All Forum Posts by: Peter Albanese

There's no need to do a HELOC on the first rental property for renovations. Make the bank pay for renovations. Tell the bank you want a 12 month construction loan on the new property and include both the purchase price, as well as renovation costs. Usually you can get interest only for first 12 months during renovations. Then after 12 months, the bank will convert your construction loan into long term financing, whereby you pay both principal and interest. They will probably do a new appraisal after the renovations. By then, you have hopefully rented out units and/or raised rents to reflect your renovations and created what's called "forced appreciation". Don't ever offer your cash or equity to the bank, always ask to borrow it first. The only risk I would consider here is the possibility of rising interest rates 12 months from now.

Maybe its time to just give them notice of the rent increase when the lease expires and give them time to find another place. 

 Random side question, besides the SEC Attorney, wouldn't most of these costs be financed and rolled into the loan?

 Google "financial model for multi-family investment"

Does anyone have past experience with and Self Storage Building Manufacturers which they would recommend? 

Because these loans were recently done and you have loan costs, you will have even more loan closing costs and that's just wasted money. I would do a line of credit against one or both of the properties. Even though you have to technically borrow your own equity, I'd image you will be ahead of the game over the course of those loans, rather than paying 5.5% over the course of the two loans. Those are great rates, but whatever you do, if you refi keep the loans at 80% LTV so you don't have to pay PMI, which is just a waste of money and it cuts into profits. Further, PMI does not insure you, its basically insurance for the bank and you're paying for it.

This is NOT true. Go to another local community bank and ask for an FHA loan for rental property. You can do amortization up to 30 years and you can do up to 10 of these loans. Never forget, not all banks have the same "appetite" for certain types of loans and their "appetite" for loans can change depending on whether or not they need to lend more or not.

What was the best place or website to find these syndications? Are you just looking at syndications through the major crowdfunding websites. People probably know about Open Door Capital because of this site, but what about the others?

A lot of people use house flipping as a way to make income, to then invest in rentals because if you have a good deal, you should make a decent chunk of money. I would highly consider putting in some sweat equity on the first handful of deals. The first place you need to start is the bank. You need them to tell you how much you can borrow for a flip or rental deal. Next you need a real estate broker you trust and ask them to find you a deal or even better a foreclosure property in an area you like. However, right now the market is hot, so many listings will end up getting bidded up in price. Therefore, if you can find an off market deal, that would be ideal. This typically requires some marketing or word of mouth to find an off market deal. 

There are a lot of variables involved with your question, so I'll try to compare and contrast the two investment options. These are really two separate animals. 

#1 PASSIVE. If you can find a good deal on a single family home rental (SFR), you may get higher returns and you are 100% in control of your investment, but you will also have more hands-on work. If you pay a property management company to do all the leasing and work for you, it will probably be about the same return on investment. Sweat equity can increase some of your returns if you're willing to put in the time.

#2 VACANCIES. There is an advantage to a syndication, because you'd be investing in something with multiple units and so vacancies are less impactful on the bottom line. If you rent a single family home, you only have one unit to take the loss for the vacancy. As a side note, you will eventually want to get more single family homes, so your total investment isn't riding on one property and vacancies in one home can be spread across all of your properties. By the way, you shouldn't be vacant for more than 5% of the year, basically 1-2 weeks in between tenants. 

#3 DEAL ACCESS. Syndications have access to larger and sometimes better deals because everyone is pooling their money together, so they may be able purchase more desirable/expensive properties that a single owner may not be able to afford themselves alone. Typically when buying a single family home, you are competing against home buyers, there's less of a market for people able to afford to purchase a 48 unit apartment complex. 

#4 LIQUIDITY. With a single family home, you can sell that on the open market at any time, with or without a tenant. With a syndication, there is typically a minimum amount of time you must be invested and so there would be less liquidity to cash out your $50K, if you were to need access to your capital. 

#5 SUMMARY. I think this all comes down to how active or passive you wish to be with your investment. If you want a hands off approach, I would look at a syndication. If you're not afraid to get involved with the business, you could choose to do single family homes.