All Forum Posts by: Megan Hirlehey

Hi BP,

I have an AirBNB that I'm looking to refinance. It is owned by a partnership (so I need a commercial RE loan) and I don't have any loans against the property. The company that owns the property has loans, so I want to refi the house and use the cash to pay off the company's loans so the debt is attached to the asset it belongs to.

I know that in the twisted logic of the banking world, a 12-month lease in the middle of an eviction moratorium is a safer bet than an escrow account that ALREADY contains the money owed by the respective tenants through the end of the year, guaranteeing the rent will be paid.. so how do other people do it? Are there specific lenders out there that specialize in STRs? There must be a way..

Thanks!

You make a good point about paying a bunch of fees to basically just move money around for similar interest rates, I did not really think about it from that angle.

The family member is not in a hurry to get his money back right now, but has communicated he wants it back within about a year to invest in his own properties so I'll likely have to come up with a plan to repay it all in that time-frame at the latest. He may even be open to forgiving the debt/throwing in more money in exchange for half ownership in the company owning the property (I didn't think of this option when I made my original post). The range is just because he gave me the 30k in 10k increments so they have different interest rates. I have not been making monthly principal payments to him, only interest payments to this point, so if I don't refi I would have to decide how to split the cash flow between the HELOC repayment and the private loan.

I do have other personal debt, about 50k in student loans, but that is completely separate from these properties. I'm not taking any income from the rentals for any personal expenses or unrelated debt at this time. Even if I did want to use this money for personal debt, I was under the impression that banks don't lend HELOCs on properties that are owned by legal entities (i.e. an LLC)?

Hi BP,

I'm looking for some input regarding refinancing one of my rentals.

Background, I have 2 investment properties, one owned in my name and one owned in an entity. The personally owned property has a HELOC against it as the only mortgage, and I owe $60k on the HELOC, I still have $15k available on that line of credit (which is what I used to buy the second property). I also have a private loan from a family member in the amount of $30k. The property held in the entity is free and clear. I do not plan on buying any more properties for at least 2-3 years do to an impending career change that will take up 100% of my focus and "mental bandwidth."

The HELOC property is currently rented out as an "AirBnB" (I require a minimum of 30 days so it's technically still not a short-term rental but it's also not really a month-to-month rental) and cash-flowing "ok" at about $200/month, but won't have a long-term tenant placed in the near future. I just flipped the second property, and I have a month-to-month tenant set to move in on August 1.

Question: My original plan was to refinance the free and clear property once I get a tenant in it, and use that money to pay off the HELOC and whatever is left over would start repaying my private lender (I believe it would have to be a commercial loan as it is owned by an entity, and I think I could pull about 65-70k out based on current market value). However, with the current economic climate and uncertainty surrounding COVID, I am not so sure that it is the best time to refi a free and clear property, especially with a month-to-month lease in place. Both the HELOC and the private lender are under 5% interest. Here are what I see as my two options:

1. Refi the free-and-clear property, and pay off as much debt as I can (being that I will still have an active HELOC, I was thinking I don't need to be as worried about holding cash, maybe only hold about 3 months of expenses as opposed to 6+ which is my normal comfort spot) and use the ensuing cash flow to continue making monthly payments until all debt is paid off except the mortgage. If I do this, would you pay off the HELOC ($60k, adjustable rate pegged at prime minus 0.06%, full payment due in 2027) or the private lender ($30k, fixed rates between 3.5-5%)?

2. Hold off on refi until if/when I place a long-term tenant and just use the cash flow from both properties to pay off the debt much slower, incurring thousands (maybe even tens of thousands) more in interest over the "cash-out and pay off" option. Based on the current cash flow and expenses, I could probably only put about $500/month towards debt payoff without adding in some of my own money

3. Any other options I'm not thinking of?

What would you do in this situation?

@Richard Santi

Thanks for your input. The furnishings are my biggest hurdle, I’m nervous to spend all of that money upfront without a proven concept. I’m not sure what I would do with an entire house of furnishings if it didn’t work

@James Carlson

Thanks for your response, especially the inventory thing, I never would have thought of that!

Hi BP,

I've done nothing but long-term rentals up until this point, but with everything going on, I'm wondering if this is all increasing the need for traveling medical professionals?

Do any of you specifically rent to the niche? what are some of the benefits and pitfalls associated specifically with this demographic of renter vs. your standard long-term tenant? 

Where do you post your listings if specifically trying to target these renters?

Are there any additional lease considerations?

Ii haven't decided one way or the other, I'm just trying to research a bunch of different options to see what makes sense in this market.

Thanks!

Hi BP Community,

My tenant's security deposit earned about $9 in interest this year. He is moving out at the end of the month, and assuming he will be getting his full deposit back, what do I do with the interest? I prefer to give it to the tenant (and I'm going to assume there is some law requiring me to do that anyway), but how do I also pass on the tax liability to him? I realize that the tax on $9 is negligible, but this is more of a "big picture" thing so I learn how to do it the right way when I (hopefully) have dozens of units that might be earning hundreds/thousands of dollars per year in interest someday.

Thanks!

Hi BP Community,

When do you start your leases? I never though it really mattered but have heard some people make the claim that you should always start them on the first of the month.

Does anyone subscribe to this theory? If so, why? The only reason I could really come up with is for the simplicity of keeping all tenants on the same pay schedule and therefore fee schedule should they be late on rent. Are there any legal implications to starting on the first vs. any other day with regard to processing evictions in PA? Or any other reasons I am not thinking of?

Thanks for your input!

Given that you are so close to the lease start date, I would take John Warren's advice. I used Cozy in the past to collect deposits and first month's rent, but that was with 2+ weeks until move-in so I could be sure the money cleared in time to give them the keys. Going forward, I don't see any problem using Cozy to collect these things if you have enough lead time before move-in. I use the free version so the money doesn't clear for like 7 business days or whatever but I worked that into the plan from the beginning so it hasn't been an issue. So far, it has made collecting rent a breeze for me and I plan to continue using it for screening and rent collection.

Thanks for the response. I'm not super worried about a low valuation, like I said this is mostly a learning experience for us and I'll likely partner with him again in the future. I'm just looking for a way to essentially back up my numbers if I do give him a buyout number