All Forum Posts by: Saran Mandhadapu

@Saran Mandhadapu

I recently (a month or so) closed on a residential loan @4.5% for 30 year fixed.  I got the paperwork in quick enough for them to lock in my rate as they said it would soon jump to 4.75.  Sounds like you're right on the mark.

Saran, i recently purchased a 4 unit in Western PA for 4.8% with 20% down. Amortized over 20 years.

@Saran Mandhadapu Quicken loans gave me the 4.5% interest rate owner non-occupied and no points.

Good Morning BP Community!  

Thanks for stopping by.  My sister and I have saved enough money to go in on a deal together. We're looking at a two story 4 unit apartment home in El Paso, Texas.  The building was built in 2015, is new and is fully rented.  Below are pertinent details:

Price:  $300k

Down payment:  $75,000

Taxes:  $6,800.00

Rent:   $800.00 (800 x 4= $3200 monthly)

Water fee:  $50.00 (50 x 4 = 200 monthly)

Mort:  $1300 @ 30 years, 4.5%

Water Expense:  $2400.00

Additional expenses I used were:

Vacancy:  $2000.00

Electricity for outside lights:  $50.00

Maintenance $1000.00 (since its so new)

What do you guys thing? my my calculations it should have a flow of around $11,000 per year.  Any help, comments, advice, opinions are greatly appreciated.  In addition to advice if you can recommend a lender it would be highly appreciated I'm currently working with Quicken Loans. 

Thanks all for your help!!

Saran Mandhadapu the point of a well-formed and managed LLC is that the corporation is its own entity. If something happens in your rental and someone sues you and wins, in theory, they can only get the corporation's assets (savings, real estate holdings, etc) and can not go after your personal savings, house, car, vacation property, retirement accounts, etc.

The rub is that there's a lot of discussion here about lawsuits being able to prove that the LLC isn't run exactly correctly, and a good lawyer being able to get to your personal assets anyway.

You need to decide whether it's better _for you_ to pay for an LLC and everything that goes along with it. Or keep things in your name and bump up your insurance (usually an umbrella policy) to cover your risks.

There's not a right answer, only a right answer for you.

I would go with buying in your name and then transferring to the LLC after. Are you sure that 25% down is the best you can get for the down payment. Around here it is easy to find 15% down and a few small credit unions are even offering 10% down payments. It does mean mortgage insurance and a slightly higher rate, but you could have 2 properties for that much down.

Saran Mandhadapu Ok at the risk of raising some static I would do option 2. 1) Most likely you will HAVE to form the LLC to buy the bigger unit. (some commercial lenders will only lend to an LLC). I.e. You are going to have the added LLC expense any way. 2) most investors tend to re-fi before a 10 yr loan is due for re-finance. Usually to pull equity out. 3) personally I view the quicker pay down (25 yr amortization) as a sort of safety net if there's a market downturn. Remember the cash flow you are not getting is largely being put in Equity. You get it when you re-finance or sell. If the market falls and you can refinance your new loan the new loan payment will be lower and allow lower rents. I like to keep 30-35% equity when I re-fi. Yes I know there is some missed opportunity there, but theres a sort of safety as well. 4) Some commercial loans don't turn up on your credit report. The credit line on my LLC checking account does not show up under my name for one. 5) eventually you are going to need a bunch of cash reserves for the conventional loans and that's missed opportunity as well. It's easier to do the commercial loan. 6) although it's rare to be called on it, when you deed a property from your name to an LLC you do trip the due on sale clause and the bank has every right to call the note. Why risk it?? 7) if your going to need the commercial loans anyway why not develop a working relationship with that lender now?? That's my $.02. RR