All Forum Posts by: Gunnar Teltow

@Bob Hines yes that's exactly right. Most tenants in North County seem to qualify for at least partial Section 8. My favorite units to buy are already rented to a tenant with 100% Section 8.

A few friends of mine and I own 30 units in North County. The economics are very strong but I agree that you either need to live in St. Louis or have a strong team that you can trust.

I just got back from St. Louis. I toured with a friend/agent and learned that there's a BIG difference between North County and North City :)

South City is a good place to invest, I heard that from several people. We're going strictly for cash flow so North County is our playground but South City is certainly nicer with more appreciation potential and less tenant headaches.

Chelsea, here is the thread. Not sure yet when and where the next one will be but if you set a keyword alert for "Austin" (QuickTip!!) it should pick it up.

South Austin Meetup

Hi @Chelsea Lewis

Welcome! I think there are two good ways to take the next step. Go to one of the meetings like the one @Bryan Hancock mentioned, and we now also have on once a month in South Austin if that's more convenient for you.

Second, do a deal. Find something that sounds like it makes sense, run it by everybody and their brother to vet it, and then pull the trigger. My first deal under contract was a $3k lot in a flood plain in Sequin, TX (thanks @Brian Whitten !). That one fell through at closing when the seller didn't show. My second one (first one that closed) was a cheap rental property in St. Louis.

The rental cost me about $5k more than I should have paid but I again learned a lot and it led to my next deal, which was killer. So my point is don't wait for perfect one. Just do something that makes sense and get started. Everything after that will flow from there. Good luck!

@Daniel Dietz

An LLC has members, not shares. Typically, we use LLCs to pool our funds for deals. Each member makes contributions and receives distributions pro-rata to his/her initial investment. The interests cannot be traded or sold. The LLC is taxed as a partnership, meaning it's a flow-through entity, and it issues K-1s to each member. I'm a member and also the LLC's manager but I'm not taking compensation for that role.

The note came from the seller. Hope this helps!

@Daniel Dietz

When I first heard about the deal from my property manager, I put together a spreadsheet and showed it to a few people in the office to see what they thought. Even if you run the economics only out to 10 years and assuming zero appreciation and 60% expenses, the numbers are pretty eye popping so everybody wanted in.

I already had a Texas series LLC for Deal #1 so I simply opened a new series, collected the funds, and closed on the purchase.

The loan route is not much more difficult once you find a willing private lender, all you need is a promissory note and a pledge & security agreement. Best to have this done by an attorney but it's pretty standard fare.

@Michele Fischer your last comment is so funny! After reading it, I actually studied up on the St. Louis County PHA program. It's interesting, the waiting list is closed, and you have to participate in a lottery just to get put on it!!

It also spells out very clearly what the S8 recipients have to do to maintain their benefits, like paying their piece of the rent on time, abide by the lease, don't house people not on the lease, and keep the property in good condition. Given what it takes to even get S8 benefits, I would hope most tenants wouldn't want to rock the boat for fear of losing the assistance. At least that's what I'm telling myself :)

That and the direct deposit coming in each month like clockwork seem to make S8 not the worst way to go.

@Account Closed

I ended up going with a local broker here in Austin so unfortunately I can't give you any input on Summit after all. Sorry!

@Jal Singh Thanks! Given that this is the size of a car loan, putting a mortgage on it seems more trouble than it's worth, plus then you're talking another thousand dollars+ in closing costs. Also, I own this in an LLC for liability reasons, which I've read on BP lenders don't like, although I haven't asked my bank yet.

I'm hoping to buy 1-2 more houses into the LLC that owns Deal #1 and then find a private lender or portfolio lender/credit union willing to give the LLC a revolving credit line. That would seem like a more efficient way to handle leverage for inexpensive properties like that. Looking forward to your post on your deal!

Thank you so much for everyone's comments and votes!!

@Justin B. the way I found the second deal is a great example of how taking action creates opportunity. The PM I hired for the first property brought the second deal to me. So while I probably went in about $5k high on the first house, without jumping in and doing something, the seller financed portfolio would never have come my way.

@Jerry W. your numbers are spot on. I did inspections on all houses and there's a fair amount of stuff, as can be expected. On the other hand, a completely new roof for one of these is $3k, and you can do a full rehab for about $10k. So on the equity side, I raised $200k (including my own share) which is about $50k more than was needed for closing, to have money available for immediate repairs. The rest will come from cash flow. My partners and I won't expect any distributions for the first year. I want to get everything in good shape and solid so that the renters are happy.

@Chris L. your number is right also! The cash-on-cash on this deal is just stupendous, due to the great financing. Still, not a slam dunk, needs proper management over time as you point out.

@Aaron Montague some of them a on the same street but overall there not close enough for me to be able to change a neighborhood. My numbers don't assume any appreciation, so I just need things to not get worse! (knock on wood, fingers crossed...)

I think there is a window of opportunity in that area that will not last indefinitely so I'll be looking to raise more debt and equity capital to take advantage of it while it lasts. North County is low income but it's not a ghetto like parts of East St. Louis. It seems like Vegas, Phoenix etc. have played out, and now everybody is starting to want to dip their toes in in Detroit, but St. Louis has somehow been overlooked even though it looks quite stable demographically and economically, if boringly so.