All Forum Posts by: Franco Li

@Dantrell Baker

Hi! Welcome and let us know if you have any questions, especially on analysis! Best of luck.

@Akash Sky

"Basically, I wouldn't be able to service the debt on my own in the case some disaster occurred and every single long-term tenant stop paying rent."

This will effect your liquidity; liquidity meaning you need to (1) have substantial reserves to cover at least 6-months (varies) of debt service and expenses outside of your downpayment, or (2) show you have income to support the debt service despite vacancy. I will note that this also varies given that lenders require different things, but national lenders (not a good idea anyway) will at a minimum ask to see that you have sufficient reserves.

Think from the perspective of a lender, wouldn't it be problematic to lend you money and see the worst-case scenario - i.e you don't have enough income to pay me back, your asset isn't generating revenue to pay me back.

BTW, I don't want you to think this is a dead end. This is why you should form partnerships! Or you should look into these million dollar properties when you have sufficient sources of liquidity! OR just be super creative with your strategy - i.e. buy a place that has the potential to be a million dollars!

Property appreciation must be really good! PM me and I can probably help you run some analysis!

More than anything, you'll have to provide sufficient liquidity to cover debt service for this loan, and a solid asset to ensure the lender some comfort  - i.e. stable market, etc.

If you already have a ton of liquidity and excellent evidence to showcase your ability to generate income, getting a loan of that size should not be a problem. A $1M loan at 30Y-fixed at 5.00% will only cost you  $5,368.22/month of debt service, so it isn't really a big deal, you can do it!

I have suggested this before elsewhere, but have you ever considered a strategy where you own a larger equity stake and just give him a PM fee since he'll be managing it? This will help me secure an income source and still own part-equity - to not make him feel left out. I can't say I've crunched the numbers for your particular situation, but you should look into your return scenario. 

I do not recommend loaning your father money because that puts you in a very weird situation - what if he defaults?

Regarding (4), definitely have it on the LLC somewhere or even the title that if he passes away, you'll own 100% interest in the real estate. This protects you from having to deal with unkindly partners. Good luck!

Irrespective of where we are in the cycle - and I personally think we are late for a correction - I think RE is a great asset. As long as you are not betting on property appreciation and more for cash flow, and you have done a full due diligence on the real estate asset, I think there is no harm in expanding your portfolio of investments to real estate. 

I work on Wall St and can you tell you that there are numerous bear-players who are waiting for the drop, but you'll also miss out on a lot of opportunities. As long as you buy correctly, trust your gut (assuming you've educated yourself enough), and learn to diversify your holdings - i.e. bonds and equity as well, then you'll be fine. More importantly, if you buy in an area that has a lot of rental demand, then whats to worry? Good luck! 

I've actually just been in your shoes, although i've already built a portfolio of rental investments over the last several years. Last year, I was also wondering whether to use the money i had on hand for my own place or another investment, and I bought my own place. I think folks who suggested the duplex/triplex is a great idea, but would also suggest that you can buy a home for yourself AND still seek other investment opportunities. Also rates will be going up, so definitely consider that as well! 

And more importantly, if you do plan to leverage either way, you need to also consider how much liquidity you'll have in hand. Lenders will look at your other mortgages, so make sure if you buy the rental property first, that you should also consider how much money you'll need to save for your own home. Good luck!

Hi Everyone!

I am the founder of a real estate analytics startup called DiviSmart.

As a real estate investor, I've found on numerous property hunts that investment-related information is not too obvious, and certainly not provided by many brokers/agents. DiviSmart wants to make real estate transactions as transparent as possible, so we work with both investors and agents to provide independent and unbiased investment analysis - think CarFax or a Moody's/Fitch Rating Agency for personalized real estate!

Agents use our services to promote an honest investment valuation on their listings, and investors tend to use us as a benchmark to validate these opportunities.

Here's one we did for an investor in Brockport, NY:

http://divismart.com/viewreport/divismart/61-westw...

Let us know if you or your team have any questions or is interested to learn more. We are re-pricing our business as we add additional features, and would be more than happy to explain more! Happy New Year folks!

Sincerely,

Franco Li

Co-Founder

If you have sufficient liquidity, you should look into a local lender or a credit union that can give you 85-90% LTV albeit at a higher rate. Good luck!

I'm not sure what type of financing you'll be looking at, but $15K is quite short on this deal. Banks will not give you financing unless you can offer some liquidity to support debt service for x-months w/o cash flow; and more importantly, if you have other mortgages outstanding, you'll have to show that you have EVEN MORE liquidity to support all debt services for x-months. Saying this, (1) and (2) would be quite difficult in my opinion to do. Finding a partnership sounds like a great idea, but you'll have to be able to offer something beneficial to whoever it is since your equity contribution will be low - will you be managing the property? Find a passive investor, someone who can put up the money and take a higher dividend, and you might be able to make a servicing fee out of it if you can PM - call it 10% of monthly rent ongoing - which i think sounds fantastic (low equity contribution --> good ROI).