All Forum Posts by: Kris Mann

@Michael G.

Yes, Virtual admin, 1099. Based offshore @ $1500/month. I got lucky and found someone who used to live in my area before moving offshore; and even had property management experience in the US. 

@Terry A., there are a lot of valid comments from everyone. This boils down to two competing interests at play:

1. You want to know as much as possible before you make an offer

2. The agents have limited info, need an existing relationship, and want sell with the least amount of work

1. You want to know as much as possible before you make an offer
Nothing wrong with that. But you are competing with a lot of seasoned investors who can live without that info, or local investors in your case who are able to figure these things out when they view the property.

2. The agents have limited info, need an existing relationship, and want sell with the least amount of work

   * Your agent may have to get this info from the listing agent, who may not respond to back.

   * The local/seasoned investors are not asking these questions, so the listing agents will go with the path of least resistance.

   * You may not be a tire-kicker, but the agent doesn't know that for a fact until you do a deal. Even if you have proof of funds, that doesn't mean you will pull the trigger. I have a friend with $4M in a savings account who has been contemplating a rental investment for the last several years, and he still is as of today :) Once you buy a property from an agent, you will notice that they are willing to spend more time on you. 

   * The demand for investment properties far outstrips the supply in most markets, so most agents will take the "nobody got no time for that" approach if you ask too many questions :) I have a couple of agents that I work with regularly and they go the extra mile for me. Even then, from viewing to purchase, I take no more than a couple of hours of the agent's time. 

   * I had good success calling the listing agents directly, but you should be able to establish your bona fides on your very first call for them to take you seriously. 

I don't say any of this to discourage you, but that is the ground reality. I totally feel you; I too struggled with similar issues in the beginning, but worked my way past them over time. All the best!

@Jeremy Anan, you crack me up when you say the wholesaler has definitely been trying. The only thing he is trying is to pull a fast one here :)

You can always threaten legal action or send a demand letter from your attorney. But most people are either too foolish to care or too clever to worry. It would be throwing good money after bad money.

Yes @Randall Alan, I am well above 10 in my LLCs. But my lender/broker (a good friend) chose not to add them in the application as part of the real estate owned since they are in a LLC, very much like the guidelines above. But I can see how the guidelines are open for interpretation, and the outcome could largely depend on the lender.

Hello again @Nat Rojas. My 2 cents based on my experience which is limited to LLCs only. I have always held all my rentals in LLCs, but a couple of my previous primary homes were turned into rentals when I moved. They are still under my name. When I tried to get a FM loan on my most recent primary residence, I was only ever questioned about the two loans in my name. None of the loans on my rentals came up, though they were personally guaranteed by me. @Randall Alan could be right since he seems to have dealt with this more, but my understanding is that commercial loans thru an LLC on residential properties won't count towards your limit.

@Brad Fallon, I am also from MD. I almost exclusively invest in PG county, though I live in Howard. 

What do we really mean when we say BRRRR "works" vs. "doesn't work"? In lower cost markets, you may be able to get all of your money out after refinancing. But not in our market. That doesn't mean BRRRR doesn't work. You have to enter with the right expectations and make sure the outcome works for your financial situation and goals.

I have completed over 25 projects in PG/HC/MC, and maybe 5 of them resulted in recouping all of the cash. Usually I have anywhere from 10k - 50k left in each property, but I don't mind. 

Here are my approx average numbers over 25 projects, mostly in PG:

• Acquisition cost: $200k
• Rehab + carry cost: $50k
• ARV: $300k
• Refinance 75% LTV: $225k
• Amount of my money left in each property: $25k ($200k + $50k - $225k)
• Equity in each property on outset: $50k ($300k - $250k)
• Average cashflow (after debt service and operating costs): $700

For my situation, I am happy to own a cash flowing property for 25k out of pocket, where I have a built-in equity of $50k right off the bat.

The type of financing, who lives in the house, when you rent it, how you buy it are all just variables within the model. You living in the property with room mates just adds more variables to the equation, maybe you should not tie the investment to your personal situation. But that is your call.

