Skip to content
×
PRO
Pro Members Get Full Access!
Get off the sidelines and take action in real estate investing with BiggerPockets Pro. Our comprehensive suite of tools and resources minimize mistakes, support informed decisions, and propel you to success.
Advanced networking features
Market and Deal Finder tools
Property analysis calculators
Landlord Command Center
$0
TODAY
$69.00/month when billed monthly.
$32.50/month when billed annually.
7 day free trial. Cancel anytime
Already a Pro Member? Sign in here
Pick markets, find deals, analyze and manage properties. Try BiggerPockets PRO.
x
All Forum Categories
All Forum Categories
Followed Discussions
Followed Categories
Followed People
Followed Locations
Market News & Data
General Info
Real Estate Strategies
Landlording & Rental Properties
Real Estate Professionals
Financial, Tax, & Legal
Real Estate Classifieds
Reviews & Feedback

All Forum Posts by: Michael Tan

Michael Tan has started 7 posts and replied 10 times.

Post: Greater Lafayette Area Investor Meetup

Michael TanPosted
  • Redwood City, CA
  • Posts 10
  • Votes 4

Hi all, I'm an investor currently based in California but I grew up in West Lafayette, within walking distance from this meetup location. My experience in RE involves a flip earlier last year in Indianapolis, and I currently have several small multi-family properties in the Lafayette area. Right now, I'm about to undertake a rehab project on one of them and do a delayed BRRRR of sorts.

I've been trying to connect with more local investors (or out-of-state investors who invest in the Greater Lafayette Area. I've sent several of you messages already and wanted to post in this event group as well.

Please feel free to reach out privately via BiggerPockets, and I'd be happy to exchange contact information so that we can continue our conversation off of the site itself.

Looking forward to e-meeting people.

- Michael

Thanks, @Jacob Sampson, @Shaun Weekes, @Frank Wong, for your replies.

I wanted to follow-up with an update on this situation. The lender's projected rate shot up drastically once I made the post, but after the appraisal came back (exactly the same as list price), the rate dropped back down to what it was before (5.35%).

I ended up buying the rate down to 5% at a $230 fee.

I'm still not entirely sure why the rate shot up so high, but I guess the takeaway in this situation is to not panic until you have rate lock numbers from the lender. Additionally, I should have shopped around some more. I was in contact with multiple different lenders, but given how painful each of the various loan applications are to fill out, I got lazy and didn't bother to follow-through to the point where I could get accurate quotes.

Post: How should you structure your accounts?

Michael TanPosted
  • Redwood City, CA
  • Posts 10
  • Votes 4

Context

I'm about to close on my second deal, and am in the process of exiting my first. A lot of people in this group already know what my mid-term strategy is, which is primarily cash flow focused and relies on acquiring a small portfolio of 2-4 unit multi-family properties.


I'd love to get some feedback from this group as to how everyone manages their various accounts.

Research Takeaways

Most of the research I've done on this topic basically results in the following takeaways:

  • Separate your accounts. One popular option is to make an individual account for each property, but at the very least separate
    personal/RE-related transactions.
  • Talk to a CPA
  • Talk to an attorney

The advice is practical, of course, since every investor's situation is different and the structuring of accounts is highly contextual based on the individual's goals / investing strategy.

It's also infuriatingly general advice. I want stories and details, of both mistakes and successes, none of which seems to be readily available online. I want to know about the lender that turned you down because your bank statements were impossible to sift through. I want to know how buying a burger using your business checking debit card, or paying for an inspection with your personal card, got you into a hot mess come tax season.

Mini Story Time

My first deal was a flip, during which I was caught off guard multiple times when I was asked to pay for things right off the bat.

I didn't have time to set up my accounts properly, and I had no real idea what I was doing. As a result, I was using a Chase personal checking account for... basically everything. I had set up a business checking account with Wells Fargo, but when it came down to it, I couldn't afford to wait several business days to consolidate funds into that account -- I needed to send payments ASAP.

Not the most ideal situation. But how should I proceed?

Current Situation

To speed up transfers between my personal and business checking accounts, I created a business checking account with Chase. My ideas moving forward are as follows:

  • Perform all real estate related transactions through my single Chase Business Checking account (what implications are there if I use a business checking account vs personal checking account?)
  • Since it's easier to create a bunch of personal checking accounts, simply create a personal account for each property. This potentially gets complicated though. If I'm using borrowed money, where do the funds go if I use some of it to acquire Property A, and the rest to acquire Property B?

I'd love to get some feedback from the more seasoned investors here, specifically regarding my current situation. But also feel free to leave some general feedback for the good of the community.

Thanks!

I have been working with a lender who gave me a 30-year fixed rate quote of 5.35% for an investment duplex (through Freddie). I actually signed an initial set of disclosure docs to agree to this rate for a duplex that I'm closing on.

The lender reached out to me with new documents today stating that there is a change in loan terms. He explained that they ran the initial numbers assuming that the property was a 1 unit investment property, and that the new rate for a duplex will be 5.875%.

I have a hard time believing this is the best rate I can get.

