All Forum Posts by: Deepak Malhotra

Investment Info:

Small multi-family (2-4 units) buy & hold investment.

Purchase price: $88,300
Cash invested: $88,300
Sale price: $320,000

My very first duplex. My next door neighbor told me that the owner had three duplexes but would only sell if he could sell all of them at the same time. My neighbor was willing to buy two. He wanted to know if I wanted to buy one. He told me that the numbers "penciled." I had no idea how to do the analysis but was happy that someone else had done it so purchased, paying all cash. I later learned that he meant that the price was less than 100x one month's rent. Only later did I decide to use leverage and refinanced with Washington Mutual.

What made you interested in investing in this type of deal?

My neighbor told me that the numbers worked.

How did you find this deal and how did you negotiate it?

My neighbor did that work.

How did you finance this deal?

Cash.

How did you add value to the deal?

Just routine maintenance.

What was the outcome?

Positive cash flow the entire time I owned it and it gave me the desire to buy more.

Lessons learned? Challenges?

I was worried about the slab foundation and flat roof. In the end, neither turned into a problem.

Hello, I have some free and clear properties in Texas, Mississippi, and Nevada.  I would like to put "friendly" liens on them as a barrier to fraudulent transfers, which are apparently on the rise.  Which banks are allowing low fee HELOCs on properties in LLCs?  Alternatively, does anyone know of a loan originator who can help me create my own friendly line of credit from one of my LLCs and record the liens?

One more question, is it possible (and lawful) to apply for the mortgage conventionally (under my name as an individual) for a more favorable rate, and then assign the asset to the LLC at a later date?

 Both Fannie and Freddie are allowing transfers into LLCs these days.  Just ask your bank for permission first and quote the relevant Fannie Servicing Guide section if they refuse.  https://servicing-guide.fanniemae.com/svc/d1-4.1-02/allowabl...

Quote from @Robin Simon:

Congrats, any reason not leveraging this investment?

It was a HUD repo so better chance of winning by paying with cash, and was cheap.  I have a fair amount of cash with no deals that make sense right now.  Interest rates are now usually higher than cap rates if you factor in any sort of repairs and capital expenses.  The relatively safe 9% with JEPI is looking good to me right now versus real estate that is at record unaffordability

Investment Info:

Single-family residence buy & hold investment.

Purchase price: $75,750
Cash invested: $76,158

Single family home in Airway Heights near Fairchild Airforce Base, two blocks from a park, two blocks to a library, three blocks to restaurants

What made you interested in investing in this type of deal?

It was a HUD foreclosure.

How did you find this deal and how did you negotiate it?

MLS.

How did you finance this deal?

Cash.

How did you add value to the deal?

It needed a new roof and we put new flooring everywhere. Added a second bathroom in the basement. It was sad to see the condition it was in after the last tenants were out.

What was the outcome?

Cash flow was good while I owned it.

Lessons learned? Challenges?

Just because a tenant pays rent on time doesn't mean they are a good tenant. I heard all kinds of stories after the tenant moved out. Having a management company in the same town or meeting the neighbors may have been advantageous. Avoid jurisdictions that prevented evictions of non paying tenants during the pandemic.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

Acted as my own real estate agent.

Investment Info:

Small multi-family (2-4 units) buy & hold investment.

Purchase price: $450,000
Cash invested: $90,000

These were two fourplexes that faced each other but were on separate tax lots. Basically an eight unit building but because they were on separate tax lots, two Fannie/Freddie conventional loans were possible. This meant better loan terms. They were 1950s base housing moved onto 1980s foundations/basement units.

What made you interested in investing in this type of deal?

The numbers worked.

How did you find this deal and how did you negotiate it?

On the MLS.

How did you finance this deal?

Two conventional loans.

How did you add value to the deal?

Minor renovations during ownership including new roofs, new windows, painting, new paint scheme outside, flooring.

What was the outcome?

Cash flowed well while I owned it.

Lessons learned? Challenges?

Financing is much better for 1-4 unit buildings than 4+ units. When you repair (as opposed to replace) things, you get better tax treatment. When you have a dumpster in an alley, non tenants will put things in it.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

I was my own real estate agent.

Investment Info:

Large multi-family (5+ units) buy & hold investment.

Purchase price: $208,000
Cash invested: $53,040
Sale price: $470,000

Six unit building in Medical Lake, WA, a quiet suburb 20 minutes from Spokane.

What made you interested in investing in this type of deal?

The numbers seemed to work.

How did you find this deal and how did you negotiate it?

On the MLS.

How did you finance this deal?

Commercial loan.

Lessons learned? Challenges?

The city thinks there is gold in the water in Medical Lake, based on my utility costs. I now prefer single family homes so I don't need to worry about utility costs increasing.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

I was my own real estate agent.

Ok, I understand the separate loans now.  Keep in mind that if you do get married, you can still get loans as separate property, that gives you each 10 Fannie/Freddie loans instead of 10 as community property which is the norm.

 Also consider a commercial or portfolio loan.  The downsides of commercial loans include the lack of consumer protections, they are usually higher interest and adjustable after a certain number of years, and you have to show them your income and expenses periodically and they have more ways to call the loan due than with a Fannie or Freddie.  But the underwriting is much simpler and they often just look at the income and expenses. Well Fargo, for example, has a commercial loan that is fixed for 15 years and amortizes over 15 years, which is better than a rate that adjusts after 3 years (unless you are planning to sell before 3 years).

@Bernard Sims In Washington State, we have seller's disclosures but if a seller doesn't provide one, the only consequence is that buyer can terminate the sale. We are a Buyer Beware state. I know Texas has some implied warranties but I can't tell if they only apply to builders. It is worth at least an initial consultation with a real estate attorney.

If I was in your situation, I'd probably make two nice up and down townhouses with the bottom units being "mother in law" suites with separate entrances. Maybe resell as zero lot line townhouses. Ask the attorney what that entails in the same meeting.

@Michael Noto Please explain this strategy. Husband and wife can each have separate owner occupied properties without committing mortgage fraud? If you have an owner occupied property, how long do you have to have it before turning it into a rental and being able to get another owner occupied loan? How many owner occupied loans can one have at the same time?