All Forum Posts by: Account Closed

I know a mortgage normally would not fit under the 'creative financing' category, but this is a special category, so I thought I would give it a try here. My wife and I bought a property two months ago planning on flipping it. Then probably about the 100th time we heard the word BRRRRRRRRRRRR (right number of R's?), we got the 'novel' idea to leverage the property and rent it out like we do with the rest of our properties. We are fast learners, probably only took us 20 podcasts to come up with that idea!

Here's the question: We are having trouble finding a lender in Memphis or TN who can do a delayed financing cash out. We tried a national lender with experience in these (Quicken), but unfortunately, our balance would have been too small $60,000 and they need $75k.

Lee, PM me. Maybe we can compare notes on selling to tenants. We own several SFRs in Memphis and have a tenant who has requested to buy (and whom we are ready to sell to). I have spoken to a couple closing attorneys re: drawing up the documents for owner financing. The only issue we are having trouble wrapping our heads around is having to deal with foreclosure in the event of default. Anyone here with experience in TN, preferably in Shelby County, providing owner financing?

 Good point - in my area you have to have 10 properties before they will do so. So right now we are stuck paying a $42 connection charge each time... grrrr.

First I will explain how it works for us with single family, and then explain the distinction for duplexes. For our properties we first turn on utilities in our name so that the lights are on for showing the property, and so that we can have the alarm system on (we use SimpliSafe). When the tenant signs the lease, we let them know that we will call the utility company and ask them to turn off utilities on the move in date. Thus, the tenant needs to call a couple days in advance to have the utilities put in their name.

With a duplex, things are a little different from a single family. Often with a duplex, there is a single water meter is for both sides, but the gas and electric meters will be separated out by unit. In that case you would get all utilities in your name, and then for the gas and electric, the tenant would have to get those utilities placed in their name on move in day. You could state in the lease that there is an additional fee of $X/month for water.

In short, we always get the utilities in our name, and then when a tenant is moving in, call the utility company and ask them to turn those off. That way the tenant has to get the utilities in their name.

Brandon,

My wife and I have used Bryon Large from the Joseph Law Firm in Colorado. Send me a PM and I will forward his contact info. He also helped a relative of my boss in an 'entertaining' situation - border and immigration lost documentation of one of the guy's H1B renewals, and accused him of having worked illegally in the US. The lawyer helped him track down proof of the renewal that immigration had 'lost' and worked it out quickly.

For minor plumbing issues we have been using our licensed and bonded carpenter/contractor. I was wondering if anyone on BP has a recommendation for a licensed and bonded plumber.

Thanks in advance,

Tristan Hayes

Michael,

For the City of Memphis, taxes are (this year), $7.77 per $100 of assessed value. Assuming you are looking at single family properties, this works out to  1.9%. Of course, your property may be assessed way over its actual value, in which case you should appeal your assessment.

@Hadar Orkibi I completely understand the difference in the two markets. In most large cities the market forces rents up. In Memphis, I don't feel that tenants in "B" and "C" markets are used to rent increases, and most realize that they can shop around and find plenty of reasonably priced alternatives.

It was amazing when I lived in Washginton, DC and rent increases slowed due to the crisis/lots of high-end inventory coming online. Some landlords still were able to force through healthy rent increases. A new building would come online, charging $2,000 for an area/quality that normally costs $1,800. Management would attract tenants by offering a free 13th month of rent for signing (pointing out to tenants that this makes the rent roughly $1,800/month for the first year), but they would effectively pass on a rent increase by charging full rent for any subsequent years. I would wager that a high number of tenants stuck around and received the effective rent increase.

I agree with @Alex Craig . My wife and I have a small buy and hold portfolio in Memphis, and we would much rather hold on to a good tenant than raise rent and gamble on a tenant leaving, i.e. avoid the tenant search, lost rent and turnover costs associated with a changeover in tenants. We may be wrong, but for us the math is simple: even if you have a good team and can turn over the vacancy fairly quickly, the lost rent + the aforementioned direct costs are equal to roughly 1 month of rent ~ 8%. Will the rent increase be enough to make up for the increased turnover in tenants? Our position may too conservative, but as they say, a bird in the hand... 

Thanks Craig! We got a reference for Scooter Rice of Rice Heating & Air. Evidently if the floor furnace is the soul source of heat - yeah you are out of luck & it's no longer code. I'm partly surprised at how poorly these floor furnaces function in general. The two floor furnace setups I have seen just super heat a central hallway and then the heat slowly & inefficiently radiates into the bedrooms. Glad we called a more experienced HVAC guy. Getting a second quote on a new furnace setup. Thanks for the feedback everyone.

@Alex Craig I can imagine that speed dial gets hit right after the tenant gets a notice on the 6th!

Thanks again everybody!