All Forum Posts by: Lorraine Pennington

@Joe Norman Appreciate your update. Knowing they are Amish actually softens my attitude towards their site! lol. 

I've hummed and hawed about this decision for so long already that it's time for me to just pull the trigger. I think I'll go with the landlordlock option but only roll out 20 and see how it goes. I'll circle back to you in a few weeks to check in. Have a great week and thanks again for the update! 

Hi @Joe Norman! I've been circling this question for a few months now. I've looked into all the options you've mentioned above and I was between Landlordlocks and the Kwikset Key control deadbolt. 

I spoke to the people over at Landlordlocks about 3 weeks ago and they walked me through the whole system. The biggest problem I saw with them was the cost to upstart my units. But it has remained my top option and just today I was set to order through their website. 

I already knew their website was bad (brochure style) but their order page is the worst. Doubt crept in with the purchase I was just about to make and I decided to do a quick search for other user reviews and found this post. Your comment about questioning their credibility resonated with me for sure. The order page is that bad. I've got 74 units I'm keying for so for us, this is a major investment. 

Curious as to what you ended up going with? Yes, I'm hoping you can tip my scale to one or the other! 

Yes, I've played around with IRR awhile back and it seemed inconsistent to me for some reason. I'm going to brush up on it and see if that will put my mind to rest.

I do feel if I was willing to wait the 4.5 years that the asset would steadily produce for the next 20.  It just was going to take a lot of time and work to get there. Curious as to whether there are investors out there that would recommend patience - after all this would be a play for the long game. 

Appreciate your comment @Jonathan Towell. Thank you!
Lp

Hi there, 

My strategy thus far has been buying D class buildings in B/ C class neighborhoods. I spend on average about $5k on each unit to rehab and am a buy and hold investor. I've done this to 22 units and average 20% COC Net incl. reserves and debt obligations. I pull out the cash that it took me to rehab right away and leave my down payment as the figure to calculate my COC returns.

It has taken me on average about a year to stabilize the properties and 1 year for the payback on my rehab expenses. This is where my question to you all comes from... 

I've stepped up to commercial and although I am dealing with higher dollar amounts, I am expecting my rehab investment to be returned to me within 1-3 years. My latest project was forecasted to take me 4.5 years to payback the rehab expenses - it needed major capital improvements. I wasn't able to negotiate the selling price lower to compensate - so I walked from the deal. However, since then my mind keeps going through the figures and I find I am trying to convince myself that perhaps my expectations of capital investment payback need to change if I'm to scale up. 

Would you mind sharing your expectations so as to give me a reality check?! 

I appreciate any and all feedback. 

Thanks, 
Lorraine

I've got about 7 - 4 plexes and after closing I moved them all to an LLC. Yes, you are correct you won't be able to change the loan as it's residential, but it does allow for some asset protection. They all moved over and it did not trigger anything from the lenders.

You will want to take an extra step when it comes to the insurance. Our personal names are on the insurance docs since it needs to match the loan docs since they pay for it out of escrow. But you will need to request for  the LLC to be named additional insured. I also have our trust named additional insured but not sure if that applies to you. The insurance company will do this for no additional cost. 

You are right, the veil of asset protection could be easily pierced, but that is more a function of how your LLC is set up. If it is just a sole member LLC then very easy to pierce. If it is you and your wife, still easy to pierce. The best advice I've rec'd is to have a 3rd party, no doubt someone you trust, as a member of the LLC. They could have a minor share in the LLC and you can structure it so that they receive 0 of the profits. In that scenario piercing the LLC would not be so easy. Possible, but not as easy. Unfortunately, sometimes its dependent on the judge you get. Hope none of us ever have to get to that point. 

The only way you can get your name off a loan is if you 1) ask your lender and 2) have at least 50% equity and still it is unlikely. I always ask anyways and as the assets mature and loan is reduced, you bet I'll be getting our names off. 

It doesn't matter whether the title is held in the same name as the property management LLC. And I would challenge the idea that running your operation gives you any ability to acquire other properties in an LLC. You will be able to use an LLC but only when you get to a commercial loan. The lender will require it and the property will have it's very own LLC - nothing else tied to it - to protect the lenders interest. Even in that scenario, the loan will be under the LLC name, however they will require you to guarantee it personally. Unless of course you are putting 50% down.

