All Forum Posts by: John Matthews

 No, I didn't. If I recall correctly, the individual working with the program was a bit slow moving on providing information and by the time I got a reply it was rented by another tenant.

Hi BP,

I've been looking around for a way to send eviction letters online - does anyone do this, if so, what site / service are you using?

@Chris Penny Understood, and that's what I was running into when I started. 

The way I got around this was by buying an undervalue property with short term lending (hard money / private money), then stabilizing the property (rehab / raise rents / remove problem tenants, etc.) then refi out your entire position.

Example: My second property was a duplex that I bought with private money. I bought for $45k. The lender charged 12% interest for a 6 month term with a 1% origination fee with 10% down. In this case the tenants were both paying, the property was in great shape, the seller just needed to close quickly, they were behind on bills. I found a lender who didn't have a seasoning requirement, and refinanced with them in 3 months. The property appraised for $100k, and I was able to get a conventional loan for a bit over $70k. I then was able to use the proceeds to buy another property.

Have you considered other alternatives to increase your ROI?

@Dannielle Givens Congrats on making this decision!

That said, if I were you, I'd start networking with real estate agents if you're looking for deals on the market. While you can buy deals on the market by yourself (using the sellers realtor as your agent) I'm not sure that I recommend this for your first deal, so you're going to need a realtor eventually, may as well start now. They'll help you drill down more accurately. Listings on Zillow, Redfin, Trulia, etc. often have multifamily listed as condo or singlefamily, so it may take some extra work to figure out what's what. That said, if you CAN locate a property which is actually a duplex but it's listed as a SFR, you may have a leg up on the competition since they may not know that.

There are benefits of working directly with the sellers agent, like the potential for better prices, but it may not be worth it since they likely have the seller's interest above yours.

Otherwise you may be able to find duplexes on Loopnet as well.

Best of luck!

@William Wong - You will likely have to refinance with another bank if you want to do this - but there's probably a bank out there who will. That said I haven't worked with a bank who will let you refi their own loan. Think about it this way, what's their incentive? They're in the business of making money - if they're currently making X amount of money from you, why would they suddenly say "sure, pay us less". The only way I can see them wanting to do this is if they've got high origination fees and/or pre-payment fees.

If you're dead set on doing this (I've done it before) just refinance with another bank later. Really though, if you're in this for the long haul, you'll want to develop a good relationship with a bank early. This will open up more options down the road. Saving a few dollars a month (after paying all the refinance fees) probably isn't worth it.

@Chris Penny I think your best bet would be either getting an equity partner involved. You could also try to have the seller carry a note for the 10% difference, but this may be complicated as banks typically don't like other lenders being involved - they want to see that you personally have enough skin in the game.

@Justin R. - Thanks for the info and thoughts, I am definitely giving "is LLC necessary" some consideration.

1# - Great. This is very small, so good to know. That said, if I want to refinance after transfered to LLC, is it the same cost to transfer deed out of my name? I like buying properties under value and refinancing out my position to maximize my ROI.

2# - Makes sense. I'm looking at the $400k range. $1M properties just don't make sense for me from a cashflow standpoint (but again - maybe I'm looking at this wrong?) unless I look at true multifamilies, in which case this discusison is kinda moot.

3# - Maybe it's not an issue in reality, but my DTI at this point should be just over 40% and it's never been an issue. But perhaps my lender just hasn't cared.

4# - Right, definitely a strategy thing. Suffice it to say with about $30k in the bank at the beginning of 2015 and a 5 figure W2, I was able to acquire 15 doors by the end of 2015 (starting from 0). Philadelphia is a VERY different market than San Diego and lots of them were with hard money / private money -> rehab/stabilize -> refi but not all. Not sure I would've been able to do this a traditional route. 

As a non-LLC do you still have to pay the $800 "doing business in CA" tax?

@Cody L. - Good to know. Perhaps the lender I've been working with has just not been concerned about this fact and don't care about DTI.

@Andrew Postell & @Account Closed thanks for the replies. Yes, I am used to getting portfolio loans back east and haven't had success finding a bank which does these - that said, I neglected to call them portfolio loans when I spoke with the individual banks. I'll keep asking around and be sure to use this terminology in the future.

I am fine with these rates - and that's what I'm used to. 5-5.5% with a 25 year amortized loan over a 15 year period, adjustable every 5 years. Definitely not great terms, but there are a few upsides:

1. In Philadelphia, PA in order to deed the property under my own name I'd have to pay a 4% transfer tax. Someone can jump in here, but it seems like San Diego County doesn't have a transfer tax (yet), but just in case this is less than desirable.

2. Because they're all portolio loans they don't show up on my credit report, so if I wanted, even though I own 15 units (9 properties) I could still have 10 mortgages with fannie / freddie. This probably isn't a huge deal as I can always refinance into a blanket loan later, so I acknowledge this is really a personal issue that I should get over.

3. Similar to 2 above - since they don't show up on my credit report, it doesn't affect my DTI since I personally don't have any debt. Yes, it does affect my income, but as you both probably know, the more debt you get, the worse off your DTI becomes, even if your income rises commensurate. Example: $50k W2 income. Then buy house with a mortgage of $500/mo, monthly net income (before debt service) of $600/mo. Add in monthly rent of $1000/mo. Now my income is $57,200 but my debt is $18000 annually. My DTI before buying the rental property is 24%: Add in monthly rent of $1000 DTI = 31.5% for a jump of 11%. . If instead I buy with a portfolio loan, then there's no debt - it comes through as income or expense from the business. In this case my annual income is now $50k+$100*12=$51,200 and my debt is $12000/yr for a DTI of 23.5% or a slight drop in DTI. After 4 of the above properties using a conventional loan I've hit a DTI of 46%. If instead I bought them with a portfolio loan I've got a DTI of 22%. The ability for growth outweighs the added loan cost for me.

4. Cash seasoning / downpayment requirements. Again, banks I've worked with in the past haven't had a requirement for how long the cash was seasoned if it was used to purchase a rental. It hasn't usually been an issue since I usually buy with private money under value then refi into a bank loan, but occasionally I do. I understand why these requirements are in place, and I'd never recommend that anyone do anything shady to come up with the down payment, but it does open up more options.

And I agree, it's unlikely that the banks will call the note due, I'd rather not tempt them. 30 days notification isn't all that long and if I have to deed it back into my name, to satisfy the bank what then? Keep it in my name and lose the LLC protection? I'm putting this at the bottom since really if this were the only issue I'd probably be ok with it.

With all of that said, I'm open to being convinced that my line of thinking is flawed or that I'm missing something, so please chime in, I won't be offended :-)

As for the liability thing, yes an LLC isn't bullet proof, but then neither is insurance. I have both, and still it's not perfect, but I'm happy with the level of liability protection that I have currently.

Hi all,

It's been a while since I've posted on BP! Moved to San Diego and considering heavily investing out here. Doing some research though I've found only one bank which will fund the purchase of a residential property under an LLC. Everyone else requires you buy in your name and deed the property to the LLC after. I'd rather not do that - with rates climbing (maybe) it seems more likely that banks will try to invoke the due on sale clause - among other things.

That said, who in the San Diego county is buying property under their LLC? And what banks are you using? I'd appreciate a referral!

Thanks,

John