All Forum Posts by: Kenneth Garrett

I have all of my rental properties in a series LLC and use commercial loans. Commercial Loans only care about whether the project cash flows. If you meet the Debt Service Coverage Ratio (DSCR) with a minimum of 1.25 then you are good to go. 75% LTV is typical. You can get 80% if the ratios are closer to 2.0. DSCR is based on NOI/P&I.

Example: Monthly Rent 1200 - Taxes 300 - Insurance 50 = (NOI) 850/500(P&I)= 1.70

They will still check your credit but its more based on the deal.  I found it was easier to work with smaller banks (local) then the large ones. 

Hope this helps.     

Private Lenders do fund projects at 100%.  It does help if you provide some funding as well.  Closing cost, earnest money, etc.  I generally have private investors fund 90-100%.  You will need to build relationships because at the end of the day, they are investing in you.  There is a tremendous amount of trust that private lenders are putting in you that you will complete the project and they will get there money back with interest.  Once you are successful with the project, the investors will come back for future projects.  I have used the same private lenders over and over because they know I will finish the project and I am good for my word.    Good Luck.     

If still available send any additional info to [email protected]

Gus,

First and foremost it all about the numbers.  Buy and Holds you can generally pay a little more because the rehabs are rental rehabs not flips.  BP book on "Rental Property Investing" by Brandon Turner is very thorough and will give you a tremendous amount of education. 

In all real estate you have to know your market.   My strategy is Buy and Holds but I do a flip a year.  On the flip side ( no pun intended) remember to include all of your costs.

Cost

Closing cost on the buy side

Rehab amount including contingency for overruns on budget

Holding cost ( taxes, Insurance, utilities, cost of money, i.e., hard money, private money etc).  I typically use Private Funds to acquire and rehab projects.

Sell cost (closing cost, title insurance, taxes, doc fees, real estate commissions, attorney).  Our state is attorney driven (Illinois).

I use a Maximum Offer sheet which includes all of my cost so I know how much I can offer.  Don't forget to include profit.  This is one of the common mistakes where investors forget there profit.  Profits range quite dramatically.  Some say 15,000 is ok while other will say not less than 50,000. Once again market conditions can drive this. 

On flips you are creating forced appreciation.  You are making the increased value of property.  On rising markets you are in the drivers seat, while in a decreasing market be careful.   Remember to pay attention to trends.  Rising or falling.

Its a great time to begin.  Wish I would have started sooner myself.

Have fun and good luck. 

Nicole,

This question comes up all of the time.  I think there are advantages and disadvantages on both sides.  There is nothing wrong with getting your RE License but it certainly is not necessary. 

Advantages

You can go look at listed properties when they first hit the market. You will learn a great deal regarding property rights and other things that are not necessarily taught. Don't let people tell you, you cannot find properties on the MLS. The majority of my buy and hold properties are from the MLS.

Disadvantages

You will need to disclose you are an agent when you make offers and are talking to other agents.  You will also need to pay for your license and find time to meet the continuing education requirements i.e., hours.  This will take time and money. 

If you have an agent you are working with and you have a great relationship I don't think its necessary.  It will not hinder you.

Good Luck.