I would say the benefits of running everything through the LLC comes down to organization, reporting, and being more credible when you decide to step up to a commercial property. Being able to turn around all my P&L statements made me more credible when presenting my business to the bank when I stepped up to commercial. Streamlined, professional and showing a profit. :)

@Joe Bertolino They purchased it 12 years ago and for ~ 280k. They've since renovated all the units with new flooring, bathrooms, granite countertops, new stucco. So they've invested back and perhaps that is why they are set on getting their asking price.

But agree, I need to get over "offending" a seller with a lo-ball offer.

Are you putting any money down?

And are you planning on refinancing in 4 years? Or paying it off? And I guess the question become why aren't you using a 15 or 30 term loan? If you used a 30 term loan with 20% down, then it may be worth having.

But your analysis is not accurate ...

QUOTE

$1515-85.00(insurance)-$30(grass)-$151(management fees)-$150(utilities)=$349 Cashflow

END QUOTE

You are missing your taxes, repair/maintenance allowance and loan payback. You are in fact NOT cash flowing. You are actually paying out of your pocket every month to own this property.

Further, you need to factor in your vacancies. You can quickly lose multiple year profits if you have can't turn your unit fast enough. PLUS the $500 to place a tenant will make you go upside down real quick.

My advise is to rethink your financing and re-evaluate.

Hi all,

We currently own 2 sfh and 1 fourplex and we are about to bid on another 4 plex on Monday. All units are in Albuquerque, NM. Inventory has been less than quality in NM over the last year and so I'm hoping you guys can keep me on track. My concern is that I'm justifying this deal because I've been hungry for a deal for the last 12 months! Here are the stats.

Listed at $525k, DOM 180.

Offering $475k

Annual Rents ~ $52k

NOI (factoring 5% vacancy, 8% mngmnt, plus other expense) ~ $18k

Cash ROI ~ 6.8%

Property is all 1 story and units are spacious, new appliances, central air/heat, security in place. I can't find any faults physically (realtor did a walk through already) and will rely on our inspection for due diligence.

We'd be putting down 25% and I'm anticipating loan to be at 4.6%.

Our last deals have all returned 9-10% returns on cash, so we are definitely lowering our bar on this one. But I'm justifying it as it needs no renovations (the others were minor rehabs) and I like the unit mix (2-3 bedroom, 2 bath, all enclosed yards). I am also justifying it since I have been actively hunting for our next property and there has been nothing in the last 12 months. 

The property has been on the market for quite some time, so safe to say that the current investors and their realtor are holding out for an offer closer to their listing. I'm looking at going in at $475k but have no room to move up from there. I feel that an offer at $465k would not provoke any counter whereas $475k might.

My question is ... as an investor should I accept what the current market has to give (a 6.8% COC) or keep my money in the bank!

Your comments are truly appreciated.

Lorraine

Hi @Russell Brazil! The expenses totaled $1001.99 and then less the 500 deposit it settled to 501.99. The costs were the costs so there isn't much I can say to that ... other than to reiterate that I was not out to screw anyone. Here is the revised summary of his deposit: 

Removal & Clean Up Of Wax $ 75.00

Wall Repair Throughout Home $150.00 130.00

Reattach Bathroom Bar $ 25.00 0.00

Reattach Bedroom Door $ 25.00 0.00

Reattach Closet Bar $ 25.00 0.00

Carpet Cleaning $ 60.00

Ozone Generator (kill smoke odor) $ 49.99

Treat home with 40 hours of Ozone Generator $ n/c

Clean walls of Nicotine stains (16 hours @ 12/hr) $192.00

Clean Kitchen flooring/appliances (8 hours @ 12/hr) $ 96.00

Kilz Odor Sealer Primer 2-5g Buckets $304. 00 0.00

Application of Primer (48 hours) $ n/c

Sub-Total: $1001.99 $602.99

Less Security Deposit: (500.00)

Total Due: $102.99

Hi All, 

I wanted to circle back and give an update as its been a few weeks. I appreciate everyone's input and quite honestly, I was a bit confused the day I posted this since everyone had their own point of view. I slept on it and decided to hold firm. The smoke damage inside the home is real and I felt no reason to give into the fear of the possibility of being sued. 

I sent him a very nice, yet firm email back explaining our position as a landlord and attached the 143 pictures of the unit. I also provided to him credible websites that explained how difficult it is to get rid of smoke, regardless of the cause (ie cigarette, fire, etc).  There certainly exists a risk of him still coming back at me, but as of now there has been no response. 

Many thanks again, 
Lorraine