All Forum Posts by: Gloria Sheridan

@Caleb Heimsoth  The appraisal came in at $195,000 which is reasonable compared to the other properties in the neighborhood IF you'd never actually entered any of them to make comparisons....All the other duplexes in this area are in need of maintenance and updating. Every single thing in this duplex has been replaced as of 2014 due to a fire on one side. Basically everything inside is new--wood floors, systems, kitchen appliances, sprinkler system added, new vinyl siding, etc. My strategy is 50 year Buy & Hold, but I do still hear you about it making me nervous that the appraisal came back so low. The seller paid $240,000 for the place in Mar 2015, so I didn't feel like I was way over-paying.

Zero deferred maintenance on this duplex. The only thing I went ahead and improved were the exterior security lights.

See my other reply for details on the seller financing, but 30 yr amortization with a balloon payment at 10 years. I appreciate your suggestion about possibly refinancing now because interest rates are likely to be much higher 10 years from now. I had not really thought about that yet.

@Jay Hinrichs The private note is 4.85% on $193,500, amortized over 30 years, but with a balloon payment at the end of 10 years. I agree that the savings on going with private lending is huge--Makes a big difference for new/small investors like me. One of the comments in this thread recommends that I go ahead and re-fi now so I can switch to a longer note at the current rates which are still quite low. That is good advice and I will give that some thought.

You are correct that I do my own property management right now since my unit count is still manageable and my units are in decent condition (not much breaking down). I use Cozy.co; 80% of my residents pay their rent online. There may come a point when I want to hire a PM company, but right now the opposite is happening: I'm having people ask me to handle property management for their properties. Sooo, I may just let that keep building up and see what happens.

@Luka Milicevic I agree about the owner financing! It was so easy! Now I know to look for that feature when I'm shopping for properties. I also now will ask the seller if that is something they might be interested in doing and I kinda try to sell them on the benefits of it (for both parties).

Re: Splitting water meters--I've done this now in two municipalities in the Atlanta Metro area. I am finding a good estimate is $1375/meter. [City of Marietta $1350. City of Dallas $1200 x 2 + required adjustments to the original meter = avg $1400 per new meter.]

DO NOT FORGET to account for the incremental cost for your own plumber to come run the line(s) from your new meter(s) to the actual unit(s). Any work needed on your own property is incremental $$$. The plumber/backhoe work in Dallas was an additional $3137. Total cost in Dallas, GA to add 2 meters: $4200 + $3137 = $7337. Ouch. Payback period: Just over 18 months (water bill is ~$400/month). I'm following the Buy & Hold 50 years strategy, so I can live with this.

New meter in Marietta, GA will pay back on about same time line, even though the monthly water/sewer bill is way lower.

A couple months ago I bid too low on an individually metered 6-plex in Dallas. Now that I know how much it costs to install the new meters, I'm kicking myself. I could have bumped my bid by only $2K and won. Soooo stupid! Well, now I know to check for separate meters and consider that in the value of the property accordingly.

See my other reply for comments on the private note.

@Stephen Jeffers The 25% down payment came fundamentally out of a severance payment I received from my old company. (They moved my job to FL; I didn't want to move and didn't want any other roles there, so I took their generous severance payment.) I knew that payment was coming in early Jan 2018, but I need the funds in Nov/Dec, so I took out a 401k loan even though I knew that 401k loan would become due as soon as I left the company (12/31/17). But I had 90 days to pay it, so I was just basically was moving the money around to meet my needs.

I pretty regularly circle back and review my figures for prior deals to see if there are any tweaks I can make to improve the accuracy of my forecasted investment performance.

I went back to the figures I’d prepared to calculate investment performance on this fully recently renovated duplex in Marietta, GA. The property is walking distance to a great elementary school in a good school district. I'd had my eye on the place for years, saw the For Sale sign go up, and called on it immediately. Purchased Dec 2017; $258,000 purchase price. 25% down. Seller financed at a great rate (4.85%).

I’ve learned a few things and also have now included adjustments to account for:

1. The cost of separating the water meter.
2. The affect of moving that monthly water bill off my expenses ($100/month saved) and onto the residents.
3. More accurate closing costs (my original addition of the fees was low somehow—the estimate I use generally to swag a closing cost is $4,000 for the kinds of properties I buy).
4. Adjustment to show market-average rents for the quality/size of the units (mine are $1050 now, but will adjust to $1200 in Jan 2019).
5. More reasonable assumption for Vacancy allowance. I have been using 8% which is too high. I’m using 4% now. Basically: 1 month’s rent lost due to vacancy at $1200/month rent divided by annual expected revenue of $28,800 = just over 4%.

So, results are attached but show overall pretty decent performance:

Monthly Cash Flow: $728.42

Cash on Cash ROI: 12.43%

I'm “reporting out to you all” on this to keep myself accountable to see how things are progressing, as well as share what I’m learning as time is going by.

