All Forum Posts by: David M Trapani

Interesting topic! Yes, totally doable so long as you've made the right improvements, the value has appreciated fir sufficient cash-out with 75% LTV (and if its worth doing). The lender doesn't typically ask if it's an STR and usually doesn't need a lease in my experience. So long as the property appraises & you otherwise qualify, they should allow your to BRRRR. Keep ownership of the STR for continued cash flow. Use the tax-free cash out to acquire more income property and shore up reserves. Have done this with STR's 6+ times within last 3 years or so. Good luck & best wishes.

Seller carry back financing can be a great way to go. I’ve heard the (sellers) market is so hot in the smokies area, that seller finance is rare. Sounds like you’ve happened upon a seller whose open to the idea. Yes, the realtor(s) get paid out of your down payment or purchase money. Sometimes, in order to make the deal happen, a realtor will carry the commission. You may wish to talk with Avery Carl or her husband - realtor from the Short Term Shop out that way. They’re  very knowledgeable about the area and know what to look for or to avoid. They participate here on BP. Good luck & best wishes! 

Hi Geoff!

This event sounds interesting, yet unable to attend in person.What's the best way to join electronically? 

I clicked the link (above & it may be my computer being finicky), but unable to navigate past the general "Zoom" web page to sign up...

Hoping to participate, if I can...

Cheers & have a great weekend!

David

4-5 STR's with pools Palm Springs (area), CA. Get STR insurance. Recommend large umbrella coverage. $1M-$3M plus at fairly nominal cost. Experienced record heat July-August (122 degrees), so pool, A/C & umbrellas a must. Spa or hot tub, fire pit, corn-hole & other games are an added draw. Guests love amenities.

Looking forward to BPCON NOLA, meeting new friends & networking on our favorite topics! Cheers! David 

Hi David -

Unless prohibited by PA law, the answer is yes you can. The method is called all-inclusive mortgage (trust deed in CA) also known as a “wrap” in layman’s terms. I’ve done some in the past & have seen a few as well. Because the existing lender may call the loan (due on sale clause) if a new loan goes on title (it would be a seller carry back second note and mortgage) you typically do not want to record the second. Craft a note and second mortgage per agreed terms, but don’t formally record the mortgage. Have a written contract spelling out all terms conditions dates for payments, performance etc. As the buyer you would want the deed to the property on executing these documents. Same as the mortgage prefer not to formally record the deed as it may trigger existing lenders due on sale clause. Not sure of PA law, but in CA deed does not need to be recorded to be valid - only consideration, intent to transfer title and “delivery” of deed from seller to buyer is needed. Make payments on the 1st and 2d to the seller and he will write a check to the existing lender. Be sure to insure the property. When your able for better rate /terms refinance the first and second with new loan. If you can, take cash out for reserves and more income investment props. Also, since seller concerned about cap gains (they may be going to a whopping 56.7% in CA under Biden), ask him to “walk the note” (substitute collateral & hypothecation) to another income investment property you wish to acquire. This is a win-win as seller defers cap gains, has good new collateral and continues receiving his monthly check. Alternately, if you own another property which is free and clear if you walk the note to that prop you get cash out tax-free as there’s no existing loan to pay off. Again, more opportunity to shore up reserves and acquire more income investment property with that cash. You can do this as many times as you like if both parties are aboard, cooperating and working towards a win-win scenario. You may want a lawyer TJ craft the needed docs. You’ll need savvy & cooperative agents & title people for walking the note. Cheers & best wishes - David 

Hi Komal,

I've done 4 NNN QSR's. We use commercial banks or credit unions. They seem to understand this type of investment. If you wish to dm me I can share the name of my commercial broker. Worked with him since about 1997. Not only can he find NNN props within your parameters nationwide, he can also hook you up with lenders who may assist you. Cheers & do well! David

I agree with Anthony's questions and analysis. What are current rents? Are they at or below market? If below market, can you make improvements needed to increase to market? Is there any rent control? Hopefully not. Run your cap rate, cash on cash and ARV analysis in advance. Try to seller finance with a reasonable or low down (keeping capital for reno and reserves). Fix it up. Raise rents. Add RUBS to your rental agreement to have tenants pay water, sewer & garbage (unless they already pay by custom in your jurisdiction) to reduce your expenses. Your property, if done right, should then be worth significantly more than when you acquired it. Do a cash-out refi (usually up to 75% - 80%) and used those tax-free proceeds over and above the seller carry back note amount to enhance reserves and go buy more income property. If seller is willing, do not pay her off with the cash out refi. Instead "walk the note" (substitute collateral & hypothecation) to acquire yet even more income property. Keep a close eye on reserves. Be sure to buy in the right locations. Best wishes & good luck! David

Congratulations Deanna!

Hoping this is the first of many STR's for you. Cheers & best wishes!

David

As others mention here, it's a cash-out refinance. If it's an investment property, i.e. you don't live in any of the units, likely limited to 75%-80% LTV. The beautiful part? That's all tax-free cash to you as you own this property free & clear. Great for shoring up reserves, paying down any high interest credit and/or acquiring more well-located income property