All Forum Posts by: Brandon Eleazer

Hi BP,

Myself and two partners are looking into getting a commercial loan to buy a 6 unit building. We've spoke w/a few different local commercial loan officers, who all say that they require each partner to qualify for the loan by their debt-to-income and credit scores. But only two of the three partners have strong financial backgrounds. 

Given that only two of the three partners qualify for a loan, would a good strategy be for the two partners to buy the property (by obtaining a 75-80% LTV) and then quit claim ownership to an LLC that contains all three partners/members? For instance the two partners buy it using AB LLC, and then quit claim to ABC LLC. Or just buy it in their personal names and then quit claim to the LLC. Which, if any, is a better way to do this?

Any thoughts about the due on sale clause here? Has anyone done something similar recently? Any alternative methods to get all three owners an equity stake? Thanks!

Thanks for your input @James Triano

I'll admit this is something that I need to work on too. I don't even think I'm too over-the-top with the systems (my partner would call them "rules"). I just don't want to answer the same questions repeatedly - like "what's our tenant's phone number"; I'd rather we have a way to find out that information to avoid receiving the text asking me for it every time.  It's about reducing the amount of unnecessary communication, and finding ways to save ourselves time.

Once or twice a week is much more realistic than every day. But like I mentioned I don't anticipate a phone call every day, we would just be keeping ourselves on-call or checking our emails for those 30 mins in case the other person needs something. I guess some people might think that's arrogant like "I'm ignoring you until I'm available. You must wait until X:00 time to talk to me", but I view it more of "You can have my undivided attention for these 30 mins everyday if you need it. I want to make sure all our questions and concerns are answered." Again, if it's time sensitive or it's non-business related then he can reach me at anytime.

I'm trying to come up with a technique to add some structure to the clerical and communication sides of our rental portfolio. My partner is very REACTIVE (likes to wait until issues happen then find a solution....Like "hey do we have insurance on this property?"), while I prefer to be PROACTIVE (prevent future issues and get things done before necessary) 

In the past I've suggested keeping all communication via email, cloud based file system like Google Drive, using Podio to leave comments and delegate tasks, and even mentioned something like Time Blocking in the past and he laughed all these ideas off, saying it wasn't necessary. I don't think it's a big deal to want some organization - it might prove to be very helpful.

Here's the e-mail I sent to him earlier this morning. Any thoughts on this? What works for you? Have you experienced this? I'm not sure what else to suggest we do. Thanks!

"I recommend that we block off 30 minutes a day to focus on our rental properties. The concept is similar to an early morning meeting like many businesses do. Gives an opportunity to discuss what is working, what isn't, make changes, be proactive etc.

That doesn't mean we need to talk rental properties every day, it just means that if either of us have any questions, ideas, or anything that needs to get done then we save it for the time block. For example if our time block is between 5:45-6:15pm EVERY DAY then we'll know that if a call, email or text comes in during that time its about our portfolio. If no phone call/text/email comes in during that time then there's nothing that needs to be done. We may find out that we need a 45 minute or 1 hour time block duration if we regularly exceed 30 minutes (especially if we experience vacancies, several maintenance requests, or if we accumulate more rental units)

This will hopefully allow us to organize our time, communicate better, and get more things done. It will also eliminate random email, calls and text throughout the day that are distractions when we're busy working (and might not be able to respond). Of course if any time-sensitive issues come up then those will need attention immediately. Only non-time sensitive issues should be saved for the time block period.

What's a good time block that you're willing to dedicate to our rental portfolio every day? I used 5:45-6:15 as an example because I thought it might be during your evening commute. But it can be anytime. The key is that we keep it consistent, otherwise it doesn't work."

Hi,

I made an offer on a property where the owner has decided to sell it in the middle of turning it from a duplex to a single family. As part of due diligence I found a few active permits for the work being done: Electrical permit to rewire new 200AMP service w/switches, outlets and lights; and Alteration permit for major alteration to interior (knocking down walls to make single family home?)

These permits are active status. I believe the city hasn't inspected this work. In fact the listing agent told me that the permits were actually stolen from the property. My question is what should I anticipate if I buy this property when these permits expire without inspections being completed? Or if the work is completed is it possible to schedule inspections based on the previous owners permits?

Something tells me I'm missing something simple here and probably overthinking this. Just want to know how it generally works when you go to rehab a property picking up where someone else left off. Thanks!

Could you look up recent cash sales in similar condition and price it that way? I would think a landlord is looking to pay around what people are paying for REOs nearby. 

Nice job @Brad Noe,

Great details in this post, thanks for sharing. If you do a cash out refi can you fill us in on those numbers? (Appraised value, LTV, type of lender, etc.) Do you think you'll need to wait another 3 months before a lender will do the loan based on the updated value and not what you bought it for in October?

@Account Closed I may be looking into a HELOC next month, so I'll try reaching out to Huntingdon or Key. If I cannot reach them I'll DM you for contacts. Thanks in advance!

You could live in one of the units and get FHA loan with much lower downpayment requirement.

Hey @Jared Wolf

If you're considering getting the license strictly as a side job/extra income it's generally not recommended....just stay focused on your primary business.  However if you're just getting started in investing or you're thinking about a new career, then sure give it a shot. There's not much risk if you're still going to keep your full time job. You can get a license in a short amount of time and for little cost, and you'll learn a lot. I wouldn't worry about your limited availability because lots of clients work on the same schedule as you. However, I'd still consider partnering with another agent in your office so that you'll have someone to handle paperwork and stuff during business hours when you can't get to it.  Some brokers have in-house transaction coordinators who also help with this.

I'd also say go for it if you're only getting the license to have MLS access and not depend on an agent to buy properties for yourself. That is, unless you can hook up with an agent who's willing to give you access to his/her MLS instead (maybe for a small fee). I've always had my license and can't imagine the hassle it takes to rely on an agent for everything...so many missed opportunities relying on others when you can just have the ability to do it yourself.

My PM charges 7-8% of monthly rent, 10% for maintenance (so if a repair costs $100, the total cost is $110); $350 to handle the eviction process, and they charge the 1st month rent when a lease is signed with a new tenant. It really makes it look like the fee structure is designed in favor of lots of maintenance and turnover doesn't it?