All Forum Posts by: Chad Carson

Thanks Jonathan! So, you refinanced an existing unit and pulled out cash to use for the new purchase. Did you get any financing on the new purchase or was it 100% cash? If so, what kind was it?

Will Gaston, I have a portfolio of college rentals in Clemson, SC, and our experiences and management philosophy seem to be very similar to yours down in Columbia. 

A few points to add to the great conversation:

• Some towns (mine included) regulate the number of unrelated occupants by zoning type. In my town single family and duplex zoning can only have 2 unrelated students in a unit (so a duplex could have 4 total) unless you get a grandfathered rental license. Multiunit has higher allowances depending upon which zoning it is. These were passed to regulate away student boarding houses with 5-10 students living in a home.
• Watch out for licenses and yearly inspections. Our town has these and it's $100/unit on top of any business licenses. They also tried to make all older units upgrade windows to current code sizes, which pretty much meant every 30+ year old house would have to spend about $1,500/house. After an uproar, they decided to make tenants sign a disclosure that the windows were substandard without having to change them.
• Closer to campus = better. Along public transit and/or bike routes = better.
• We do 12 months leases only. It's a landlord market now, however. If there is an oversupply of rentals, tenants could demand differently.
• Like Will Gaston, we don't add parents to the leases. We do ask for an email during application process that the parent's plan to pay the rent (if the tenant doesn't qualify by themselves with a job).
• Every town has a range of rents, and tenants think of the rent in per bedroom even if you rent by the unit instead of by bedroom (which we do). Ours is about $300 - $800/bedroom. We like to focus on the lower 50% of that range in convenient locations. The expensive luxury stuff seems is trendy now, but I'd be afraid what will happen in future recessions or if the college landscape gets shaken up.

Finally, someone mentioned the risk of colleges not being the same in the future. I'd be super concerned renting to students of smaller, expensive private schools. Big state schools are a little more insulated, but even with those I have a little concern long run. The internet and new technologies have upended all sorts of old, crusty, inefficient institutions. Universities fit that description and they'll have to show society a better value proposition before they can keep raising prices at the current rate.

I'm working on a blog post about real estate financing, and I'm curious how people have financed their latest 1-2 rental purchases. I'd like to do a rough survey of what sources are used most. 

So, can you tell me your type of loan, like:

• traditional mortgage types (FHA, VA, conventional)
• hard money
• commercial mortgage (like a portfolio loan or secondary market commercial)
• private money
• HELOC
• Seller financing
• Personal savings

If you did a BRRRR deal, you can list both the purchase and refinance source.

And if it was a traditional mortgage, hard money, or conventional mortgage - what company did you use to originate the loan?

Thanks for your help! I hope the answers are informative for everyone else who just happens to read this post as well.

@Simmy Ahluwalia perfect! This may be a great fit. I'll pass your information along. Thank you. 

Great resource @Chris Mason! Thanks for sharing. 

Thank you Alex! Very helpful. I'll pass your information along to this buyer. 

There are so many different definitions of success in real estate (and life). So, I'm always suspicious when someone points the path the "right" or best" way. Usually it's marketers selling you something.

And scale -- I don't see that as a holy grail of real estate. I see making money serve your life as the holy grail. And that can happen with 5 properties in many cases and 500 in other cases.

Many of the big syndicators and go-getters I know talk about lifestyle, vacations, etc out of one side of their mouth while their huge, monster of an "automated and outsourced" business controls their lives. If they want to take over the world, that's awesome. Go for it. But let's not pretend that's the only or best way to live an awesome life.

I wrote this article on BP in response to these bigger-is-better type digs:  Why the Massive Real Estate Empire You Think You Want Won't Give You the Life You Imagine

@Nephtalie Pierre We used to do a lot of short sales in 2004 to 2006, but we've only done a couple since then. The ones we did were referred to a local realtor and they listed it. But we were able to still buy it because these properties needed a lot of work - more than the handy homeowners @Richard Dale-Mesaros pointed out could buy.  And because we got in early, we had done extensive evaluation of repair costs and were able to make a strong offer with no contingencies. 

If I were to ramp back up my own short sale business, I would find a couple of good local realtors to send all the leads to. If they could sell it for more than I could pay, so be it. That's best for the seller and the bank. If you have your license (I do), you could get referral fees on all these you don't buy. Then there will be a few odd ducks that need lots of repairs or where there is a big 2nd mortgage to negotiate down and you'll be first in line to buy these.

I actually like this model better than what investors used to do (negotiating directly with the bank) because it's a lot less work and we as investors can focus on the other parts of the business.

Hi all,

I'm trying to help an international investor connect with potential mortgage lenders for foreign nationals. He already owns a property free and clear in an LLC in Atlanta, Georgia and would like to buy more.

Any leads, tips, referrals for lenders?

Any ideas on what types of investor mortgages would be available?

Thanks!

Thomas, I think you make a good point about always building in opportunity cost and comparing what you COULD be doing when you make a decision like paying off debt. But the only thing I see missing from this ROI equation is risk. Risk adjusted returns are the bottom line so you can compare apples with apples.

Yes, there is opportunity cost to basically purchase your own debt at 5% when you could invest it elsewhere at 10%. But by doing that you're dramatically decreasing you risk profile.  If rents had cratered in 2008 - 2010, for example, the free & clear people who wasted their money on sub-optimal returns would be the only ones still standing. You might have to sell those income funds (likely at a loss) to pay off your upside down debts or fund negative cash flow on properties.

And the other thing not in the equation is timing and life goals. It may make sense to always try to optimize returns and build the biggest pile of wealth in the end. But at some point people reach enough. And peace of mind, less complication, less risk, less volatility all matter. Getting those in exchange for lower returns can make sense. So, it's hard to say something is suboptimal without all of that context. 

 Awesome discussion!