All Forum Posts by: Daniel P.

Thanks Stephen. I purchased my 2nd property through an LLC (can't recall my thought process at the time) thinking I would be taking advantage of it being in an opportunity zone. I later decided against this after additional discussions with my CPA and transferred title to my personal name while closing on a 30-year loan. It certainly wasn't an inexpensive change of mind.

@Matthew Coffey 

Hey Matt - hopefully some additional information will help answer your question on cash-on-cash. On the first property, my annual expenses including PITI payments come to just over $10,600.00. I'm reserving 8% for repairs/capex and the property has all new mechanicals and appliances. The expected annual gross income is $14,375.00, minus my annual expenses and I'll net around $3,700.

In addition, the all-in was $105,000 with an ARV of $130,000. I then refinanced at 75% LTV which brings my cash invested to around $8,400. This brings the cash-on-cash return to around 44%.

One of the reasons the cash-on-cash is great is because we opted to leave radiant heat in the property. If we removed radiant heat and installed forced air, our renovation cost would be higher and the cash-on-cash lower. Do I regret not installing forced air? Slightly... but I'll be taking care of this over the next few years.

Hope this helps!

@Sean L.

Cool - I'll PM you my friend's contact information. Great guy and always interested in connecting with new people.

@James Palassis

Your question actually led me to something interesting, and certainly a learned lesson. I know I mentioned finding a lender with no due-on-sale clause, and this was my understanding up until now. Here's what went down...

- Before acquiring any properties, I called a number of lenders and asked a handful of questions, mainly to get a feel for their customer service but also to determine if any said "no" when asked if there's a due-on-sale clause on the note.

- One lender was both very helpful and said "no" to this question. Here was my mistake -- I did not ask to see where on the note it specifically mentions this. I simply took their word for it and moved forward.

The plan was pretty standard: to purchase under my personal name, refinance with no due-on-sale clause on the note, and then transfer the deed to my LLC. So far I've purchased under my personal name and refinanced two properties, and was hoping to transfer them to the LLC next month... then I read your question and realized I couldn't answer you with concrete information.....

I went through the note in further detail and found there is a clause that requires I receive written permission before transferring the property to an LLC.

"If all or any part of the Property is sold or transferred without Lender's prior written consent, Lender may require immediate payment in full of all sums..."

Long story short, it looks like I'll need to contact the banks who bought each loan and get their approval before transferring to the LLC. I've also learned a valuable lesson on confirming with my own eyes - something I do often with my properties but skipped on this portion of the lending process.

Lesson learned.

Do you have any experience with getting a lender to approve this? Curious if you make any headway with this in the near future.

@Sean L. Fellow NY'er! Yep that's correct and allows for the BRRRR. I didn't use hard money lending but I've met a couple people through BiggerPockets who are doing something similar with a hard money loan (at least, last I checked they were looking into it). I will say that a HELOC has played a huge part in my ability to do what I'm doing though. Unrelated - I noticed you're looking into investing in Upstate NY. My really good friend recently invested in Syracuse if you're interested in an introduction.

@Pearly Tan Sounds good and let me know if you have any more questions on my experience so far. More than happy to share some more information. If you pull the trigger on something in the near future, feel free to reach out and share how it goes! 

Hey Pearly.

Since this is a turnkey property, my involvement with the rehab process is minimal from a decision/selection standpoint -- for example the materials and finishes for the bathroom in property #3 are the same as those used for the bathroom in property #2. The idea is that regardless of which property needs a repair, I (or the PM) will know exactly what type of paint, tile, etc. to use. It makes tenant turnover and general upkeep more of a streamlined process.

But to answer more directly, I personally don't get involved with the selection of parts and finishes. However, I certainly am provided with the SOW which breaks down all aspects of the renovation, timeline, total cost and the different payment/draws before I close on any property. If there's anything in the SOW that piques my interest, appears to be missing, etc., then I'm speaking with the project manager to determine next steps. I've also spent a couple hundred on getting a structural engineer for peace of mind - I've done this twice and once resulted in an slightly updated SOW.

Hope this helps!

 Follow-up question... when you convert away from radiant heating, do you also take the extra step and install central air in your rentals? Seems like an additional cost that's worth the time and effort but curious what you think. Sure it's another mechanical component to maintain, but I'm all for providing a little extra to tenants - slightly more than what's offered in the immediate area.

 Thanks for the feedback and it's something I'll most definitely keep in mind. Despite the full renovation, I'm setting aside 8% for repairs and hope to put most of it (plus some additional funds) towards a variety of updates after holding for 10-years... I might have to add this to a future list of improvements. 

In the meantime, I'll make sure to keep a close eye on the radiators each year and inspect them for leaks - try and catch it before becoming a significant issue if they were to fail. 

Thanks again for the heads up.

I'm not sure, but I would guess it's incentive for return investors. If there's enough equity for a decent BRRRR, and it's a solid property, I think it's more reason for someone to come back again with their recycled capital. There's also the question of "why not just purchase with 20/25% down instead?" -- I think without that extra meat on the bone, I personally would reevaluate my approach and consider a more traditional method.

Then again, I guess I can't really say for sure. So far I'm liking their approach though, and really enjoy being part of the process as well.

Thanks for the reply, Bill!

 Thanks for the question, Lynette. My understanding at the time was that radiant heat was more efficient than forced air. Add to that the cost of replacing the heating system with forced air and we simply figured it's best to leave in place. Plus we wouldn't be able to increase our rent at this property by swapping it out. I guess the short answer is... it just didn't seem worth the added cost.

Thoughts? I'd love to get your opinion!