All Forum Posts by: Cliff Earle

Hi Joseph!  I've done business with Norada as well, and found them to be efficient, honest, and reliable.  Thumbs up.  Good luck in your acquisitions.

Luke, I'm going to take the opposite side here from my fellow BPers.

I think it really depends on two factors: where you live and your risk views.

Where you live determines which local markets you have access to. For example, I live in Los Angeles, and trying to invest for income is a tough game...and with a limited budget, nearly an impossible one. I'm not too familiar with the Seattle market, but suspect it is fairly high priced as well.

The second is more advanced. I've always felt that part of managing investments is ensuring diversification, and that *where* your investments are located is part of this analysis. For example, as I live in LA, I'm already dependent on that city for my job, and my home is also based there. In addition, I run a small business there. The *last* thing I want to do is create another source of income that depends on that same location's fortunes. I don't know how much of your income is tied to Seattle, but it's a risk to consider.

As for out of state investing, I've used turnkey providers with success. The key difference is the additional due diligence required. Go visit and speak to the sellers in person, and look at their properties. Ask for references -- more than one. Run the return numbers yourself to double check. Just because an opportunity is not in your back yard does not mean you should pass it up.

Disclaimer: one of the two turnkey providers I have worked with is Norada. It was a good experience....but as always, do your own due diligence.

Good luck, sir!

Good luck, Dan -- let us know how it goes!

I've had good experience with Norada Real Estate. While turnkey providers often have a bad rep, I've found Norada's properties to be high quality, and both their staff and seller partners to be extremely responsive. For example, a seller and his partner spent about 45 minutes on the phone going over a home inspection I had performed on a property, and later sent me a detailed report of repair with pictures; and the marketing executive has made himself available day and night to answer questions. (I just wish I could give as high marks to the bank we were working with, which has thrown up one roadbock after another.) Great outfit. PM me if you would like further details.

Great points, Mehran -- thank you!!!

Thank you all for the suggestions! The NSF makes much more sense now.

Hello BiggerPockets!

I am negotiating my very first property management agreement. This management firm has a strong reputation, and I spoke with not only the firm itself at length, but also two of their customers (one of the two references was not provided by the firm). However, in reviewing their contract, some of the fees made me curious, and I was therefore hoping to solicit some feedback:

Base: 10%. Seems normal to me. One suggestion I heard was to base it off net rather than gross rent, but I suspect that would be a fight. However, what about basing it off collected rather than scheduled rent? (It also looks like they collect even if there is no tenant, which I’d like to remove –- but I think the prior sentence will address this and more.)

Leases: new tenant one month, renewal half-month. My understanding is that “normal” rates are half of the first month, not the full month. Someone suggested adding a clause to bar against high turnover, such as prorating this fee if a tenant is there for less than X months. There is also a fee in there for “acceptance of existing lease,” and I was not sure what that meant.

Pets: 100% of monthly fee. Why not 10%, as with the rest of the rent? At the very least if should be shared.

Eviction: 25% of cost. I hear this is within normal limits, but should I request a cap?

Setup fee: $200, discounted for additional properties. While this company only manages properties they rehabbed themselves, and as such is already familiar, I’m less included to question this one than the recurring fees, which will add up to far more money over time…the whole “pick your battles” thing.

NSF: 100%. I don’t follow the logic…the harm from a bounce is more to me than them, right?

Late: 100%. Seems like it should be split, as while they have to do extra work, 90% of the delayed money goes to me.

Key: $6. Fine by me.

Utility fees: 100%. Not sure what they mean by this, unless it is for vacancy periods –- any ideas?

Coordination fee: 10%. Not sure what they mean by this either –- any ideas?

Many thanks for your time and suggestions!!!

Michael, I agree with your analysis: even with IRS limitations, there is a lot of potential value to unlock here if the rules can be addressed. (Though I still do not “get” why income and appreciation on the financed portion of a NR loan are taxed, but you get no tax deduction for the loan interest itself…seems unbalanced to me?)

That said, for a NR loan greater than 40%, I would seek higher than your quoted 6% if I were lending, just due to the risk of rising rates combined with the non-recourse rules. If the economy does heat up and the Fed goes on a tear, 6% may end up being very low over 20 years….

Jon, I’d been searching more for general feasibility than specific names (though I certainly would have appreciated any!), but I totally understand and will defer to BP rules. Apologies for any rules violations.

Thank you, Ann Bellamy -- much clearer now.

Thank you all again for the helpful comments.

To clarify, I am asking this question in general, from the perspective of someone with an SD IRA who has several potential deals in the lower-priced range, but would still prefer to use leverage to unlock value. As Ann has kindly noted twice now (thank you, Ann!), you cannot use a recourse loan with an IRA.

In other words, I do not have a specific deal yet, just several inexpensive options. Again, I know of places that do non-recourse loans, and places that do small loans…but nowhere that combines the two of them. I thought he thread might prove helpful to others than just myself, as I can’t be the only one who has face this issue. :-)

So Jon and Ann, you were 100% correct. :-)

Don, thank you for the link -- I had already spoken with that vendor, and they do not make loans below 50K. (That said, they seem to be one of the few that make fixed-rate non-recourse loans at all. Almost everywhere else I called tried to sell me on the charms of an ARM…at a point when rates are far more likely to rise than fall. ;-) )

Joel, you are correct with the kills-the-LTV comment…unfortunately, there are not many options with an SD IRA. I may just buy the property outright, and use the cash flow from it to help risk-hedge a larger property in that same account.

By the way, I'm a little puzzled as to why anyone would seek a non-recourse loan unless it was for an SD IRA. Can someone please clarify why this was interpreted as me "not wanting to back up my loan"?