, this is a great way to go about it.  

Best of luck with your expansion!