All Forum Posts by: Michael Gonda

Quote from @James Hamling:

What you describe here @Michael Gonda is the perfect scenario for Turn-Key offerings, right. 

But you want to keep going for a couple decades, and mention interest rates. PERFECT! That all paint's 1 very nice picture. 

How about we put it all together and evolve your position UP to "Bank".     Offer the properties Turn-Key, to upstart investors, on seller financing (C4D). 

Now, you've "evolved" yourself in things where your no longer involved in the operations or the operational expenses. Gained capital via the assorted down payments. Retained cash-flow. Profited from current rate environment. Can be structured in a way that you retain maximum flexibility in ability to refinance, sell notes, or utilize as colterol for future endeavors etc etc.. 

We all know the term OPM, and the profit potential of Other Peoples Money, well take a page out of the Banks playbook and tap OPL Other Peoples Labor..... 

20% down, that's a fair bit of capital. And best part, it doesn't cost you a dime in interest, right. And, you have all that TIME restored, for other deployment. 

 Hi James

That's a really interesting idea but.... 1. I wouldn't know how to start on this and 2. it makes me a little nervous giving over our proprites to someone else like that. 

But I see the value in the idea. 

So how does something like this typically work?  It seems to me that someone would be purchasing a business not just rental properties right?  As the value of that arrangement would be above the appraisal amounts alone, someone would be purchasing the whole shooting match. 

And then they would still be paying interest in the properties also.  Would that be more or less interest than a typical bank loan?  I would assume it would be a good bit more than a bank's interest rates. 

This seems interesting but I would need to think it over a good bit. 

Quote from @Josh C.:

I know you said they are high end rentals in good neighborhoods, and I don’t know where you live, but 3MM in equity with 25 paid off house means the houses are worth 120k each. Is that correct? What are the average rents? In most of America, even Midwest where I am, that’s pretty low grade house with a fair amount of capex and headaches. If so maybe transition to something easier or if they really are high end and $1500+ rents live off that. After expenses should be 10k a piece for you and your partner most likely tax free, which in the Midwest is a very good start.

 Hey Josh

Yeah, my numbers above are really conservative.  We have spent a good chunk of our lives building up this portfolio, so I am being extra cautious with numbers as you can expect.

Our rents are generally in the $1,400 to $2,000 a month range, and the street value is probably between $230k and $300k for the SFHs. But we do have a few duplexes, four units, and townhomes in the mix that skew the appraisal values and per-door numbers. 

With most of the homes paid off we are almost but not quite making enough to retire now from rents alone so we are thinking of tapping into the equity to make up the difference (of course the debt service is going to eat into the rental income). 

Quote from @Joe Villeneuve:

Quote from @Alan Asriants:

Use a cash out refi to reinvest into more long term rental properties

Take out a HELOC for a flip/other short term gain opportunities

I don't think he needs, or want to add properties.  He doesn't need to.  He can refi for the cash (loans, not income) and have better tax situation, much greater income, without adding properties.  He's in a great position.  Adding properties at this point just adds headaches for no reason.

This is kind of what we are thinking as well.  We can add properties, but honestly, there just aren't that many deals out there.  I might be a little biased because we started purchasing places around 2009/2010 and we were picking up screaming deals all over the place (3/4 of our portfolio is made up of homes we purchased for ten's of thousands of dollars that are now worth hundreds of thousands). 

We know what we are doing, we have a lot of experience at this point so adding properties wouldn't be that hard.... but the deals are not there and as Joe mentioned, there is still overhead in terms of time and just general PITA.

I really like the idea of cashing out as long as we can sustain at a solid income.  I don't need to have fancy cars and a new boat every year, I just want to live comfortably without having to maintain a 9 to 5 gig. 

Quote from @Joe Villeneuve:

Quote from @Michael Gonda:

Thanks so much Joe

That second option is really looking very interesting; frankly, I hadn't thought of that.  I was thinking of doing a block refi on all of the homes but maybe doing 2 houses at a time is the better option now that you mention it. 

