All Forum Posts by: Adam M.

Cap rate simply is a measure of return based on NOI/Purchase price. It is somewhat arbitrary and used to make comparative analysis with other properties. I don't believe your calculation of COC is correct. it should be (EBITA + 1yr principal paydown)/Down PMT. Your COC should increase each year as your rents increase and your proportion of your monthly payments towards your principal increases. Have you read the lease terms?

@Keri Middaugh

Yeah so Robinhood is a mobile first brokerage. FINRA certified. They are just like ETrade or any other investment brokerage except they have no fees for trading (most stocks). I think they have fees for withdraws from your account. They have a fee schedule but I've not paid any yet. Robinhood.io

I'm commenting just so I can hear if anyone has pulled off a deal like this. Holding costs would have to be high since there is a limited market.

I've been in for a year and a half i think and I've been a bit disappointed. I started putting in $50/month and using the built in automated investing and it didn't turn out so great. Since my portfolio was small $800 or so any time a note would go into arrears it would tank my projected return. I switched to using Lending Robot to manage my portfolio which offers two benefits. 1) Since they aren't the lender they are able to analyze the loans on more data points then LC is and thus get you returns a bit higher. 2) since my portfolio is under 5k I don't pay a management fee (it's only 0.45%). I stopped investing simply because I got behind on bills but I still have reinvestment on. In my case what stinks is that the loans I purchased using LC's automated investing is returning like 2-3% (even though they projected 5-6%). Because these loans were performing so poorly, in order to achieve the desired 8% return Lending Robot had to invest in low quality high yielding loans. Only until last month has the amount of money managed under Lending Robot surpassed the loans that were bought under Lending Club so hopefully I get into some better quality notes. I'm up to $1600 total on like $1500 in cash invested over that time. Velocity of money is definitely LOW. My portfolio age is 9 months which should mean that I would see less past due payments but I think this is doubtful since so many of my new loans are higher risk. I knew going into it liquidity would be an issue but I didn't plan on selling any nor am I currently. I had planned on investing until I was getting $100 in payments each month but I'm not so sure right now. Basically I am in a holding pattern with it. I am making more money than it sitting in a bank and it keeps me from spending it. I have switched some money to investing in REITs via Robinhood since I will get the advantage of "fixed" income without the transaction costs and liquidity issues. Plus there is always the upside of price appreciation. If I was you I would do that for a similar if not better asset.

I'm curious to know if anyone who has bought through them has verified ownership with the county? This should all be public record.

@Saraan A. That doesn't sound like fun. But bravo for picking yourself up and bouncing back from it!

It sounds like you have a decent amount of cash saved up and a solid rate and amount available on your credit line which can be combined to get the cash for a down payment and any expenses that exceed you loan. But as Andrew said if an HML isn't willing to do the deal it's likely it is not a good deal.

HML terms vary. Generally it goes something like 70-80% of acquisition cost 100% of rehab costs up to 70-75% of ARV, 6-12 months 7-12%+ interest rate. You get better terms as you get more experience. Something you need to understand about those loans is the concept of seasoning. Due to the high risk nature of the loans they disallow you to sell the property before the seasoning period has ended (generally 3-6 months). This is so the transfer of the property is in public records. I would be hesitant about credit cards since that is personal debt. If an HML forecloses on you might simply have to just sign the property over to them instead of having to file for bankruptcy like with a CC. Also your interest rate on a CC is likely to be higher.

I think my biggest concern would be whether or not you can put both your names on the title as well as the loan (FHA might be more strict than conventional). I would look into this and definitely speak to a lawyer. If one of you is putting money down with the expectation they can participate in the equity gains and later finds out they can't could cause some issues. I'm assuming this is a 50/50 split but whatever the split is you need to share proportionately in the upside as well as the downside and have the terms on paper so there is less chance for a misunderstanding later down the line.

Thanks @Brenda B. and @Aaron Y.. I've already started my own and have been pinning quite a bit.