All Forum Posts by: Pete M.

@Jeremy Bohnett

Welcome to the BP forums! Fellow Issaquah resident here. Still getting started in REI, too, but been preparing for the last year, basically.

Regarding your questions:

1. Start your own LLC with just you and your partner. Keep it simple and clean. Messiness leads to liability.

2. The LLC that will be the legal owner of the property needs to be registered with the state in which the property resides. On a related note, if you dig into legal entity structures, you'll often see mention of having an "asset holding" LLC that then owns the LLCs that own the properties. This "asset holding" LLC is usually registered in states with favorable legal rules, such as Wyoming or Nevada. In my case, my asset holding LLC is in WY, and it in turn owns my WA LLC that will hold property/properties. I'll also add that you'll hear mixed opinions on whether all of this is necessary--that's for you to research and decide in the end. We chose to set it up from the start to reduce our legal exposure and not try to shoe-horn it in later, but it also costs more money to establish and maintain.

3. You and your partner will probably both provide a PFS to the bank/lender and be the guarantors of the loan, especially if you don't have a track record. As Basit mentioned, you can buy in your name and transfer to LLC, but that can also get weird with the Due On Sale clause (though unlikely). If you do that, I've always been told to be sure to use a warranty deed, not quick claim deed. There are other options, like land trusts, that can be used to avoid the DOS clause, but those will cost more.

Pete

@Kevin Dougherty thanks for the information, much appreciated. Can you tell me a bit more about the alternatives that would allow refinancing sooner on appraised value? Are these portfolio loans, or something else entirely? Thanks.

Hi all,

Browsed several posts in this section, but didn't quite get my query answered and would like up-to-date responses.  If I missed a current post, please feel free to link it to me.

Anyway, I'm currently evaluating an 8-unit complex that should offer me the ability to refi my money back out of the deal.  We're looking at using a commercial loan for acquisition, and then a refi at the new appraised value to pull out our original money.  The work involved is mostly raising rents, and I'd guess maybe $25k-$30k in capital improvements to update some units on turnover.  Most of the units on on MTM leases, so rent bumps can theoretically happen pretty quick.  When talking to a loan broker, he said I should expect a 12 month seasoning period, starting at acquisition.  Does this sound right?  I'm hoping to get the property stabilized and flowing in a much shorter period, and would like to be able to refi to pull out the money sooner (like 6 monhts), if possible.

Insights are appreciated. Thanks.

@Will Gaston  Yep, I think you know it. ;)  My partners have been handling the interactions w/ the PM for the most part, but I can't help but wonder whether we need to consider firing her and getting a new one...

Thanks.

Tagging @Andrew Junquet

@Anna Buffkin  Thanks for the insights!  I have a hard time believing it's an issue with price, either.  Your understanding of the area/neighborhood matches our own... not the greatest, but not the slums.  We consider it a solid "C" area, lower-income residents mostly.  We had to evict one single mother already (she left willingly, just stopped paying after a month); other side went vacate right after we bought because the couple there wanted something bigger.

We've been relying on the PM for advertising, though we did throw a sign in the yard as well.  I will mention the Craigslist idea to my partners, though I'm not sure if we're doing that or not already.

If you don't mind sharing, what are your qualifications for prospective tenants?

Thanks.

@Adam Odom Not right next to the river, but not far.  It's just west of 12th street, on Taylor Rd.

@Chris V.  I know part of it is just the season.  Dec-Jan are the toughest to fill for sure... people tend to move during the warmer spring and summer months, before kids go back to school in the fall.  Always someone looking to move, but fewer inquiries.

We have a duplex in the Cayce area that's been completely vacant for a couple months now.  We handed the property over to a PM, and while she's had showings, virtually none of those are being converted to applications (though the viewers are taking the actual form and seem to have positive things to say).  We started at $700/unit, but have since dropped to $650, and are even considering waiving the application fee for those who are ultimately accepted.  These are 3/1 units, though on the smaller end from a sq ft perspective.  Units have had some light rehab (paint, flooring in some rooms, countertops replaced).

Looking for any insights on what we might be missing... I know it's hard to say for sure without more details, and I know we're getting into the slow season for moves.

Thanks.

@Andrew Junquet

Useful info, thanks all!

@Jake DeAtley Property was built in 1950, so sounds like it was grandfathered in.  Has an "adjusted build date" of 1985, though.  I'm guessing that means they still wouldn't allow it to be changed in the record to a quad, though--right?

@Peter Grote Thanks for the feedback.  I've talked to the current PM, and while he's usually leery about managing non-conforming properties, he said the fact that the postal service didn't raise a red flag and is delivering to all four units is good enough for him that there'll be no issues with the county.  I talked to a second PM and he essentially said the same thing.  Both PMs are managing lots of units in Tacoma and Pierce county, and have been for a long while, so I wouldn't chalk it up to inexperience either.

The property was appraised last year after renovations for the list price of $425k, though... which makes me wonder why it's so low.  Perhaps appraiser cannot use the fourth unit, and has to compare to triplexes?

Thanks.