All Forum Posts by: Lori Lusk

I suppose it depends on your goals. If your goal is cash flow and you have lots of money to invest in other properties then you can do that.

However I'd take a look at your cash on cash for both. You can redeploy the funds you currently have in the property to buy another property, maybe even a larger property than you're planning on. That's exactly what BRRR'ing is. It gives you the opportunity to have cash flow with no money in the deal. Like I said, infinite cash flow. Then you can use that money again on another property, rinse and repeat and you're BRRR'ing!!

My personal advice, and what I would do, is refinance and go buy another property. 

You’re welcome!!! :)

My advice is move on. It sucks, but you’ll end up spending a boatload on attorney’s fees and all it will get you is a judgement and they’ll never pay it. I’d also recommend increasing your security deposit if the market allows and warrants it. Especially if you’re in a C or D neighborhood. It’ll happen again and again.  Unfortunate part of residential is you’ll get some not so great tenants. 

Also, not sure if you went in the place during those 6 years, but I’d also recommend at least annual inspections to make sure they’re treating the home well. You can even have certain things repaired or replaced during their tenancy if they are beyond normal wear and tear. Or you can kick them out. Always good to do the inspection before renewing their lease.  

I agree with @Kevin Murphy. Keep some reserves in case something happens, but reinvest after that. Please don’t let it sit in a savings account making an 1/8th of a percent. And depending on what your interest rate is on your loan, I.e. 4%, as long as you think you can get a better return than that on your money, don’t pay down your mortgage. 

Hi @Jesus Jaramillo,

How would you have a lower return? If you are doing a cash out refi, you should have less money in the deal, and most likely a higher cash on cash return. Maybe you mean lower cash flow? But cash on cash is calculated as your cash flow divided by the cash left in the deal. 

Your property is now worth $215k, right? Assuming you can get a cash-out refi at 80%, the bank will give you a loan of $172k. So if you bought at $138k, and if your rehab was less than $34k, you would have all of your money out, which would give you an infinite return, as long as the property still cash flows. If you’re cash flowing $1200/mo, the difference in your payment won’t use all of that up. Does that make sense?

Hi @Mark Pettie, 

There are several things to take into account when looking at MF. You’ll want to consider the age of the building and whether the major systems have been updated. I.e. electrical, plumbing, sewer. As well as the potential for asbestos and lead based paint. These can add a lot of cost down the line. Also consider capex like a new roof, parking lot paving, new siding, etc... likely your lender will require a PCA (Property Condition Assessment), similar to a building inspection and they should be able to fairly accurately identify condition and useful life, however I would take their repair estimate $’s with a grain of salt. 

Also make sure you speak with several property managers and get their opinion on rental rates. Never trust what a broker is putting in their OM. Lots of brokers are shady, or just plain don’t know what they’re doing unfortunately. It’s always a good idea to have a contractor and PM walk the property with you to tell you potential rehab costs and rental rates with certain finishes and layout. A PM should also be able to give you a good idea of vacancy rate and whether you can add in RUBS for more income. 

Lots to think about with MF. But we’ve had a lot of fun, headache, failure and success. But all in all it’s a great asset. Hope this helps. 

-Lori

@Charlie Fitzgerald - Yes, we are already talking to an attorney about the structure around the note, I am just curious what people are offering to their investors. We are going to have the structure all laid our in a contract, but I'm wondering about the negotiable deal points, what people are typically offering. Looking for "comps" if you will.

Hello BP!

My husband and I are working on preparing a promissory note form so that we can offer the opportunity for our friends and family to invest in our real estate business. I would love some examples of fair market terms and how people structure repayment of the principal. 

Currently, we are planning to offer a fixed interest rate, paid monthly, with a pay off date being in X years. What interest rate and term are most people offering? And how do you go about paying off the principal? For example, if we offer an 8% interest rate, with a 10 year term, would you amortize that loan like you would a mortgage, or is it more typical to have an interest only payment until the payoff date, at which time you would pay off the lump sum principal amount? Any other ideas of structuring a note? Just FYI... we will be accompanying the note with a deed of trust.

I'm excited to hear what structures everyone uses. Thanks for your time in reading this!

-Lori 

@Michael Rogers - thank you so much. I will work on getting more referrals. None of the referrals I have tried so far have gotten me anywhere, but I'm not giving up. :)

Sorry, I didn't know how to do the @ tagging. Trying again.

@Michael Rogers

@Upen Patel