All Forum Posts by: Jon C.

You could also probably refinance under a conventional residential loan and eliminate your PMI if you really have 35%+ equity.

It sounds like you're financing a residential property, which means this "commercial" loan is just a portfolio loan that allows you to buy a residential property under an LLC, and without typical conventional loan qualification requirements. That's also why you're looking at a 4-5% interest rate on a 15 year term (hopefully with 30 year amortization and an interest only period). I'm assuming that doesn't include the points they're charging you. Meanwhile, conventional loans are still hovering around record lows. It doesn't sound like a good deal based on what you mentioned.

20 Unit property is the obvious answer from a management and scalability standpoint (i.e., 1 roof to maintain, insurance and management on 1 property versus 10, etc.). You can also buy the property under an LLC which adds some degree of liability protection and makes a future 1031 easier.

In short, it's easy to do the transfer, but if you don't have your lender's consent, it's still a technical default for a fraudulent conveyance of the Property. I'm sure plenty of BP members will tell you to go for it, but I could never/would never recommend it. Some portfolio "Investor friendly" lenders will allow it, but the rates are higher. 

I'm not familiar with CT Landlord/Tenant law, but what does your contract say? Are you obligated to deliver the house vacant? If so, what are your adjournment rights? You may have a force majeure argument to make, based on the fact that evictions are stayed due to a global pandemic.

Put EVERYTHING in writing and set time deadlines for each and every stage of the remediation work they are contributing. Institute strong incentives, either positive or negative (i.e., If they beat the deadlines they can earn more interest in the deal and if they don't meet deadlines their ownership percentages decrease).You do not want them to suddenly get a big job, and then your investment (and money) becomes their side project.

They MUST have some skin in the game. Do not allow their contribution to be only sweat equity. They need to have some decent money on the line as well.

Never a dull moment! At least you resolved it quickly.

Things to consider - Are you entering into the deed as joint tenants, or tenants in common? You both have to be on the deed and the mortgage, which means that if you break up you will need to refinance and one of you will have to buy the other one out, but who's going to be bought out and what will be the basis for the price you agree on? 

You better enter into a Tenancy-In-Common agreement, or some other form of side agreement whereby you agree in writing to establish the terms of your business arrangement NOW (i.e., valuation based on 3% per annum increases in value over ARV, or based on appraisal of a reasonably agreed upon appraisal company with a solid reputation, etc.). As for property management and expenses, are you sharing in the down side of the investment and the responsibilities? You better have an agreed upon method for arbitrating potential disagreements and allocating the responsibilities and obligations between you.

Write out the list of items and enter into a written legal agreement like you would with any other business partner, because this is still a business agreement, first and foremost. Your girlfriend will either appreciate your professionalism and your understanding of the weight of this proposal for your economic futures and your relationship, or she'll be insulted that you feel she needs to enter into a full agreement for every aspect of this investment deal. If it's the latter, then you will know that this deal should go no further.

 My wife has membership interests in some of my deals, but I retain sole management rights. It's the only way it would work for us. It also forces me to make good investments, because the only thing worse than losing money, is having someone remind you about it every day of your life. I wish you luck, man. You're a braver man than I am. 

I have no experience in Atlanta, but I will say that the one constant in any development project I have been involved with is that you need to get the land at a deal of a price. There are obviously a lot of upfront costs in development, between land acquisition, architects, insurance, zoning and variance applications and approvals, legal costs, etc. Based on what you want to build, you need to make the land purchase contract contingent on your ability to get any zoning and variance approvals prior to your closing. 

As for location, as a general rule, most developers follow the growth in a particular area. Look at what direction it's headed in and buy a couple of miles outside of that. You want the market to be heating up around your development in about 18-30 months, so your development, if multifamily, is online with A-Class brand new inventory that may not otherwise exist in that area, as it's heating up. If you buy in already hot areas, then the land costs go up exponentially and your construction budget really needs to be tightly managed. Contingency costs become even more costly.

Check your local department of buildings to see what other project permits have been filed lately and where they are located in relation to where you're looking to develop.

These are obviously all generalities and every project has it's own variables that sway the decision to develop based on asset class, size, location, etc., etc. 

It's an awesome undertaking and I wish you the best of luck with it!

@Lolita Rogers I am not allowed to advertise my channel on this feed, but this is a topic I covered recently, as condos are an investment vehicle I deal with somewhat regularly. For many of us, depending on your market, condos may be the best option for investing. Obviously everyone knows that they come with monthly common charges (often incorrectly referred to as "HOA" fees), but they also eliminate the need for the level of property management and maintenance that comes with typical investment properties. The common charges cover a lot of the usual investment property expenses, and most condominiums have a built in property manager. You are typically only responsible for everything within the interior of the condo. This means a new roof, gutter cleaning, government compliance issues, are the responsibility of the Condominium, and not you as an individual. Many condos also feature amenities that are maintained by your common charges. It's nice to offer your tenants, a gym, pool, game room lounge, additional security measures, etc.

If your condo investment is in a great geographic location (i.e. an older condo that needs cosmetic rehab, but is centrally located), it can be a huge win for you, because LOCATION, LOCATION, LOCATION. 

All that being said, you need to read the Board minutes and review the past two years of financial statements to make sure the condo is in good financial health. Track their history of annual common charge increases.  Also check the condo's house rules to see if they have any restrictions or fees on the renting of Units. Assessments are inevitable, but if the condominium has good reserves and is not currently considering any major capital improvement projects then it really could be a solid investment.