All Forum Posts by: Michael Seeker

@Account Closed we have a lot of college rentals and are very familiar with them.  Most of our tenants tend to be upperclassmen or grad students as the younger students tend to live on campus in our area.  We sign 1 year leases so we do not have down time or off months.  If you are investing in a smaller city where the university is the only game in town, you may have a hard time keeping property leased during the summer.  

I'd suggest looking at things that are currently for rent or coming up for rent over the next 2-3 months in whatever area you are targeting to see what other local landlords are doing.  If everybody is doing 1 year leases, then you should have no problem staying filled up through the summers.  If everybody is doing 9 month leases, you might want to plan on having 3 months of vacancy each yer.

I have not had to file a claim so cannot speak to that end of things.  Premiums are the best I found on rental properties and communication is usually very prompt.  I've only used their website and emailed my rep directly so not sure what to expect if you're trying to talk to a human on the phone, but I try to avoid that as much as possible :)

What you're looking for is a non-recourse loan. These loans exist, but generally are for high dollar amounts and utilized by established businesses on a portfolio of SFR's or a larger MFR complex. The ones I've come across have all been in the $1M+ range and were issued to companies that have been actively operating rentals for 5+ years with the loan being a small portion of their overall business.

It sounds like you've got one SFR you're trying to get financing for. You might search for and ask around about non-recourse financing but I would be very surprised if you found somebody interested at a higher (60%+) LTV.

What is the reason for not wanting to offer a personal guarantee?

What information are you looking for?  I've insured all of my rental properties with them for a number of years now and would recommend them.  Experience is great!

If you have specific questions, feel free to ask.

I'm not sure how you get any benefit from owning each property in a separate LLC. If some scenario came up where you were being sued I don't think an attorney would have any difficulty proving that these are not separate entities.

You may want to look into S-Corps, as I seem to recall that being the preferred investment vehicle for flippers.

From what you're describing I don't think you're achieving any benefit and you're certainly incurring extra expenses and headaches by titling each property in separate LLCs.

@Jonathan D. - I do have separate bank accounts for each LLC and all funds related to each LLC reside in their respective bank accounts. The operational entity does things like receiving rent payments and paying contractors and then distributes or is reimbursed by each LLC. It does not have any debt, nor does it generate any profit or loss. It requires some work to keep everything in the right place, but it also helps ensure that the numbers for each entity line up correctly and that all expenses are accounted for.

@Jonathan D. - I have a similar set up with my rental properties, however I do not have any loans to my LLC that handles transactions. When I have an expense that would apply to multiple operating LLC's, I'll split that expense based on the number of units in each LLC.

The loan makes things a little more complicated, but you should be able to account for how much debt each individual LLC is utilizing and split out the loan payments accordingly.

Hey @Traci Lovelace - sounds like a great opportunity.  Historic tax credits are awesome and I'm always on the lookout for deals that will support them.

As for your appraisal quandary, there are a couple things to consider.  First and foremost, does the lower current value affect the amount of cash out of your pocket at any stage?  Some lenders will provide a set percent of funds for initial purchase (usually 70-90%).  If your bank is reducing the amount of money they will give you up front, thereby requiring you to bring more capital to the table then it might be worth pursuing with the seller.

If your capital outlay is not affected by the lower appraisal, then it's hard to make a case that any price adjustment is needed.

I'd suggest reaching out to the seller/seller's agent and letting them know that the appraisal came in low which could affect your ability to close.  Ask if they could meet you in the middle (i.e. take $11K off the price) and see what they say.  I'd also point out to them that they would have a hard time selling to anybody else above the appraised value ($22K below your contract price).  This could save you some money.

I would avoid making any statements/offers that could jeopardize the contract assuming the deal is really good (numbers should look good without the tax credits).

You probably should not share the ARV portion of the appraisal with the seller either as this could change their perception of the building quite a bit.

Hope this helps and good luck with the project!

@Lindsay Galey - I have to take back some of my comments on the feasibility of this property after taking a look at the google streetview.  I was thinking this was on another, more desirable section of Garvin, but it is right next to a very ugly 60's multifamily property.  This isn't an area that will attract great renters and you might not be able to be as aggressive with the rents as I had previously mentioned.

You can change a lot of things about a property, but you can't change the neighbors!

Thanks for the mention Pavel - you've set the bar pretty high!

Lindsay - As Pavel mentioned, I love the Old Louisville neighborhood and own several properties there (and always have an eye out for more).  There are a lot of bad properties in the area that will be nothing but headaches due to poor maintenance/ownership practices for many years.  The property you're looking does not appear to be one of them.  It's on a nice, quiet street and looks to have been completely updated very recently.  It appears whoever did the work ran out of money and fudged on the cabinets and some of the appliances to save a buck.  The cabinets are probably good for 5-10 years, but they are cheap, low quality and will not weather very well.  That being said, it's got all new mechanicals and most/all sheetrock.  You will be hard pressed to find another multifamily building in this area that is for sale, at a reasonable price and in such good shape.

Duplexes in this area and/or the Highlands don't usually look good on paper due to the high comps and low rental income (compared to a larger multifamily).  You'd probably be able to push rents up to $900 range or maybe even a bit higher if you put in nicer appliances and both units have access to laundry and offstreet parking.

Overall, you might be hard pressed to find a better owner-occupied property than this one.  If you're only planning to live there temporarily (0-2 years), then you might want to find something where the numbers crunch much better.  If you'll be there a while, then I would say the personal appeal and ease of ownership should weigh more heavily than the bottom line.

You may also want to play with the numbers you are using in the BP rental calculator.  Maintenance and upkeep expenses should be much lower on this property than many other multifamily properties in this area.  If you're using a flat amount (say 25%), then a poorly maintained property with lots of deferred maintenance will look better on paper than this one but you'll likely not do as well with regards to net income.

Feel free to PM me if there's anything I can help with