All Forum Posts by: Franco Li

I think perhaps before meeting this person, you should get a sense of what you are looking for in terms of investments and strategy. Then when you approach them, make sure they understand the rental market and property appreciation. Make sure they also understand what the taxes are going to be like and to be honest, if they can tell you vacancy rates, they are probably lying. If anyone can give you a correct number on vacancy rates, then they might've struck a gold mine! Ask anyway for giggles! 

Most importantly, they need to have some definitive answers for you regarding rental rates. If they don't that is a huge strike in my opinion.

Private lending with a colleague/family is a very ambitious; if this person is a stranger, I would be even more cautious since the funds might come from atypical sources. However, if you are looking for someone to fully finance your project, what is the interest they are looking for? What about the repayment plan - i.e. balloons in 1 year, straight-line amortization over 5 years, etc.? Splitting the profits is a hefty sum since you may take a personal loan easily these days at maybe 15%+ APR with an online lender. To your best advantage on a flip, is to have it be a balloon (no worries about payments while you do work on the house) but again, I would crunch the numbers first before saying you'd split the profits.

Please also make sure to document everything! Good luck.

Seems like if they just complain and still pay, thats doesn't qualify as a bad lessee. I would reconsider if  they are causing you more problems, but should definitely ask yourself whether you need to perform these updates?

My strategy has always been to leverage as much as possible at the best rate, which will typically be an ARM of some sort. Considering the rising interest rate environment and your risk appetite this may be a debatable response. As an investment banker, and my colleagues and I strongly believe that a 15Y or 30Y fixed mortgage is the ultimate bank scandal, since you effectively pay double to triple your purchase price if you include the future interest payments.

By saying that, I also bias since I love ARMs, and I believe that despite the rising interest rate environment, ARMs are still the best choice, although it does take some understanding. Do some due diligence, look up a 7Y ARM that will help you save some money on a monthly basis, opt out of your strategy in 7 years, and move onto the next one. Good luck!

While I think it is extremely intelligent to form an LLC, you have to be careful that (1) a lender will give you leverage through the LLC, (2) if you already have a property under your name and your financing is under your own name, LLC conversion of ownership may not work that seamlessly. Also, if you own 1-2 properties, a bankruptcy-remote entity or the LLC shell doesn't shield you since the payments from the LLC still go to you, thereby labeling you as the ultimate economic beneficiary. I would still look for some legal counsel since i'm not a lawyer. Good luck tho!

@Travis Preheim

I tend to think many investors are not in the industry but have learned substantially prior to getting in. I do think being a broker, contractor, or even a property manager would substantially help you, but at the end of the day, its about crunching the numbers correctly and being realistic. I would recommend finding a smaller opportunity, do as much due diligence as possible, then get in and learn. Some crazy things - i.e vacancy and managing re-lease - needs some practical experience! Good luck.

@Mike Huang @Nick Adams

Agree with Mike! I think you might find better opportunities to be honest in Jersey City or Hoboken, or even the areas near Rutgers!

@Victor Kang 

If you are positive income on the property and you have wiggle room to cover debt service, maintenance, property management, taxes, insurance, etc., I would seriously consider trying to leverage as much as possible - do an IO of some sort - and reap on the positive cash flow. Meanwhile, use your substantial savings do buy another property and run a similar investment. Although each house may not cash flow as much as you'd like, you'll have two opportunities for property appreciation, combined with two families paying your mortgage! Look into local lenders or some sort of credit unions to get you below 20% down payment, and you can possible do 3 houses! Best of luck in your due diligence.

Philippe Ty Best advice I ever got was to look for local lenders who can give you higher than 85%+ leverage (15% or less down payment). They exist and you may not need to have as much liquidity as other banks require.

Joe Chambers I think it also depends on your own investment goals! NYC properties are expensive but retain some sort of value, while other suburbs may help you get some cash flow. Although I do think it's not a really black vs white subject, there are numerous places that cash flow and appreciate. Those are what you should be looking for! Good luck