All Forum Posts by: Dan G.

I am gearing up to start investing in some rental properties (probably at least 10 single family homes).  I prefer to buy locally here in South Florida.

I want to use leverage to get higher returns, and also, just as importantly, get the tax write off so I won't pay any taxes (as they will be deferred) on that higher return.

I want to protect my assets that are not in real-estate in the event a worst-case-scenario plays out and the houses get foreclosed upon.  I know some states always are non-recourse, and I've seen conflicting information about Florida in that regard.

In Florida, do I need to get a non-recourse loan in order to protect my other assets?  

If I do need to get a non-recourse loan to protect my other assets, can I get a 30 year loan with a fixed rate?  If so, what are the terms?

I called two major non-recourse lenders and they both told me the longest term I can get is 10 years, amortized to 30 years, with a balloon payment due after 10 years. I don't want to take the risk that goes along with a balloon payment, so I am hoping that I can get a 30 year fixed loan. This will not be done in an IRA, by the way.

Thanks!

Dan

Hello, 

My brother says he had a friend who used leverage to buy a bunch of houses, and after the housing market crashed in 2008, the banks demanded more cash from him due to the LTV being out of whack. He couldn't pay, so they foreclosed on the houses. Is this how it works? If so, what is it called when this happens? Does it have a name?

Thanks! 

Dan

 Thanks Steven! Is this true if I buy rental properties in any state that has state income taxes? Are there any carve outs or exceptions where I can avoid paying taxes in those states? 

Hello,

I am thinking about buying some SFH rental properties in the Midwest. I live in Florida. If I buy houses in Michigan, for example, do I have to pay state income tax in Michigan, even though I don't live in Michigan? I've tried to research this online and I am seeing conflicting answers.

Thanks!

Dan

 Thanks Tilo. I have no problem giving the property manager full access to my bank account funds so they can take out all the fees and costs for repairs. How would I go about setting that up at the bank? 

 My concern with asking all the right questions is that I might not receive honest answers.  If a property manager does bad business, there's a good chance, in my mind, they won't do good business during the up-front sales process, either.

Does NARPM or IREM show complaint history against the companies?  Is there more to these organizations that just paying dues?  Why is a NARPM or IREM member going to be a better property management company than a non-member?

Is there a resource I can check for complaints lodged against companies?  I know the State of Florida has this for real estate agents at the Florida Department of Business and Professional Regulation.  Is there something like this for property managers?

 Thanks. I'm still concerned because I'm planning on buying C class properties where tenants tend to be less on the ball and are more likely to miss the letter or not return a phone call. Is there nothing I can do? And what happens if they mail a check to the old company and the old company cashes it? Since I fired the old company, they may not send it to me so fast. 

Hello,

I am just getting started with buying out-of-state single family home investment properties (I still haven't done my first deal yet) and one thing I keep seeing over and over again is that a bad property manager can kill you, and that a good one can be hard to find.  So, if your property manager is bad, you need to switch as soon as possible.  My question is, is there a way that rents can be paid in such a way that in the unfortunate event I have to change property managers, I won't have to contact all of my tenants and make them change where they are mailing checks?  I was thinking about setting up a mailbox that forwards mail, but that would delay delivery.  And how does this work for switching over automatic direct debit/ACH out of the tenants' bank accounts?

Are there property managers that will allow me to receive the rent payments, and then allow me to pay my management fee to them each month?  If I receive the rent payments, then I don't have to worry about switching the tenants over when I change property managers.  I'm not sure if this is realistic.  If it's not, I welcome any suggestions.

Thanks!

Dan

How big of a factor is cash flow? For example, if I have a $1 million portfolio of 20 $50k class C houses in the Midwest with a cap rate of 13% versus a $1 million portfolio of 5 $200k class B houses in Ft. Lauderdale with an 8% cap rate, how would they compare for non-recourse financing? The class C portfolio would net $130k per year versus the class B portfolio netting only $80k per year. Is the much larger income stream not appealing to lenders? Would they still only want to finance the class B portfolio despite the lower cash flow? 

Hello,

I'm planning on accumulating several dozen single family homes with cash over the next year, and then getting a non-recourse loan so I can leverage up the portfolio (without risk of personal bankruptcy). I am still contemplating whether or not I am going to buy mostly class C properties in the Midwest with very high cap rates and low to zero appreciation, or if I will mainly focus on class A and B properties with lower cap rates with higher appreciation potential and less vacancies and repairs. But I was wondering, does the direction I go in affect my ability to get financing to fully leverage the portfolio down the road. Let's say I, hypothetically, accumulate a $1 million portfolio of homes paid for with cash and I am earning a 10% net return, making $100,000 a year in net profit. And I want to get maximum leverage (let's say 75% LTV), is the finance company going to care if the houses are class C properties in the Midwest versus class A and B properties in the Ft. Lauderdale area? Might they say, "Sorry, since your properties are class C and aren't likely to appreciate much and could easily depreciate, we are only going to give you 50% LTV. If you wanted to get 75% LTV, you should have bought class A and/or B properties in Ft. Lauderdale".

I'm trying to learn about this now so I don't end up learning the hard way.

Thanks!

Dan