All Forum Posts by: Henry Der

You should request the year's rental collection ledger which will show all the collections or arrears.  Each month will have a total and this total should match the deposits each month into the owner's bank account.  Ask for both of these and see that they match.  If they do, you have a pretty accurate view of the stability or quality of the tenants.

Looking at purchasing a large apartment complex using sub2.

Owners willing to do a sub2 for capital injection to help turn the operations around.  Owner will stay on mortgage, but will be off title and off deed as part of the agreement, as I will assume ownership of the property.  Several years left on the mortgage term.

Structure: One LLC on deed (I will purchase) owns a different LLC on title. Mortgage is against the LLC on title. Possible that one present owner may stay in as a minor shareholder. Have several questions:

Lender Concern/Actions:

1. Would lenders typically allow this type of deal to occur where existing owners/mortgage holders are no longer on title nor on deed?

2. If I do get ownership transfer, would/could the lender call the loan (typical due on sale clause) - are there any sub2 rules to prevent this?  (Title remains unchanged, but the deed transfers)

3. I am a Canadian without a US credit score. Lender will not likely allow me to assume or renew the mortgage. Could the existing borrowers continue renewing in their names? 

4. What are the potential problems with this scenario?

My maximum risk:

5. Would the sub2 borrowers (existing partners) be on the hook and me zero liability on the loan?

6. Then my maximum risk should there be problems, just be my cash injections that I do as part of the purchase?

Thanks very much in advance.

How did they not pay for 12 months?  Probably a little less than 12 months for some of them.  It seems like evictions are costing around $400-500, all said and done.  It was a 6 unit renovated building.  Going by memory here -  2 tenants moved in around January and they did pay the first month.  There were some issues, so we gave them a free February.  Few more moved in February.  Several of them lagged in March, then the rent moratorium hit with Covid and they ALL stopped paying.  The management company said because of covid, they could not issue any evictions until I think September.  The courts were all backed up, and we finally got 4 of the 6 out, I think October/November.  We had staggered the evictions for the other 2 because we didn't want a completely empty building.  So the courts kept moving the dates further away.  In December, the management co discovered the last two had vacated.  However, the court date for the last one still has not been granted because of the backups...

I have about 10 suites, 2 duplexes, one six unit.  Presently using a company that manages a very large portfolio (3000-4000) and I am finding a very high turnover in people I deal with, and seemingly slow to get things taken care of, and communications between the various departments getting missed, lost, and having to explain things multiple times.  Also the work quotes always seem to be on the high side, as they profit from any work done as well... Any recommendations of some companies I can talk to, to maybe make a change?

Have a few rental suites in Memphis TN who received eviction notices. The Management company checked and they have left.  I thought, great, let's forget about paying the legal costs for court dates, hearings, etc. stop all that, and start renovating.  Management co says I should pay legal costs to complete the process...  I say, what?  After they have damaged the place, not paid rent for 12 month, stolen appliances, and you want me to do what?  They said they can come back and claim ... blah blah blah.  I said they will never come back, otherwise they will have to face paying back 12 months rent....  blah blah blah.  I know management companies like to do things by the book as they are liable for things, and it's not on their backs to keep on losing $$$ in the pandemic...

What is your advice here?  

I purchased a property this year. Was having rehab work done, but project and budget has gone off the rails. Seller will buy back the property and assume all debts going forward. I will hold a first position loan for the money already invested/spent on the property and project. Seller will continue to complete rehab and take on project as their own now. What type of paperwork would I need to engage this first position mortgage - debtors will be an LLC and personal guarantees of two people. Loan type will be interest only for 18 months. When I take a loan I normally sign 20 to 30 pages of nonsense. Hoping I can use something less burdensome. State is Ohio. One debtor lives in a different state, other one in state (does that matter?). I live out of the country (not in USA). I will use a title company to register the loan. He has given me a sample of a statutory mortgage document that he says I can use, which is no more than a half a page and is very simple - too simple it seems...with no mention of debtor obligations, personal guarantee stuff, etc.? If you can recommend the correct approach, level of debtor documentation to use, links to documents I can look at or download, that would be a good start. Thanks in advance!

Looking at a 26 unit rehab in Memphis, TN.  Are there any tax incentives, etc. that the city is providing to rebuild completely vacant and distressed multi-family properties?

I am looking at a 26 Unit rehab project in the 1700 E Raines Rd area (Memphis, TN) and I am having some questions about tenant turnover and numbers and project validation.   I'm new to Memphis, but understand this is a reasonably good area.  If any of you are willing to help me with reviewing the project, I would love that!

Besides that, I have a few questions:

1.  Spreadsheet below, I get a 15% return, expenses at 43% of income.  Most people tell me it should be 55 - 60%, but I am not sure what I am missing.  Can you point out any expenses that should be included that I have missed or miscalculated?

2.  End result is are refinished qty. of 26:  2Br, 1Ba units for $25K - good?

3.  What rents do you think I should target.  I'm using $550 tenants pay electricity, I pay water, no gas.

4.  I'm using 10% vacancy, 8% management, 5% maintenance, 5% reserve.

5.  Suite Turnover cost of 1 unit every 2 months at cost of $1250 per = > 7500/yr.

Is this too low?  Should it be 2.6 units/month (10% vacancy) x 1250 => $39,000/yr?

This is what I need your help on - to understand the turnover rate and how it relates to vacancy rate.

So these are the numbers:

Units		26
Rent/Month		550
GROSS INCOME		171,600
			% of Income	Per Unit/ Year
Vacancy/bad debt	10%	17,160	10.0%	660
Management	8%	13,728	8.0%	528
Electricity (owner portion)	100	1,200	0.7%	46
Gas (none - all electric)			0.0%	-
Water		3,360	2.0%	129
Taxes		4,959	2.9%	191
Insurance		5,796	3.4%	223
Dumpster	120	1,440	0.8%	55
Snow/Lawn/Shrub Maint	200	2,400	1.4%	92
Maintenance	5%	8,580	5.0%	330
Reserve Fund	5%	8,580	5.0%	330
Move Out Resets @ 1 every 2 months at $1250	625.00	7,500	4.4%	288
TOTAL		74,703	43.5%	2,873
NET INCOME		96,897
CAP RATE		15.4%

Hi, am beginning to look at the Memphis TN market for multi families and SFR flips. My knowledge is limited as a Canadian entering this market, and having spent no time there at all. The reason I am drawn there is because some opportunities have been presented to me (SFR rehab and MF 20+ unit rehab), therefore I need to do some research. Can anyone provide some weblinks to:

1. Economic data/employment growth/business sector health, etc. for Memphis
2. Rent/Vacancy Trends
3. In/Out migration stats
4. Anything else?

Thanks a million!

Can anyone recommend how a Canadian investing in the US through a US LLC/C-Corp could build up their credit score for the sake of qualifying for mortgages? As a non-US citizen, how would one go about it? Most of the properties are purchased under an LLC, with a C-Corp as the sole member. Could a company hold credit/credit score in the US system? Or does it have to be a person, and if a person, therefore would need some type of identification (ITIN maybe?). Would appreciate any thoughts!