All Forum Posts by: Jo W.

Hello,

I own a SMF (2 units) free and clear (would appraise for 60-70k) and I'm looking for a way to pull money towards my next deal. I've reached out to a few small banks and i got the same answer "we don't lend below 75K" or "we don't lend if the house is on LLC"

I tried to get a HELOC but i got the answer "we don't do HELOC if it's not an owner occupied and it's on LLC"

Any ideas?

@Thomas S.

Thank you! if the lease survives the sale it will not be a good deal for me (with the current asking price It will still cash-flow $300 a month but it's a 4 unit so for me that's a no). 

Asking price is 179k 2br 1 bath each unit. Will need cosmetic updates for all of the units (About 40K) Rent before cosmetic update should be 700- 750 (currently 2 vacant and 2 are 500, after cosmetic updates it should be 850 -900)

Taxes about 3k insurance about 1500 vacancy 8% repairs 10% CapEx 10% management 9% Water about 2k a year

ARV after cosmetic updates would be about 230K

@Kyle A. That's exactly the situation! one tenant is a family member of the seller and the other one is a close friend.

In the summer i can find good tenants pretty easily but in the winter it's harder. Their lease will be up in Jan so that's another point to consider.

Hello everyone,

I'm looking into buying a 4plex in Buffalo NY and two units are rented below market value, one unit with a year lease (Will end by Jan 2020) and the second will end by Jan 2022.

They seem like good tenants (Though I did not run any screening yet) but it's rented for 250$ below market value for each unit.

What are my options once i buy the property? Do i have to honor the current lease or can i cancel the lease and increase the rent as the lease is between the tenants and the previous owner?

@Tim Porsche First of all don't be too hard on yourself, it's your first flip and we all do those mistakes, just learn from those mistakes.

Mistake number 1. I'm assuming you don't have a time frame set in the contract? Big mistake! Always and i mean ALWAYS have a set date in the contract.

Mistake number 2. You paid for a job that was not done, you need to set time in the contract when the contractor is getting paid.

If your contractor is playing games you should be very firm and assertive "So, you said that you are going to finish the job by X and you didn't finish the job so here is what's going to happen, i will visit the job site every day this week and if i see that you are not making any progress i will have no choice but hiring someone else to finish the job and filing a dispute" 

As for the dispute itself i would be careful as he can easily put a lien against the property and that will cost you more than 4K 

Hello everyone.

I reached out to a hard money lender and the terms they are able to provide are 12% interest only payments for a year + 4 points.

I'm considered as "Newbie" for the lender as i never sold any of my properties (Just refinanced / took a HELOC).

I have an excellent credit score (Over 740), a house worth over 60K with no mortgage on it + access to 40k HELOC which i use as my emergency fund.

I was just wondering if those terms are too high or it's a part of "getting my feet wet" terms? 

@Mike McCarthy

I'm not a tax expert but for my understanding the IRS considers seller financing to be an installment sales contract, sellers have the opportunity to spread out capital gains taxes over the duration of the installments (5  years in our example) which means that each year he can find other expenses to offset that income. it will be very difficult to find write off on a high amount in one year.

@Mike McCarthy

I believe you should start with the "555" method: 5% down, 5% interest, 5 year balloon payment.

Of course this is a starting point and you should ask yourself how much you are willing to pay. You should show the seller his benefits for doing seller financing (Tax benefits, the ability to close fast etc)

Hello @Philip Abbey

There are many things to consider and it also depends a lot on what kind of personality you have (Risk taker, self motivated etc) so there is no one answer fits it all.

Of course if your interest is over 8 percent on those loans i would strongly recommend you to pay them off first / consolidate the loans into one loan with lower interest rate and invest.

For me personally i know that i can make more than a single digit return on my money + tax benefits so if my loans are less than that i wouldn't try to pay them off faster.

The way i see it you have two options:

1. keep shopping around for a conventional loan (For 4 units it would usually be up to 75% LTV)

2. HELOC. it's your primary residence so you should be able to find some good options.

I got a HELOC about 6 month ago, 85% LTV (85% of the difference between the current mortgage to the appraised value) 2.95% for the first year and then prime +1 for another 9 years. No origination fees as long as i don't close the HELOC for 3 years.

@Jun Deng

Jun, it all goes back to screening tenants. If you screen your tenant properly you will most likely get a good tenant who pay on time.

Check the BiggerPockets great guide on screening tenants 

https://www.biggerpockets.com/renewsblog/2013/01/27/tenant-screening/