All Forum Posts by: Hunter Preston

@Riggies B tang It depends on what type of loan product you would prefer. You could get a standard Fannie/Freddie loan in your personal name - which you could find for 75% max LTV for 30 yr fixed from most conventional banks or lenders. Interest rates would be comparable to a primary residence mortgage.

You can find some smaller or regional banks that would lend to an LLC but I've found the interest rates to be at least 1.0% higher than conventional. They also have 5 yr resets with interest rates and 15-20 yr terms. One lender I found that will do theee types of loans with 80% LTV in Syracuse area is Citizens and Northern. M&T Bank may have something similar as well.

There’s also Asset based lending if you can’t qualify the loan on personal income but could prove rental cashflow to make the payments. Interest rates tend to be 3+% higher than conventional.

@John Woodrich Does that included LLC's? If I buy a foreclosure in an LLC, rehab, rent it out, and then refi then I could be taxed on the cash out?

I'm curious what the differences are for tax implications for a straight flip vs. a BRRRR? My understanding is that any profits from a flip will be taxed at my personal current tax rate as income. However, if I'm refinancing and getting an 80% LTV loan, any "profits" after the cash out on the refi would be debt on the 80% LTV loan. Would there be any self income that I need to report to the IRS if the extra money is debt?

For example on a flip: $60k all-in on purchase, rehab, and financing w/ ARV of $140k, the profits would be $80k but would be taxed at my personal income level

On a BRRRR: $60k all in w/ ARV of $140k and 80% LTV loan on the refi, the cash out would be $112k and profits would be $52k. Would this $52k be tax free since it is part of the refi debt?

Thanks!

I'm currently reading "Multi-Family Millions" by David Lindahl and he mentions an interesting no money down strategy. I am wondering if anyone has tried this or if lenders will agree to this sort of arrangement:

1) Seller transfers property into LLC and refinances property at 75% LTV

2) Seller "sells" 75% of LLC to buyer (me) and I assume 100% of the commercial loan (75% LTV)

3) Seller is able to pull out equity after refi to get paid

4) Seller retains 25% equity of property and 25% of cashflow each month

5) Optional arrangement in contract to specify buyout of remaining equity by predetermined time

Here's an idea for a possible creative additional income stream for rental properties AND obtaining a small 0% interest / net neutral loan for each property: home security systems. 

1) Negotiate a deal with an alarm company to be paid as one of their sales reps (ie. $500 upfront for each "sale" of a security system for each of your properties). Many security system sales reps can be paid between $400-$700 for a 3 year contract @ ~$40 / month. Conservatively, $500 would be a fair payment - especially if you have many properties (sales) that you could bring to the table.

2) To obtain a 0% interest loan / net neutral deal, you would charge tenants an extra $26 / month for the benefit of the security system. At $40 / month over the 36 month contract, the total cost over 3 years would be $1,440. At $26 rental increase x 36 months + upfront $500 that you make per deal, this would balance out the $1,440 cost and make a net neutral deal while obtaining $500 upfront per deal.

Let's expand this concept and say that you own 100 properties. By providing tenants with a security system and charging them an extra $26 / month, you could make $50k upfront as a 0% interest "loan" that is paid off over 3 years.

3) The next obvious step to create an income stream would be to simply charge more than the $26 / month. Let's say you charge tenants $35 / month for the new security system. At 100 properties, this would make you an extra $900/month profit while still obtaining a $50k 0% interest loan. If the extra income stream is all you care about, it would be easy to play with the numbers and negotiate a deal with an alarm company to get less (or no) money upfront and instead agree on a lower monitoring rate.

The numbers make more sense with the higher volume of properties and obviously the situation depends on where your properties are located (A, B, C, or D class neighborhoods, etc.). It may be a tough sell to tenants in rural properties to pay an extra $35 / month for a security system - however, for many other locations this can be a selling point for prospective tenants and a reasonable rate to pay for a security system (many security system owners are paying $45-55 / month).  

I personally have a background in security systems, so if anyone has any further questions regarding alarm systems (typical costs, technical questions, logistics, etc.), please feel free to PM me!

What do you think? Could this idea work as an additional income stream and/or 0% interest loan?

@Linda Weygant

This is awesome stuff - nice work! The details of this deal are very helpful to learn about your strategy in the Denver-area market and your continued success. I recently moved out here to Denver in May and am a beginner REI with only one property back in NY. These posts are a great start for my real estate education. Thank you!

I've noticed that finding SF's under $200k in Denver are few and far between and many investors are using these for scrape and builds.  But there are many more options with Condos/Townhomes at this lower price point. Do you only buy Condos/Townhomes or do you venture out into SF's as well?

It also sounds like you're having quite a bit of success at renting out each room instead of a lower rent for an entire family. Are your room rentals still normal year leases (like to college kids) or are they short term rentals (like Airbnb)?