All Forum Posts by: Kevin H.

Thank you all for the detailed responses, I greatly appreciate the information.  From what I'm seeing, it looks like the non-recourse loans are more common for larger deals, and for people with a proven history of owning these types of properties...  that sounds like it could make it tough for me on this one, but I'll definitely look into some of the programs you guys mentioned!

I'm in a good financial position to make a move on some of these properties, but unfortunately I'm new to real estate investing (thus denying me the history that some lenders may want), I'm also not at the point where I'm eyeing multi-million dollar properties just yet (let's hope that can become a thing in the future)!  

As I start to get my head around some of this information, I may reach out to those of you who have offered the help/resources on this subject, and I do appreciate the time you've already given me!  

I've never purchased anything other than a SFH, and I'm currently eyeing a few deals on 20-30 unit apartment buildings, which puts me into the realm of commercial lending for the first time in my life. For this scenario, let's assume I'm talking about putting a 20-25% cash downpayment on a property that is 95% occupied, and currently making money.

How likely is it that I can find a lender who is willing to do a non-recourse loan on a property of this type?

If I do find a non-recourse lender, am I correct in assuming that these loans come with higher interest rates? If so, how much higher would a comparable non-recourse loan be to a recourse loan?

Obviously it's in my best interest to expose as few of my assets as possible to the loan on any given investment (even though I want to make money, rather than losing money), but it's obviously in the lender's best interest to protect their loan with as many assets as possible. 

What's the reality on this subject? 

Exactly.  

And, even when the bank reports such things, it means nothing as long as you're not involved in an illegal drug transaction, etc.  It's just a reporting requirement, and it all happens behind the scenes.  When I worked in banking we occasionally had these issues arise, and it was simply an issue of a bank employee filling out a form and submitting it after accepting the deposit (NOTE:  that was well over a decade ago, so things may have changed slightly since then).  

Regardless, checks and wire transfers aren't subject to such scrutiny, and I've moved large (over $10K) amounts of money a number of times using checks or wire transfers.  Even large cash deposits aren't a big deal, assuming you're acquiring your money through lawful means.  

I can't see any reason to let this bother you.  If you try hard enough you can probably find someone out there who wouldn't want to live in the place because of that, but I doubt it would be any higher than the percentage of people who didn't want to live there because of any other silly reason.  

I often hear friends and associates (many who live in old homes) talking about how they'd never live in a place where someone had died...  odds are they already do.  People get old, and they die, and many of them die at home.  I once heard a neighbor making that remark, and I knew for a fact that the prior homeowner had died at his kitchen table (he was in his 90's, it happens) -- I didn't bother popping that balloon for my new neighbor.  

 That probably depends a lot on the region.  For instance, here in Colorado a "no guns" sign is entirely unenforceable at the vast majority of places (excluding places like: primary schools, federal buildings, and places with permanent weapons screening stations).  You can put a "no gun" sign on the wall and it means absolutely nothing from a legal perspective.  If you find out someone is in your establishment with a gun, and you have a sign, you can simply ask them to leave...  but if they leave when asked, no law was broken (if they don't leave when asked they are simply trespassing, like anyone else who was asked to leave and didn't).  As far as enforcing a "no gun" law in someone's home, even if rented, I'd say good luck!  

But, if you go to a place like NYC, it's an entirely different animal.  I've legally carried a gun in NYC, and even as someone who has federal authority to do so, it was a huge hassle for me at times (such as checking in at Laguardia Airport  -- where it's a felony for a "normal" person to check a gun in baggage, unlike any other airport).

All of this aside, I feel the need to reiterate that this idea has no use in the real world.  It will accomplish absolutely nothing, and drag that landlord into a heated political (and potentially legal) debate.     

I was also thinking about the overall economy earlier today.  Anyone with any sense (or knowledge of history) knows that all booms come to an end eventually...  Every bull has its bear.  But, we also know that it is notoriously difficult to properly time the markets.

If I were guessing, I'd imagine that we see some type of move in a recessionary direction within the next 3 years.  But, others think we have ten years of gas left in this climb, and still others think the end is here today.  Some believe we'll see a crash that makes 2008 look trivial, and others believe we'll see more of a flat market for a while (probably more likely, but who knows?). 