I guess that would mean each property would basically be used as income for that year, then?  Like if we have a $200k refinance we could take that money as income without the tax hit and as long as the debt service is covered by the rental amount we would be covered. 

Am I reading that correctly?

And how common is this approach?  Is this something that people do a lot?  That's a new idea to me. 

It's one of the things I do/teach as part of a system.  
Yes, that's tax free income, from two properties a year...continuously.  Don't forget the cash flow that's left from those two properties, and all the others.

 Love it, thank you very much again Joe.  I think that's a very good idea. 

Thanks so much Joe

That second option is really looking very interesting; frankly, I hadn't thought of that.  I was thinking of doing a block refi on all of the homes but maybe doing 2 houses at a time is the better option now that you mention it. 

I guess that would mean each property would basically be used as income for that year, then?  Like if we have a $200k refinance we could take that money as income without the tax hit and as long as the debt service is covered by the rental amount we would be covered. 

Am I reading that correctly?

And how common is this approach?  Is this something that people do a lot?  That's a new idea to me. 

Quote from @Stacy Patel:

Hi Michael,

It's great to hear about your successful journey in real estate. Transitioning into hard money lending is a natural step given your experience. To get started, educate yourself with resources like "The Book on Private Money" by Matt Faircloth. Ensure your attorney is well-versed in lending regulations and set up a strong legal framework. Develop thorough underwriting standards, leverage your network for marketing, and streamline your documentation process. Starting local in Pittsburgh is wise, and as you gain experience, consider expanding your reach. Best of luck in your new venture!

Thanks Stacy!  

The book recommendation is great, I am going to start there.

Thanks again!

Hi everyone

My business partner and I have 25 - 30 single-family homes and multi-tenant properties.  

-  All of the homes/properties have been renovated and have been in service for a number of years (meaning we have a strong history as successful  property owners/investors)

-  All of the homes are higher-end rentals in very good neighborhoods 

- All but 4 homes are completely paid off with no mortgage overhead or LOC debt

-  All homes have a very consistent rental history with very low vacancy

-  All homes are turning a profit and our pre-door numbers are very good

Because the homes are almost completely paid off, we have a good deal of equity in just sitting around.  We would prefer not to sell anything off at this time and plan on owning these properties for a few more decades (although we have considered selling some for various reasons). 

A rough back-of-the-napkin calculation yields about $3.2 million in available equity across the entire portfolio.  

Q1.  What would you do with that equity?  

Q2.  How would we go about getting cash from the equity?

Q3.  With interest rates as they are, and knowing they are probably going to start dropping over the next few quarters, is it best to wait on any kind of finance for a year'ish or are the rates not going to come down enough over that period to make a huge difference?

Thoughts? 

Thanks in advance

Hi everyone

Wow, it's been over a decade since I was on BP, nice to be back.

My business partner and I have a fairly large portfolio of SFH's that we purchased as rehab projects using hard money. After doing this for 15+ years, almost all of our properties are paid off. As we get older, we no longer have the desire to add more homes to our portfolio.

That said, with our experience doing rehabs, working with private funding and with the majority of our homes paid off, we are now in a good place to start offering investment funding ourselves.  But obviously, we have spent the better part of 20 years on the buyer's side of the table, so we are looking for some general advice, tips/tricks, or even the pitfalls of setting up a hard money lending arm to augment our current business model. 

As you can imagine, we already have an attorney who specializes in real estate and an accountant who is well-versed in rental property accounting best practices (but she admits she doesn't have a lot of experience on the private lending side of the business). 

Are there any good materials (books, websites, etc.) you might recommend?  Any general advice you can share on getting this ball rolling?  We have a fair amount of money to lend and we want to see about getting things moving.  For the record, we are very comfortable with our local market in Pittsburgh PA so for the time being we will be sticking to loans in the region.

Thoughts? 

Thanks for reading