All Forum Posts by: Mike Dorneman

@Dave G. Thanks Dave, great insight!!

The strategies for protecting / separating your personal assets from your rental business sure can keep you up at night! I’ve been investing for just over 18 months now. I’ve purchased 11 properties and BRRRed each of them. I carry 1m liability on each individual door, have an additional 1 million umbrella policy that covers my wife and I personally should the initial individual policy for any property be exhausted. Each property is “owned” by my LLC, which my wife and I own evenly. My insurance agent assures me we are appropriately insured and protected, however I’m wondering if I need to form another LLC for future properties we’ll be purchasing... Thoughts and other strategies appreciated! (I’m in Pennsylvania)

@Julia Gray For me, BRRRing is the way to go! After that initial purchase, it’s just reusIng the same funds over and over as fast as you can😁

@Julia Gray Way too long!! About 3 years off and on, but after that first one... no looking back! 😁

Looking for a real estate specific Attorney In North East PennsylvanIa. TIA

@Joey Samudio Hey Joe- sonthe BRRR would start with the current 4 pled you own. You start with refinancing this loan. This only works though if your forced appreciation and increased the value of the property you purchased. Hypothetically, say you bought the 4 plex for 200k... renovated to add value and now it appraised at 275k. Additionally you increased rental income as well. A lender is going to look at the new value and the rental income being generated. The new loan will be based off of those factors. So now you refi the loan and if you’ve done it right, the property is valued at 300k, the bank will loan usually 75% LTV, which would be; 225k. Now that extra 25k is what you find the next deal with, assuming you didn’t go crazy on the Initial BRRR renovation.

@Jahbari McLennan depends greatly on the house itself and distance it is set back from the main connection. I had a property that needed the line replaced from the basement to the street. The line went through the house about 40’ and then another 10’ through sidewalk to the main. The cost about 10k. Main line repairs are not quick or cheap...

@Aaron Harren the LLC will create separation between the business assets and your personal assets. You will need to draft (with an attorney) an operating agreement. This will out line how the business is divided between you two. I.e. who brought what, who gets what, who does what work and what happens if someone wants out.

@Jahbari McLennan specifically what needs to be replaced? The main from the basement to the connection on the street?

Technically Yes. However the value of the home will need to support the full balance of the loans and still retain enough equity to meet the banks loan to value ratio (75-80% depending on the bank).  It will be difficult to find a bank willing to do it this way. 

You do have other options though. What you are looking to structure is the same as a commercial ARV loan. This is a loan the cover the purchase price, plus fund the renovation up to 80% of the ARV(after renovation value).

To break it down: Lets say you believe after the reno this deal will appraise at 400K. If you bank loans up to 80% LTV / ARV, you can get 320K out.

Now you could take that 320K as part of the original cost to purchase, and the remaining as the reno budget. Keep in mind, you would be responsible for the down payment of 20%, (80K).

Not all banks will do this, but i've worked with a few local ones that will.

Hope that helps.