All Forum Posts by: Tim Delp

I'm assuming it only shows this on some of the properties? If so I'm thinking it most likely was a quit claim/change of title. It may have been inherited and that was when the change of ownership took place, it could have been a divorce and one person quit claimed off, or marriage where one was added to title. Best think to do it look at the previous owner and see if there is the same last name from the previous owner or did someone transfer from their personal name to a trust or something.

What specifically is the trouble you are having with your landlord?

My general suggestion would be to look to move somewhere else if you have a landlord that is not living up to their end of the agreement.

Tend to agree with the other posts that it sounds like there isn't much positive cash flow. The part of the equation that we don't have is the terms of the mortgage, if there are not too many years left of them based upon a low interest rate and there is equity in the property then it could be attractive from the scenario you reference of owning the properties with minimal money out of your own pocket and then trying to refinance once you've owned it a year to a mortgage with longer amoritization to increase your cash flow.

$250,000 30 year mortgage at 5% would get your P&I to $1,342. I guess I'm still confused are you saying each 4 unit currently has debt service of $2,410 or is that for both quads?

Jon Holdman You are correct that when I was referencing cash flow I didn't include maintenance and/or vacancy. I was simply showing a point of reference between two different properties. I'm thinking the majority of real estate investors on bigger pockets realize that if you own a house you will have maintenance and if it is a rental your renters will move out, but I appreciate your insighfulness!!

I agree with the other poster that I've never heard of a bank calling a performing note due for violating the due on sale clause by transferring to an LLC. The other consideration that you will want to take if considering this is the cost of your insurance. I've heard that when you own in an LLC you have to obtain two insurance policies. Basically one for the property and then a seperate policy for the liability coverage. Your typical homeowner's insurance includes both of these in 1 policy, typically providing $300,000 in liability coverage for the owner. When owned by and LLC this has to be done in 2 policies from what I've heard. I've heard the expense of 2 policies is typically more expensive essentially for the same coverage. This added expense as well as the cost to create and LLC, file annual tax returns for the LLC etc is going to affect your cash flow.

I've seen many people instead simply obtain an umbrella policy to get added protection for themselves in the event of something happening at the rental property.

Also while no one has ever heard of a bank calling a note for due on sale clause I would hate to have nice low interest rate locked in for 30 years a 3.5% and have a bank 10 years from now call the note when rates are much higher and my only option is to refinance to those higher rates.

I also see a lot of investors transfer or hold from the beginning their properties in revocable trust. This allows you to create anonymity so as you acquire more and more properties someone can't simply look on the property appraiser or clerk of courts to see everything you own. Certainly there are still ways to look thinks up but this does make it a little more cumbersome for an attorney trying to go after you to determine what you really own.

As mentioned by other posters I think your analysis is way off on the cash flow numbers. I recently purchased a home for $35,000 that is rented for $850/month. Taxes and insurance run me about $1,800/year so I have cash flow of $700/month.

What happens in real estate is that as prices go up rents do not increase proportionally. I own other properties that would cost $200,000 today that rents for $1,200. if that property was owned free and clear it would provide about $800 positive cash flow.

The cheaper properties can be more management intensive so some of the extra cash flow comes from having to stay on top of your residents and they may not have the same potential for appreciation.

Each investor has to decide what works for them and their goals. I've owned rentals now for over 10 years and this recent purchase is my least expensive and best return, I have great tenants that call the 31st of the month letting me know they have the rent money, they do usually have a few minor things that need to be fixed but well worth it and allows me to slowly make the improvements to the property.

What are other properties similar to this selling for to investors?

I would think you would simply want to buy them at a price that leaves you a reasonable profit to provide a good deal to a long term buy and hold.

I would take in to consideration that your long term buy and hold is someone who is going to want to feel like they got a good deal from a value standpoint, so if you have good cash flow and leave some equity for them I think that is probably what they are looking for.

I don't think you can base it purely on roi or anything since Roi vary across the country and it would be hard for others to say what is good in your market. And I would want to make sure the market is strong for cash buyers of long term rentals

a bank is going to require that you have your own money for your down payment. Your own money means that it is in your bank account and you can document it with 2 months statements with no large deposits.

Banks are typically not going to want to do the financing with somoene else lending you the money for the downpayment and closing costs, especially on an investment properties. Banks typically look at the appraised value or sales price whichever is less in determining their loan to value

You might find a local bank that is lending their own money not doing loan to fnma or fha guidelines that will entertain other options.

The key if you end up looking to do fnma loan with 25% down is that you will need to be able to document your own funds for the downpayment and as mentioned above you will need 2 months bank statements with no unsourced large deposits.

You will want to work with an accountant. If you are planning on holding this as a long term rental they will most likely use your acquisition cost plus improvements to determine your cost basis. I don't believe your improvements will be a write off but will be included in your cost basis for establishing depreciation over the years.

If you are planning on flipping then I believe they will most likely use your selling price minus your costs basis for establishing your capital gains you owe

I agree with the other posters, it appears you are emotionally attached to this house and the neighborhood. Also sounds as though you may be dealing with a realtor that doesn't know investment properties well for long term investors looking for cash flow. I agree that landlocked and flat roof present issues as well. As the others have mentioned we are assuming you are putting between 20 to 25% down and that is a large sum of money for the little bit of cash flow. Renters that can afford to pay $1,700 to $1,800 are typically upwardly mobile renters that can afford to buy and will eventually buy or get relocated for work.
I would suggest thinking very hard on this one if you want to be a long term investor in cash flowing rentals it may appear that you are wanting to play it safe by not buying in what you call the ghetto, but I think you can find more blue collar middle class neighborhoods where you could buy two houses with the capital you are putting out and have $300 cash flow on each house I would imagine and not be in the ghetto.
As mentioned above the problem with high rents is when you are sitting empty you quickly eat up any of the cash flow you build up. If you have new renters on average every 18 months and you are really good and average turning the property in 45 days that is $2,550 in rent you didn't receive, that is almost 1 year of cash flow assuming you had no repairs you had to make.
Sounds as though if you own this property long term you would be breaking even after vacancy and repairs.