All Forum Posts by: Sam LLoyd

You asked for an opinion, so here goes.

This depends on the layout of your house.  If you have a master suite with it's own bathroom and maybe some french doors, all you have to do is put a dorm fridge and a microwave in the bedroom and come to an agreement on when the room mate has access to laundry or other parts of the house.  When I was house hacking, the entrance, bath and bed were all on a different floor.... so there was kind of an unspoken rule that the room mate stayed downstairs after hours.

If your house is not set up well, like I described, you're on your own as to your level of privacy.

On to the money part.... depending on the condition of the place right now.... don't bother doing the flooring and paint till right before you leave... that way it is all brand new and you should be able to attract a higher class of tenants.... also, if you can get it done quickly, right before you move out... or maybe after, you won't be living in a mess. Also, if you are house hacking (assuming thins are livable right now), get as much money coming in as quickly as possible as soon as possible, and then reinvest that money.... don't go on vacation or buy a bigger car.  That could come out to 20k, which is a nice chunk of change towards the next property.

I ran into a fellow (trying to sell his house).  He started with a cosmetic remodel, but he started pulling things apart, and next thing you know, with the walls open he had to start redoing the plumbing and electrical.  At that point he decided to fix the roof, and while he had the roof off, he changed the roofline of the garage.... you get the picture.  Somewhere in there, the house became unlivable and he and his wife had to rent an apartment while they were doing the work. Then.... an inspector was inspecting a new deck across the street and said.... hmmmm, I wonder if they have permits for that.

When I met the owner, he was literally hiding a couple blocks away, and then driving quickly to the place to show it to us since he was trying to avoid the code people.  Of course, he was so far underwater, and I was new at the game, so there was nothing I could do even if I wanted to mess with permits. Since then, I've moved out of town where there are no code requirements.

Moral of the story? Depending on how strict your area is on codes and permits, I'd be very careful.  On the other hand, I've heard of an investor that got roped into a project that was half done, with no permits.... they hung tarps in front of the windows and pulled long shifts, including getting an electrician to come work in the middle of the night... and got it done.... no harm no foul.  If nothing is visible from outside????

Good luck with your project

I've seen several legal septic systems with the drain field under a building.  I've seen a couple engineering designs where the leach field is under a building, and a back up leach field is already designed in a different location in case of failure.  However, a tank under the building?  I don't think that's a good idea.

YOU ARE NOT ALONE!!  I too just bought a 4plex 'as is' without the septic inspection only to find that it's got the same issues.  However, I'm crossing my fingers at the moment because it appears to be working, and I won't need it to be legalized unless I'm going to sell.  20k seams like a very reasonable price for that project.  I would have estimated a bit more.

@Adam Rothweiler  Quick note.  Unless I've missed something, you probably shouldn't make interest only patments on a 30yr am.... It's one or the other..... you could make an interest only payment equal to a 30yr am.

With OF, at least in my area, the seller usually know's that their financing is worth something, so you could expect to pay a little more for the property... essentially points to the seller.

Another note... though I haven't made this work myself, is that the seller sometimes doesn't know they can finance the property.  For example, the property I looked at yesterday... I asked the seller if he was in a position to OF ($280k asking price).  He said no way... he needed to be cashed out in order to move and cover the loan he had.  Later, I asked him how much he owed on the place.  He said $150k.  So, the seller probably does have the ability to OF, but isn't looking at it that way.  If I can find $170... that will cover his loan and give him moving money.  Then the seller can carry back the other $110k.... if I made a full price offer.  Of course finding the $170k is the next tricky part.

Anyway, I hope this will help your strategizing.

Very good point.  You probably saved me quite a headache by pointing that out.

I'm in the same situation, but haven't had a problem yet. For example, the current property I'm trying to buy... I'll close under my own name to get the financing, and then deed it to my LLC. Thank you so much for pointing out how tricky it would then be to refi for any reason. I was planning on putting all my other investment properties in the LLC as well... and right now there's not enough equity to pull out, but I'll have to think about this for the future.

One idea I've seen is for the the owner to have an LLC (or corp) gross lease the property and then sub-lease it... and have a contract with the owner to give the owner 90% of the income... basically managing for 10%. This might allow you to have all the management and such as an LLC for liability, and then still own it personally so that you could refi?

Probably the simplest answer for now would be to try for a commercial loan on your current properties, and hold future ones in your own name until you refi, and make sure the bank you finance with is ok with you transferring title to the LLC after the refi.

Ok,  So your friend has the money for a down payment.  You write up a business plan to present to him, with actual market research done into occupancy rates, etc...  Then you sign a lease with your friend.  So...

A:  You think you can make 7k.... you lease the whole property for 6.  Your friend might make money, and you'll make money.  

B:  Your friend buys the building, and you sign a lease giving him a percentage of the gross income.  So you get 5k one month and give him 4,500.  You get 7k the next month, you give him 6,300.  

You'll have to come to an agreement on who's responsible for upkeep and major repairs.... that's where a profit sharing structure might be best.

In the end, they own the building, not you, but you'll be making money with nothing down... which is what it sounds like your goal is.

Back on the table: New terms, I'd like to know what people think.

About 10k out of pocket (appraisals and closing). 7 small cottages, 3 mortgages.... 2 against the cottages, 1 against some vacant land. LTV on all mortgages will be around 75%... interest rate will be 5, 5, and 0.

Using (what I think is) conservative numbers, the property will cash-flow $800/month.... round down to $100/door, but these numbers are conservative, so there shouldn't be any big surprises.

Would other people out there on BP go for an almost nothing down deal for $100/door in a C+ neighborhood with no way to force appreciation?  Another benefit to these terms would be the ability to resell the vacant land, which could raise cash-flow $500 or more... but I can't count on this.

First idea that comes to mind:  Of course, there are a lot of details missing, but this could work depending on you job, reserves, etc...  Have your Friend/Family give you a second mortgage against the condo you currently have.  This would give you a valid source of the funds going into the next purchase.  You might have to have an appraisal to show the bank that  you're not too far underwater... probably depends on the underwriter.

Next idea I have is that your friend could buy the property and you could gross lease it from him. 

I think it could get real messy co-signing on a mortgage (if they let you), and writing a partnership agreement gets tricky when you have such lop-sided interests (or so my CPA told me last time I tried this). Try to keep things clean and straightforward so everyone understands what's going on when issues crop up.

I'm guessing it's something simple like zoning or something... if there's anything to it.

One thing I've done on the last few refi's and a 4-plex purchase is go through a mortgage broker.  I'm not sure how he's done it, but I've gotten by with only an appraisal, not an inspection.  It's hurt me though, because there were some things an inspector would have caught, that I missed.