The reality is: If I’d "known what I was doing" back in Nov 2017, I probably would have never thought about buying this place (Too pricey! Not a value-add!) Even when the appraisal came back low (this is the only renovated duplex in this neighborhood; all the rest are quite shabby; so comps sucked), we pressed on and bought the place using seller financing. But the result has been great—Almost effortless significant cash flow. I think there are numerous lessons here:

1. Just jump in. Get started. Let yourself break the ice somewhere, even if the deal might not seem “perfect.” Go ahead and start taking in $300/month in net cash flow (a small win) while you are pondering how to generate $1000/month cash flow (a bigger win).
2. Just because a place isn’t super-cheap to begin with, doesn’t mean you won’t make money on it. Sometimes it’s okay to buy a new-ish car that you can drive on Day 1, rather than a fixer-upper you have to overhaul. I need to stop fixating on super-low-end properties that need a lot of work and focus instead on the general overall potential cash flow opportunity (for my subsequent deals).
3. There is no rule that says making money has to take a ton of work. I have the income and the credit—Maybe I should just buy more turnkey properties since I am able to?

Well, wanted to share my latest thinking and some learning/retrospective on my first deal. I've tried to attach my actual Bigger Pockets PDF, but I can only seem to add images, so I've snipped key sections of the actual details of the analysis, done using the Bigger Pockets Rental Property calculator.

Thanks for reading! Feedback requested and encouraged...

I'm looking at making an offer on a property comprised of 2 tax parcels, adding up to 2.25 acres. I want to change the property lines to make a small, very manageable 0.25 acre parcel that has the rental cottages on it, and then sell the 2.0 acre parcel. Do I have to own the property in full (100% equity) before I can make these changes? If I don't, won't there be a lien on the portion I'm trying to sell? If I *can* do this, how would any outstanding loans I've taken to purchase and improve the property get split and partially paid back to my lender?

I think I'm looking at a cash-flow positive scenario, even without selling off the 2 extra acres, but not if I have to wait years and years to get it unleveraged.

Thanks, all.    --Gloria Sheridan

@Bill Gulley Such a great reply, with so much info shared! I am facing a very similar situation right now and came to BP for some guidance. I'm reading in June 2018!

Great job! I've gone from 0 to 5 units in 7 months, with a goal of replacing my prior corporate income. I think I have quite a ways to go, but I'm quickly picking up steam. I like how you were able to be creative and fearless with combining financing sources. Keep going!

I am taking the time to share a recent experience I had with a potential lender I connected to via Bigger Pockets. This is the first time I’m looking for this sort of loan (this is only my 2nd rental property). These are simply the facts I experienced. You can come to your own conclusions about this lender, however I did not pursue further interactions with these individuals or company.

I posted a message around the end of April 2018 looking for long-term financing for a wholly-owned 3-plex. On May 1, BP member Alan Jones contacted me via BP and referred me to a lender: TJW Private Lending. Their website looks legit: www.tjwprivatelending.com. Alan indicated I should complete an application on this website, alert him to when it was complete, and he would continue the process. Any documents about my deal were to be sent to info[at]tjwprivatelending[dot]com. I completed the online application the same day and later that same day received an email back with a term sheet. The Lender was Mr. Thomas J. Wood of TJW Properties, LLC.

Still looked generally legit, except that I noticed that the Borrower was required make a deposit of 4 points (in this case, $5600) for the lender to “initiate the due diligence process.” “The Borrower will be billed with a pay pal invoice to guarantee his cash back if deal isn’t closed.”

Say what??

I next took the time to research the lender and the company. When asked, Thomas J. Wood didn’t hesitate to email me a copy of the front and back of his Connecticut driver’s license. His company does show as an active company on the CT Secretary of State website. His address as shown on the company filing, the driver’s license, and the term sheet all matched. I also used BeenVerified.com to try to find out a little more about this person. This took me a little time to research and during the pause, I started getting some pressure from Thomas J. Wood. I immediately received the emailed invoice from PayPal to send my $5600. I got a few text messages like this one: “When do you intend to pay invoice Madam?”

We talked live also: Heavy foreign accent. Tough to make out exactly what he was saying.

To see what he’d say, I offered to have my attorney set up an escrow account (at no cost to him) to hold the $5600 for us and to help us complete the transaction, to which he responded that would mean he would not have the funds then available to pay for the due diligence activities, and that would not be fair to him.

Suffice to say, when he outright declined to do business using legitimate methods, I knew for sure this guy was a scammer. So: Watch out for Alan Jones and Thomas J. Wood of TJW Properties, 129 Cosey Beach Ave. #A-5, East Haven, CT, 06512. Phone # (two-zero-three )684-1194.

All right, people, let’s make some deals, but let’s be careful out there!