When you evaluate a deal, your goal is to maximize X, where 

X = ARV - Acquisition Cost - Rehab costs - Carry Cost

Think of all the ways you can maximize the ARV while minimizing the other three variables. And think of all the ways each of those components can go wrong. That should answer all of the questions you asked in your post. On the other hand, minimizing rehab costs by doing fewer renovations and finishes could result in a lower rent, which will impact you negatively over the long run. So you have to figure out the optimal rehab that gives you the best ARV and rent combination.

The moral of the story is: you can go into an analysis paralysis trying to optimize the end result :)

In our market, if your total cost is 80% - 85% of the ARV, I would say it is a stellar deal and you will come out way ahead over the long run. You may be able to do better in Baltimore county (I would avoid the city as an initial investment).

Feel free to PM me if you need any help. 

Cheers!

@Fade Aromolaran, where in MD is this property? Setting aside the sub2 conversation, it doesn't look like a stellar deal if you are generating $2200 in rent on a property worth $340k. Looks like you will be spending 30k - 40k out of pocket anyways, which, combined with some private money, might be enough to do a good old fashioned BRRRR in PG county and generate better returns. Why jump thru all these hoops and take on the additional risk? I am within 10 miles of you. Since you are a wholesaler, I'd be happy to consider any regular deals you may come across. Please PM me. Cheers!

Thanks for the info everyone!

Closed 3 SFs with the following parameters:

• Closing Date: 1st week of June
• Location: Maryland
• Property Type: Investment
• Loan Type: Cash-out refi
• Num of properties: 3
• Holding: LLC
• LTV: 75%
• Amortization: 25 yr
• Term: 5 yr balloon
• Interest: 3.46%
• Fee: doc fee of $500, no origination fees
• Guarantee: LLC + Personal, UCC only on the said 3 properties + depository relationship
• Bank: Regional bank, I have an existing primary depository relationship

The above bank won't offer me a longer term, so I just got the following quote from another bank

• Closing Date: Quote valid till 7/31
• Location: Maryland
• Property Type: Investment
  Loan Type: Cash-out refi
  Num of properties: 5
  Holding: LLC
• LTV: 75%
• Amortization: 25 yr
• Term: 10 yr balloon
• Interest: 4.25%
• Fee: 0.5% origination fees
• Guarantee: LLC + Personal, UCC only on the 5 properties. No need for depository relationship
• Bank: Hyper local bank

If you guys don't mind, please include all of the above information for your loans, it will be super helpful. 

@Luke Carl, this is based on my recent experience with commercial refi and my conversations with a few others that I surveyed. So I am one of the many blind men describing an elephant to you, you may get an entirely different take from others.

My strategy is similar to yours - buy&fix cash, and refi later. 

1. What kind of rates am I looking at right now (ballpark)?

I got around 3.5% recently in Maryland from a local bank. I have heard as low as 3.2% all the way up to 5% with banks. Private lenders could be in the 6 - 8 range. 

2. How many years and whats the amortization (did I even ask that right?)?

Most commercial amortization is either 20 or 25 years.

3. Is there a seasoning period?

Most banks looks for 3 to 6 months from what I heard. My bank is not looking for seasoning. 

4. What's the LTV?

75% with banks. Very hard to push past that. Private lenders will do 80%.

5. Anything else I need to know that I didn't ask?

The term. Most banks want to do anywhere from 5 to 10 yrs fixed. It would either be a balloon or variable after the initial term. Since these loans are not backed by fannie/freddie, banks are unwilling to commit to long-term fixed rates. 

@Cody Smith, appetite for risk is a function of your experience and your life situation. You cannot argue with any of the advice above, they all have valid points. 

It would be a no-brainer for a lot of seasoned investors to keep the loans and use the cash towards investments. As @Pat L. rightly said, you have to get comfortable with debt to scale in real estate. And depending on the direction of the political winds, student loans could some day be forgiven, so why pay them off now? 

But your situation is different. With a young family and potential to be stationed away, I would think carefully. As @Steve Vaughan mentioned, things could go wrong and put you and your family under a lot of stress at this early stage in life. I don't think any of it would be insurmountable, but you have to decide if you have the stomach for it. It is a conscious choice you have to make with your wife that things could get rough but you both are committed to working thru it. 

All the best!