All Forum Posts by: Dewayne Gammel

Peter Mckernan I hold all my 14 properties in a "series LLC", which has protection within its subsets. Example: My LLC series 1 My LLC series 2 Etc. all properties are protected like they are in individual LLCs however they all fall under "My LLC" Also there is not any extra taxes or accountant work due to them all being under the single LLC for tax purposes. Hope this helps.

Dean Letfus I believe that buying over retail is only a good and proven strategy when you are the seller of said property! However I completely agree with you that you make your money when you buy. O'brian Rossi property was built in 1956, it was in good condition, just outdated. Previous owners had just installed new kitchen cabinets and countertops. We had to refinish hardwood floors and paint, and some other minor work. Nothing major, was rented within 2 weeks of buying. Let me remind you this particular deal was my very first buy and hold!! I pay myself my own property Mgmt fee. That is why I budget 10%. You can easily get 6-10% around here. And you do not always get what you pay for!! As far as my budgets for r&m and replacements... r&m would be used for any repairs such as a item in my rental breaking or being abused. Replacements would be for any improvement needed to keep a tenant there longer. As Kevin Perk eluded earlier in the post your BIGGEST EXPENSE is tenant turnover. So I personally include a higher vacancy rate(10%) as well as the higher r&m (12%) and add replacements (10%) (which are technically capital improvements). As most people have stated in this post, if the numbers are not satisfactory then move on...if not and you can accept those numbers do the deal! Don't sit on the sidelines, but be aware that all kinds of problems can arise from rentals as well as from being an out of state owner. Hence making sure your numbers work in a worst case scenario. and as for me being a newbie after 15 deals...most of the guys on this site that are from Memphis have well over 50 units. So yes I am still learning from those guys as well as others! Hope this helps...

@Kevin Perk

Now we have had luck charging a "refurbish fee" in replace of a security deposit. We were basically getting 13 payments off a 12 month lease. Most tenants here in Memphis damage up your house pretty good by the end of 2-3 years. They just dont take the "ownership mentality" thing too seriously! At the start of 2014 we did start charging security deposits of $500 and have been implementing the move-in/move-out checklists. I just want my property back in the same manner I rented it out!!

We did this in leiu of a post at SmarterLandlording.com

@Curt Davis

I figure mine the same way. On this particular deal the only out of pocket I had was closing costs and rehab costs. +/- $5400. and with technically "no skin in the game" my COC looks nice. Now if I would have purchased the house with cash my COC returns would have looked something like 4.2%. It would have went more positive for every 1000 that I leveraged! Not a bad deal for me!!

Sorry for the long message... I cannot figure out how to add a document or a picture. Or maybe the file is too big?? Not sure.

I personally consider myself a newbie, even though I am 15 deals in, because I am still learning. However I have completed multiple deals in 38118 as well as own 1 property in that same zip code.

My deal looked like this:

Purchase	42000	owner financed $0 down
Closing Costs	1200
Rehab	4200
Rent	875	10500	100%
Vaccancy	87.5	1050	10%
Taxes	76	912	8.68%
R&M	105	1260	12%
MGMT	87.5	1050	10%
Replacements	87.5	1050	10%
FD Insurance	31	372	3.54%
GL Insurance	33	396	3.77%
Mortgage	200.51	2406.12	22.92%
Total Expense	708.01	8496.12	80.91%
CashFlow	166.99	2003.88	19.0900%
Cash on Cash	37%

Dean Letfus Who is the HML in Memphis? Do they do 10 year amortized terms? Thanks in advance

@Steve Cook

Yes I consider closing costs as well as a down payment cash-on-cash. If I have to spend initial cash to acquire a property I do factor that as cash spent. In this case your cash on cash is 21%.

However what is the areas cap rate? I figure mine at 20% and fluctuate it from 15-20.

At:

10% =$58658.52 which equals no equity except the down payment.

15% =$39105.68 better

20% = $29329.26 best

I am not familiar with the area however I would definitely ask what are the cap rate ranges for the area. I would want some equity going in, other than my down payment.

@Jason Measures

you can use hard money. I have a place that will loan 65%LTV of ARV. The 65% includes closing and rehab. It's an interest only loan so you will want to refi ASAP!

@Dion DePaoli

Would you recommend a "subject to" appraisal as well as a final appraisal after all repairs are done? I will be refinancing out of these properties so I know an appraisal will get done by the lender. However if it comes back lower than the one that was "subject to" I would have some ground to negotiate. Right?