All Forum Posts by: Andrew Holmes

@Frank S. There is a company called Junk King - Hagan one of the owners. The can come and give you a quote. They are very good and professional. 

If there a lot of stuff then your most inexpensive option is to order and dumpster and get day labor to clean it out but get a quote for the whole job not by the day otherwise they will take forever. Get the biggest dumpster possible. 40 yrd if it is available. Always get a bigger dumpster than you think you need. Regular dumpster is 30 yrds. If you really have a lot you may need more than one dumpster but they can bring the second one when they haul the first one away. 

Junk removal companies are better if you do have way too much stuff. They bring their truck and haul it away. If there is a lot of stuff then pricing generally works out better with a Dumpster on site and a couple guys to empty the property. 
 

@Alexandre Marques dos Santos Rental prices are based on supply and demand which you already know. Rather than raising rents which a lot of investors try to do all the time the strategy for a real estate investor should be to buy the properties at a discount so you basis is lower than the typical competition. The next part should be to reduce the turnover of tenants. That is much more important than being at the top of the market for rents. My business partner and I have 240+ rentals in the Chicago market all single families and 2-4 flats. (Mostly all single families) We only do 2 to 3 year leases and yes that is even during corona. Average tenant lives in the property for 4.9 years with a 78% renewal rate. 

Houston market is very similar to Chicago market and better upside that the Chicago market. Actually looking to build a portfolio in Huston as I type this. 

@Hunter Caskey You basic thought process is correct. Your vacancy will depend on the types of renters you have in your building. If they are students then you will have turn over each year. If you have single, couple or a small family living there you can do a 2 or 3 year lease and will have much greater stability and less turnover. We do all 2 to 3 year leases on all our properties. Currently we have over 240 + single family home and 2 to 4 units. The rule of thumb I use is that over a 5 year period I will have 6 month vacancy. The reason is because the vacancy's do not happen every year. They happen every few years because the way we lease properties on long term leases than normal. Your basic though process is correct. 

Just don't count on the income for the first year and each year only count 87% of total income and then run your numbers. That will account for some vacancy factor as well as loss of rents and repairs. If you stay conservative the positive side will take care of itself. Just cover the downside and the upside is always good. 

@Sydney Emley You can get another loan that is an FHA loan as long as you don't have a FHA on your current property.

@Satyam Mistry - At this point between my business partner and I we have 240+ Single family homes and a few buildings that are 2-4 units. Per LLC or S corp 5-7 properties in each entity. All the revenue collected goes to the bank account for that entity. The idea is to have about 800 to 1.2 million in assets in each entity. Each property has a million dollar coverage and on personal there is a 4 times the umbrella in relation with net worth. This provides good asset segregation, also makes things easy for accounting.

2. Reserves are held as follows. 1 years net cash flow is never touched so there is at least 6 month reserves. I decided to do this because early on when I started I did not have a lot of capital so wanted to stay conservative. With all the additional cashflow we either pay off the properties in the portfolio or buy more free and clear houses. 

3. The way we do it is we use LLC to set up the rehab. Meaning we spend the money from that LLC during construction. Then at the time of refi once the house is rented we reimburse the LLC that we spent the money from. The reason for this is that if you write checks for the LLC or S corp that hold your rentals it will become difficult to separate between the initial setup cost and on going maintenance.

@Alyssa Feliciano

There is a lot of generic info available about LLC on the web. There are a million books on the subject but a lot of them are rather generic. What you need to figure out is what are you going to use the LLC for. FLIP/Rental/Wholesale.

Then you have to figure out if you need to setup an LLC with you family member right away or first do a deal or two with a partnership agreement. You can own the LLC and the family member can be a partner. Their interest can be memorialized in a partnership agreement and that can be recorded with the local recorder office to protect their interest if you need. In your case you may not need that if it's a family member.

Reason for me saying this is starting a business is like a marriage. Go on a few dates first before getting married. A lot of time people jump into business and then have to undo the whole affair if thing don't work out. You could so a few deals with a simple partnership agreement and get asset protection by putting it in a single owner llc. This will avoid both of you setting up the LLC together. If you do a few deals and they go well then you will have learned and then you can setup the right entity structure.

As far as a loan is concerned. It is not difficult to get a loan in an LLC. In fact a lot of Commerical lenders and hard money lenders will want an LLC for you to get a loan. Residential (Fannie/Freddie loans meaning residential loans always have a much higher standard to qualify). Also they will not give you residential loan if the property needs work. You will have to go to a hard money or commercial bank and they want LLC's to loan to.

@Mario Cuartas

@Ben Stoodley - Covered a lot of good points. 

1. Wether you have to wait 6 months on seasoning will depend on if you do a refi with a residential lender or commercial lender. A residential refi on a rental property will NOT require a 6 month seasoning but ONLY the amount of loan principal + Rehab loan that you look on the front end will be able to be refied. Example if you borrowed $ 100K for purchase + 30K for rehab then that will get refinanced within 6 month with a Residential rental product. Another thing to keep in mind is that generally you will get the refi amount 75 % appraised value or initial loan. (LOWER OF THE 2 Amounts) Basically you can do a rate and term refi in less that 6 months. A cash refi will require a 6 month hold time. 

Commerical lenders to the most extent are making you wait for 6 month seasoning. This was not the case pre corona crisis. The 6 month requirement will be waived if you have a small bank that you have a relationship with in your area. Most large commercial lenders are making you wait if you want to refi and get 75% of of appraised value. (This 6 month requirement will soon go away but the products are not yet released but very soon will be available)

2. All Hard money lenders will require monthly payment only exception will be some private lenders if you know them may let you pay at the time or refi or flip.

@Mitchell J. - Reach out to Gary Davidson (Castle Law) He should be able to help you. Gary won't charge you anything to chat. You can give him my reference. I tried to put his number looks like I cannot do that. DM me will be happy to send you him email and number hope that helps. 

@Cameron Burnett - Mark and few other people have good suggestions. You can reach out and call Gerorge Wyatt. He is a home inspector as well as a builder and rehabber. He does what is called a walk and talk. he can help you get to the bottom of this issue. Wether to walk away from the deal or if it is something you should pursue. His number is 708-828-6120. Cost will be a couple hundred dollars. You don't a full inspection all you need is for him to do a quick walk and talk. He is a investor himself and can you give you a rehab scope. If he feels it will be too much he can let you know. 

Getting a Structural Engineer can never hurt but as an investor you are looking for another experienced investor that is a home inspector and has built houses. Just another option for you. 

@Jake Shulman

As @Brie Schmidt mentioned Chicago is a very large area. You need to think about breaking down some of your criteria. 

1. Location

2. Budget

3. Type Of Neighborhood (A,B, C) I would avoid a D area. (Also do you want to be with in City of Chicago or suburbs)

4. 2 - 4 Flat This will depend on your budget & Location

5. What is your expectation in terms of Cash Flow/Equity In the Property? (Are you ok just breaking even or do you want to have cash flow while you live in the property)

6. How much work are you willing to do & Is that something realistic for you. That will depend on the condition of the property you can buy. 

This is a lot to think about but if you are going to buy and house hack might as well put some work in on the front end. So you can end up with a good outcome that will yield dividends for years to come. 

The question you asked is a good one but very broad. 

Start with Area Selection first and if you want the numbers to work you will have to look at B or C areas. A areas are very hot and cash flow will be very tight. Also depends on the condition of the property and if you have the willingness and ability to identify off market deals vs. MLS. MLS is very tight. Not that things don't come up but then you have to be ready to jump.