All Forum Posts by: Brent Rieman

Whatever you are looking at in Cleveland make sure your drive by the place at night before you buy.   Some good neighborhoods, but if you want a 10k house your probably going to be in a war zone.  The hospitals are all in areas you are going to be looking at street by street,  no nurse making 150$ an hour is going to want to live on most of them. 

 Great Point Greg

I wonder how hard it is to get a condo building FHA qualified. Years ago I was looking at a condo and this topic came up so your concerns are very valid.

I plan on holding this building basically forever, but it would be cost intensive to do this as you mentioned.  

Ive had the property for 5 years and while it has never cost me money I have not gotten it to the point it is paying me anything and im not counting the hours I put in on it.  Ideally I would like to refi it with 50-100k cash out to keep aside for CapX improvements.   I have been bootstrapping them and that is what's sucking out all my cash flow.   If I did that I would start to actually  make me some money. 

 Do you have any recommendations on lenders?

 Part of it is i havent pushed rents up enough on 4 of the units as much as the rest, this is because i didnt want the vacancy and didnt have the time or funds to renovate.   Ive been using US Bank ive found that even if i do have equity they only allow cash out funds to be used for property improvement.  

Looking to see if anyone has any experience or suggestions on this topic.   I have an 8 unit townhouse building,  its beachfront on Lake Erie, very unique property.  Its considered commercial for Banking purposes so I'm limited to commercial lending.   Currently I'm on my second 5/25 commercial loan.  A few constraints with this apart from only being able to lock the rate 5 yrs at a time is I'm finding it essentially impossible to pull any significant cash out through a refi.  If they let me pull cash out its only for property improvement.  Rents currently range from 1000-2000$ a month even though each unit is an identical layout.  The higher rents are for the ones I have renovated and turned, the others are good tenants I inherited but wouldn't be able to pay the higher rate.  I have been bootstrapping the renovations as units come open, which has worked well as I don't have a big reserve fund and I want to keep what I have for a rainy day, (like a sewer pipe reconditioning project that just cost me 12k)

With that being said there are other properties in the county that are similar to mine but are a condo complex and units are available to purchase individually on a regular 30yr fixed loan. Ive done a bit of homework on what it might take to convert this. The county didn't see an issue converting it when I talked to them. I would need to start with a survey to split everything up, (aprox10-15k) and then have a lawyer draw up everything so it can be a condo complex. (no idea on cost) Of course I would need to start and contribute to a HOA for exterior maintenance. I'm not sure how my current lender would feel about this I'm guessing they would likely be ok with the setup part if I did all this while they still held title to the whole property. But im not sure of the logistics of then refinancing probably 4-5 units depending on LTV's at a time to come up with enough to pay the commercial loan off. Then refi a few more for straight cash. I don't plan on selling any but even if I sold 1-2 I would still control the HOA. This also gives me a easier exit strategy if I ever wanted to sell the property or downsize.

Right now the building is worth around 900k to the bank when I re-upped the loan which is at 590k.  I can force the value of the building up by getting the rest of the rents to 2k but even then only let me use a cash out for property improvements.    If each unit was available separately they would be work 150-200k each, maybe more.  So im looking at 1.2-1.6+mil.  Even if I did 8 - 30yr fixed loans at 70% ltv id cash out around 250k on the very conservatives low end and likely closer to $500+k

1- I'm looking for advise or recommendations for attorneys to talk to about this process. 

2- I'm looking for thoughts from the peanut gallery on if I should or shouldn't proceed and if their is anything I'm not considering.

@Nick Belsky

I have OBO set up fairly well now too and it took time like you said for sure.  I was using their ACH when it cost 50cents per transaction and it was beautiful.  When I signed a lease I set up a recurring invoice and they paid that. One stop shop.  Now they want 10$ per transaction, o but if you ask them its a feature because they deposit faster, listen if I need to count on next day rent deposits and cant wait the 3-4 days Im not going to be in business for very long.   Anyway they have done so many things like this I really want to dump them.  But its hard as you mentioned

Looking for advice on accounting software.  I currently use quickbooks online. Very frustrated with them, they keep raising cost, I think im up to 80$ a month now. Invoicing ACH payment cost have increased 10 fold.  I just feel like they are nickle and dimming me to death and every time I log it its trying to sell me something I dont want.  Im managing an 8 unit property doing about 110k a year gross.  

I started using rent redi this year and have been very happy with it. They have REI Hub built into their platform, softof anyway its cost extra. Anyone have any experience with it?

Thanks

Thanks for all the advice from everyone.   Talked to the current landlord who seemed sincere and and had good things to say.  He is selling the place and admitted to falling behind on maintenance do to health.  Might be a good opportunity to buy a Duplex.

 I did get a decent explanation for the credit from prospective tenant.  

If I decide to proceed I'm thinking,  higher deposit and offer a 6 month lease with the assumption that ill offer another if all payments are on time.  

 Im sure I could find other bites if I waited a bit.   But I have found going into winter is a harder time to find tenants.  Its an interesting micro market.  Im  on the lake so you can get a premium for people that want lakefront but the town is a B ish neighborhood.  I have found its best to rent to people who know the town and what to expect.  Their are A neighborhoods  in the towns just east and Ive had trouble with A class tenants from over their.   Besides the Credit she seems great and I wouldn't have any Vacancies.  

 I hear you and I appreciate the feedback,   What does everyone use for Criteria?   I just evaluate each one as they apply. I have never set a hard line on anything.    I did make this mistake of "feeling the vacancy" once before and deff learned my lesson. I lost 4k on that nightmare by the time it was over.   That is not the case now.   I put this question out here as I actually think she would work out great.  works for a major healthcare system in a white-collar job with 100k+ income 4x rent,  she side hustles cleaning AirBnBs in the area. Solid rental history 9 years with positive review of previous landlord.  She is familiar with the neighborhood and has been contacting me for several years asking if I had vacancies.  Seemed very well put together when I showed it to her.  No evictions, no criminals.   Seemed like a slam dunk and I was ready to send her a lease until I got the credit report back.