My question for those investors that are more experienced with long term multifamily rentals: is this sort of rate expected? How would you advise I proceed now? There is still time to shop around before closing -- I've already contacted some of the other lenders I work with to try and get a rate from them, but am skeptical that a similar situation might arise (they promise one rate, switch to another prior to closing).

Relevant info: loan amount is for $51,750 (with 25% down). Middle credit is 723.

Thanks!

Hey everyone! So I’m finding myself unable to wrap my head around a certain aspect of Hard Money Lending as I go through my first deal.

I'm currently using an online HML provider, LimaOne, and received "Fix n' Flip" funding for 90% of purchase + rehab costs.

Closing has happened successfully (albeit with a few funding hiccups), and now that I’m heading into the rehabbing stage, I’m utterly perplexed by an aspect of their funding model — specifically, their rehab funding process  

During closing, LimaOne placed the entire rehab budget into an Escrow account and will deliver me the funds on a reimbursement basis. The basic process for reimbursement is:

1) I request a draw for a certain amount and specify which items were completed.

2) LimaOne sends out an inspector to ensure the work was completed.

3) I receive the funds after ~3-4 business days.

The problem with this model is that it doesn’t actually enable me to pay the contractors in a timely manner — the money is essentially inaccessible to me, so the end result is me paying for a high interest loan on funds I can’t functionally use while I fund the rehab out of pocket anyway. And to actually fund the rehab, I’ve had to take out an additional personal loan due to not realizing the funds wouldn’t be available for use up front.

Am I missing something obvious here? What should I have done differently? And for those who have used HMLs, how does the rehab funding process usually work?

Deal Info

I'm closing on my first deal as an out-of-state investor based in California. They provided me the closing statement yesterday (Friday, March 8th) and we are planning to close on Monday, March 11th.

The property in question is 4255 Norwaldo Avenue and was offered to me through a wholesaler who purchased it at $50,000 and sold to me for $59,500 ($9,500 assignment fee). The projected rehab costs are ~$37k and the ARV is $127k (the average of two projected appraisals given the rehab scope of work -- $124k and $130k).

In bullet point format:

  • Purchase: $59,500
  • Rehab: $37,000
  • ARV: $127,000
  • Projected Rent: $1150-1200 (given to me by wholesalers) but more realistically given current comps and from PM opinions: $900-$1000
  • Loan origination fee: $4,000 (Yikes, I know...)
  • Interest rates: 11.5% for 12 months at at $86k loan, interest-only w/ no pre-payment penalty

I'm financing the property through LimaOne Capital, a hard money lending institution, who is lending me 90% loan-to-project cost (~$86k loan).

The numbers don't quite work out as a BRRRR given the rent-to-ARV numbers ($900-1000 rent compared to $127k ARV) -- it won't cash flow, and since my all in costs are ~$105k, I'm going to be stuck $15k. Not ideal. As such, I'm planning to turn it into a flip.

Prior to closing, I am in $4,075 to the deal:

  • Assignment Deposit: $2,500
  • Appraisal (required by HML): $475
  • Insurance (pre-paid annually): $1,100 (I had the option to add this to the closing statement, but it would have delayed closing)

If we go by the numbers on the closing statement, my all-in costs will be $105k involving $17.5k of my own cash.

Questions / Comments

So as I head into closing day, I have several questions / concerns / comments, listed below:

1. I cannot see how we can realistically close on Monday, March 11th.

This is primarily a logistics questions and a result of various channels of miscommunication, but the title company was not even aware we were planning to close on Monday until late Friday afternoon. 

As far as I understand: closing on a property as an out-of-state investor requires me to set up an appointment with a local notary to get the documents signed. However, how am I realistically supposed to schedule an appointment, get documents signed, notarized, and then deliver them to the title company..... within a day?

I have a call scheduled with Title on Monday to discuss these logistics -- we'll definitely figure it out, but the whole process seems hectic and disorganized in a way. So my two questions are:

Also, as an aside, it seems archaic to me to require a physical signature and hardcopy of closing documents. Surely there must be a title company out there who allows this to happen electronically?

2. LimaOne Capital, my HML, worked with Title to put the rehab costs on the closing statements. What options, if any, does this give me as an investor?

Context for Delayed Financing Exception (BP Blog Post by Alexander FeliceBrokeIsAChoice websiteFannieMae Guidelines).

Delayed Financing won't work for me here for multiple reasons, one being that I'm not buying the property all-cash, the second being that 75% of ARV is actually lower than 100% of closing fees anyway, so I wouldn't be able to pull out all my money.

3. A look-over of the closing statement.

I was hoping to get several sets of more-experienced eyes to look over the closing statement. As far as I can tell, the fees on the closing statement are in-the-ballpark reasonable, but it would be good to get reassurance of this.

Of course, as the investor, I understand that when it comes down to it, the vetting of each line item and due diligence process ultimately falls on me.

Here's the closing statement (identifying info blacked out):

In addition, here's a full res permalink to the closing statement:

Google Drive Permalink

Final Thoughts

While my primary questions are centered around closing and the closing statement itself, I'm open to and would appreciate any and all feedback.

