All Forum Posts by: Andy V.

Thanks Gino! I listen to your podcasts and read a ton of your blogs and writings.  You guys are rock stars..............keep up the good work!

Andy

I am attempting to put a deal together for a 12 unit apartment building. My cash is tied up on 3 SFR flips so I have a partner that would fund the deal. Its a great deal as the cap rate is over 18! its fully rented and I would intend to spruce up several of the units as time allowed. I'd like to cash out/refi in a year to buy out the partner and pay him 10% interest per month as well. Is it reasonable to figure that I could get the cash-out refi, assuming the appraisal came in high enough and its based on 75% of the appraised value, and put none of my own money into the deal to buy him out? Example: purchase price of $270K (18% cap rate), appraised value after rent adjustments and some spruce up $420K. I could pay investor off ($297,000) with the 75% of $420K cash out? Or, do they always want you to have 25% skin in the game?

I meant 20% of my own money going into the purchase away from the joint ownership............

So you're saying that I will definitely have to put 20% or more into the purchase, even if the value is more than 20% greater than the resale price?  

I have three deals going concurrently so my funds are otherwise deployed. However, I found a 12 unit with a cap rate of over 17! Id like to get it under contract (with a partner), redo some of the units, fill the three vacancies and buy it for myself (from a partnership I am considering with another investor) in a year or two. I'd pay my partner 10%/yr for his initial investment, which is through his self directed IRA. What's the best way to set up our relationship? Should it be an LLC, where I buy out his share of the LLC in a year or so, but there's no real "sale" of the asset? Or, do we agree ahead of time to a sales price and actual have him sell me his half at closing? Is there any reason his IRA would not be listed as a member of the LLC. Do we not do an LLC for the two of us together, but list his IRA and my LLC as deed holders? Also, assuming the property will get appraised based on the rental income, could I get 100% financing assuming the value is 20% - 25% more than the sales figure we agree to when I buy him out or will I have to come up with 20% - 25% down either way? Any help would be appreciated. I've done 6 deals in the past two years but they were all SFR.

Andy

This property appears to be in Englewood, which has become notorious of late, as the most dangerous (deadly) part of greater Chicagoland. That's likely why the price is so low.

If your intention is to sell them to tenant buyers over time, please learn all you can about the Dodd Frank law and the Safe Act. DF was became effective in Jan of 2014 and basically made it very difficult and highly undesirable to hold mortgages for tenant buyers. This is serious stuff and contrary to what the gurus tell you, until the act is repealed or greatly modified (which may come about at the end of the year), stay clear.

You might want to make sure none of the private notes you're interested in were created after Jan 2014 as well to make sure you don't have the potential to get sucked into the Dodd-Frank fiasco.

Wow Curt, that's a ton of info.  Would it be all right to call you soon to discuss further?

I have been contemplating investing in the mobile home industry (units, not parks) to compliment my SFR investing. However, the more I dig into it the scarier it seems, largely due to my wanting to sell on terms to tenant buyers. I believe that one of the Dodd-Frank and Safe Act things to be aware of is that I would need to have a licensed mortgage loan originator included in my deals. I presume this is not a state issue, although Indiana state law may require an even more stringent conformance. Is this accurate? Where do I find one? I've asked 2 brokers I know and got conflicting feedback. How do I buy and sell legally? Also, do I have to become a dealer? What about taxes? I heard I may have to report and pay taxes on the full income from the loan (over time) in the year of the sale? Some of these questions likely apply to SFR land contract sales as well. Obviously an attorney's advice is in order but I couldn't find anyone in my area familiar enough with Dodd Frank and the Safe Act to help. Any recommendations anyone? Hopefully I will hear back from some folks actually doing this regularly, not just someone wanting to sell a boot camp..................