Here are my thoughts:

1) Interest rates are still really low compared to historical averages.  Since money is still cheap to borrow, it isn't a bad time to do so if that is part of your investment strategy. 

2) Our latest boom was born out of a recovery from a great slump, but it also brought rents up in many areas, and brought them up stratospherically in some areas (like my town - Denver). 

3) If we move in a recessionary direction I think the greatest risk will be to areas that have seen huge price appreciations in the past few years.  I personally believe that the areas that have seen modest, slow and steady appreciation will better weather the next economic storm.  This is the old 'the higher you are the farther you fall' logic. 

But, hey, I'm just some guy on the internet.  And, compared to a lot of the folks around here, I'm a total amateur.  But, I stayed at three different Holiday Inn Expresses just last week, and we all know that counts for something, right?    ;) 

  If he lived out of state while owning it, logic suggests to me that he probably has someone in the state who held keys to the property while managing it.  Unless it was just sitting abandoned, in which case I'd see if he would overnight a key to your real estate agent.  

Terrible idea, in my opinion.  Criminals absolutely do not care about your sign, and your tenants and lawful guests have a right to self protection.  Putting up a sign solves nothing, it disarms the law-abiding, and advertises the issue to criminals.  It's a political maneuver, and nothing else.

@Todd Dexheimer, 

Thanks for sharing your knowledge!  

I've been sitting on the sidelines for too long while trying to figure this out, so your post sort of resonated with me a bit.  The most attractive markets for me are also out of state, as Colorado is too hot of a market at the moment.  

I lived in Columbus, Ohio, for about 8 years when I was in college, and my folks are still in that area… it may be my first target market for out of state investing at the moment. 

I'm still considering my options right now, but I've seen some attractive looking deals for 20-30 unit buildings in C-class neighborhoods (usually 95% occupied or so), and I have the cash/credit where I should be able to obtain the financing necessary to complete one of those deals without a problem.  

Based on your experience so far, would you consider it smart or foolhardy to start with an investment of that scale?  In other words, do you feel it was necessary to 'learn to walk' on duplex to fourplex size properties before 'running' to a 30 unit property?  The financials look attractive to me on the 20-30 unit buildings, but I'm still hoping I'm not missing the forest for the trees! 

Hey Bill, sorry for the delayed response, it has been a busy couple of days around here!  

I certainly agree with you about the problem of declining populations and the issues that can arise in those markets, particularly with a long term hold. That's what has scared me away from Cleveland investments thus far (and Cleveland is my birthplace -- I know that area better than most places out of state).

But, there are also out of state areas I've considered where the population is still growing.  Columbus, Ohio, is an example of one of these places.  I went to school at the Ohio State University in Columbus, so I know that town pretty well, too.  It's no Denver in terms of growth, but it has basically gained the population that Cleveland has lost in the past twenty years. 

Naturally, the easiest option from a management and knowledge basis would be to purchase right here in the Denver area (or even elsewhere along the Front Range).  I guess I'd say my one hangup here comes on the accounting side of the house...  In the past three years of searching, I've yet to find a place where I feel like I can make money in this town!  In fairness, my searches started with a different goal originally.  We initially planned to buy another house for ourselves, and rent the one we own free-and-clear.  But, so far we haven't found the replacement house (while we have found bidding wars, lightning quick sales, or overpriced piles of crap).

If we find a house that meets our needs in this area to live in, our current home will provide for an easy rental, is debt-free at the moment, and would probably rent for at least $2200-2400/mo.  If we don't find another home (and we haven't thus far), then I'd like to put the cash we have into other real estate investments... locally or nationally. 

I know how deceiving the internet can be on real estate (or other sales items).  But, I can sit here at the computer right now and run basic numbers on properties around the country that look like they should easily cash flow some decent returns.  I can't seem to do that in Denver right now.

With all of that said, I'm a guy that will happily be proven wrong when being proven wrong can help my position!  So, if I'm missing the forest for the trees here in D-town, I'd be happy to hear about it :)