If I've missed any details and anyone has any clarification questions, just ask below and I'll respond accordingly. Thanks!

Post: Should I switch mortgage consultants?

Michael TanPosted
  • Redwood City, CA
  • Posts 10
  • Votes 4

I'm in communication with a mortgage consultant working at a mortgage banking firm (Platinum Home Mortgage). They are one of the lenders I am considering working with for long distance BRRRR investing.

My issue is that my current consultant has limited experience working with investors, but is surrounded and in close contact with others in his office who themselves have experience and/or can advise him. He has a history of fantastic reviews (from non-investors) and due to his network within his company I’m inclined to work with him.

Communication has been a slight issue between us. I prefer texting as a communication method but receive very sparse responses compared to others I’ve worked with.

I want to switch to another consultant who has more experience with investors and is more responsive to text communication. The issue is that I am unsure how to do this since I have an already established relationship with this consultant, and after talking to a different consultant (within the same company and same branch office), I was referred me back to original consultant.

I don’t want to burn any bridges with the company (which could happen if the consultant I’m working with gets upset). Any advice on how to approach this topic with my current consultant would be appreciated.

I’m an investor based in Redwood City, CA and have been looking into doing BRRRRs in the Indianapolis market. I’ve been calling several companies that I found either from Google or BiggerPockets and haven’t found much success in finding an agent who is familiar with and can work with my strategy.

Are there other investors in the Bay Area that are BRRRRing in Indianapolis? I would love to organize a meetup, so feel free to introduce yourself here or connect with me via email (the.michaeltangelo) or on BP!

Looking forward to meeting you all.

Like several of the posters above, I noticed that the event appears to be "Sold Out" on the RSVP link which makes it pretty confusing to know if I'll be able to attend the event or not (Is the online RSVP a hard cap due to room size? Or is there enough space for more people with the RSVP helping gauge how many people might be attending?). 

@David Greene it'd be helpful in the future to have some signalling on the above :)

I will still be attending (or attempting to attend) the event and if the event ends up being full I propose we still have a meet-up. Tagging a couple of the above posters: are any of you still intending to attend? Feel free to shoot me a message on BP and we can coordinate something as a Plan B. 

@Gregory Ostolaza, @Varinder Singh, @Jeff Leonard, @David Noh, @Eric Lee, @Blake Lasky, @Connie Chan, @Matthew Kelly

I'm new to BiggerPockets, based in California, and looking to do some out of state BRRRR investing in Lafayette, Indiana (my hometown). I am currently in the process of building an on-the-ground team and am debating between different options.

Option one is a property management company. Their top clients are also OOS investors from California, they manage about 350 units, 170 properties, with 50-55 clients and as far as I can call on the website are staffed around the 10-15 person range. 

Some of the pros: among all the PM companies I reached out (lazily, through email or web forms), they were the only company that responded, and did some in a timely manner (I reached out over the extended weekend, they called first thing Tuesday). I’ve heard and read that many people have poor experiences with PM companies, particularly with communication, but don’t realize it at first. So while I understand simply responding to an inquiry doesn’t constitute too much merit on its own, it *does* funnily enough separate them from their competition. Furthermore, this company comes recommended by a fellow investor in the area who I’ve spoken to and developed a rapport with. 

The cons in my mind are ratio of clients (and properties) to staff. I’m not quite sure what “normal” would be for a PM company, but it seems like managing 50-55 clients and 150+ properties doesn’t give much time for the company to help with MY future properties. Of course, the bright side of this ratio is the (perhaps illegitimate) assumption that they must have efficient systems in place to deal with that number of properties.

Option 2 is a fellow BP member (I won’t call him out but he was nice enough to offer using his name) who self manages properties in the area. One of his bigger selling points was his policy on not allowing owners to defer maintenance costs.

So, considerations... I value the ability to have a closer relationship with my PM (leaning towards option 2 on this one) and am skeptical that the PM company might be hard to keep close communication lines with.

My line of thinking is that since there will be a lower property to person ratio going with Option 2, more time and care can be spent actually performing the responsibilities required of a PM for my property. On the other hand, experience and systems of scale are definitely big selling points of the PM company. What should I be valuing most here?

Another bigger consideration is fees. Option 2 would be a much cheaper option, no numbers were discussed but we discussed no payment during vacancies, no fees for turnovers or renewals, and monthly fee would be a fixed fee or a percentage of rent that we agree on.

Option 1 involves much more extensive fees. I want to know if these fees are exorbitantly high as well since I’ve seen some deal analysis and see regularly 8-10% being the norm. The PM company charges 12% of rent, up until 3+ units when the fee decreases. I think by 4 units the fee goes down to 9%. The three point drop provides good incentive to stay with the company, but 12% feels... significant. In addition to paying 12%, there is also a $3/mo advertising fee, $100 fee on renewals and new leases, $100 “startup” fee, and a $10/mo bank fee. Maintenance is charged at $45/hr.

I’d like some feedback on:

1) The important considerations when choosing between these two options.

And

2) Is the rates charged by management company reasonable?

I have The Book on Managing Rental Properties but haven’t gotten started on it yet, what other books or resource might help me gain clarity on the considerations above?