All Forum Posts by: Ralph R.

Joel   Welcome to BP. I'm from Colorado a few years ago. Estes park to be exact. I had a rental in Loveland. Had problems with a pm there but the house did very well. I sold it a couple years ago. I can tell you the market all along the front range is tough at best. The last couple I have bought  in Co. Have taken several months to find. I am out of state so you might do better being on the ground there. Your gonna have a tough time finding anything cheap in larimer or boulder county. I think Greely is in the same boat.     RR    

@Sabrina Brown

Thanks for Starting this thread Sabrina.  I have been getting hounded by TK providers from Memphis.  I could not get any of their numbers to work for me (to much down payment to get a cash flow), and I could not figure out a decent exit strategy.  These are basic rules I see on bigger pockets every day.  I thought I was making a mistake not looking into them further.  This thread has proved my instincts correct, and I am grateful.  It is interesting to note one of the people posting on this thread represents the TK company that has been trying to get me to invest with them.

The markets where I normally invest are pretty lean right now and trying to find properties is tough at best.  I have to admit its tempting to try a TK, but this thread has opened my eyes a bit.  I think any investor needs to remember the basics before entering into any deal and out of state investors need to do as much or more due diligence on the people they will be working with as they do on the deal itself.  That's what makes out of state investing so challenging.     

  Thank you so much!!

RR        

I am currently trying to put 3 of my rental properties in my revocable trust.  My attorney advised me any change in the deeds may accelerate the notes on these properties.  I phoned one lender that holds 2 of my notes.  The verbal response was they would not give permission to change the deeds, but I should open a "case" on their website for further information.  I opened the case and requested permission to put the property in the trust. I received the following reply.  I have sent this to my attorney for interpretation.

We have received your correspondence regarding a living trust. Unfortunately we will not be able to comply with your request; however, we would like to advise the following:

Section 18 of your Deed of Trust prohibits the sale or transfer of the property or interest in the property without Lender’s prior written consent. Transfer of the property to a trust in which the borrowers are the settlors, trustees and beneficiaries of the trust does not activate this clause, nor will it cause Lender to accelerate the loan.

Thank you and we appreciate your business. Have a great day!

The other property is with another lender.  I phoned them and was told the federal government prohibited them from giving permission to place rental properties  in a trust unless it was done at the time of purchase. 

I have a copy of this deed of trust, and checked it out.  This is what (coincidently section 18?) of the deed says:

If all or part of the Property is sold or transferred without Lenders prior written consent Lender may require immediate payment in full of all sums secured by this Instrument.  HOWEVER, this option shall not be exercised if such exercise is prohibited by law.

This has all been sent to my attorney for review.  Attorneys are sometimes slow so in the interest of getting some opinions a bit quicker I am asking the BP community   My question here is this. 

Has anybody ever heard of a federal government restriction on deed changes, or ownership by a trust  for rental properties that are financed through a conventional loan?  Has anybody else run into this and how did you handle it?  

 your comments are appreciated!

RR     

@David T. 

Thanks David, I knew I needed more info, but the interest rate and the seller/HML knowing one another botherd me a lot. That's why I posted on here. I will do some more research, but on HML's if this deal is still around I will contact the seller then. the whole private money/HML thing is new for me, but hey I know its out there and I want to know all tools at my disposal. Thanks

RR 

@David T. 

The taxes are a typo. They are $650 a year. I verified them at the county web site before posting. I know the hard money rate is awful low, again that's the sellers number. I talked to them on Friday, and haven't contacted the HML yet. The hard money would only be 24 months, then I would to do something else. The questions I was really trying to get answered here was how do I check out this hard money guy. Are they registered some where, require licensing, who if anybody regulates them?? Is it unusual for the seller to recommend one? the seller is also the agent. we advertise on Craigs list for vacancies, so its not so expensive. The management company I use is the oldest and largest in the city. often they have people who come to them looking for a place to rent. I usually don't even put a number in for advertisement.

Thanks

RR

OOPS  missed a zero.  The taxes are $650 a year. I(I have verified this already.) I am aware I still need the hard numbers for water and electric.  The water price is in line with the other units I have in the same area, as is the cap rate.  The electric is for the common area laundry. But again I know I need to verify these numbers. 

@Nathan Emmert  The strategy is buy and hold,  cash to get the loan bought down should the market fall isn't going to be trouble either.   I believe the property is priced about where it would appraise at currently.  The seller is the listing agent.  While I don't think its over market I'm not thinking its a smoking deal either.  I would probably do a contingency in the offer based on an appraisal on the property  before closing just to be sure.

@Roy Oliphant @William Hochstedler You 2 have hit my main concern.  Is it common for the seller to find the hard money lender?  How/Where do I check one out? what questions do I ask? Ive looked for a lender that will take a seller backed 2nd for the down payment.  no luck here yet.  It requires a portfolio lender and I'm still making calls.  The seller was not very excited about a lease to own.  The exit stratagey would be to get a conventional loan.  all said there should be no problem, as long as I had enough down.   @Casey Kleinhenz management is 10% with vacancy rate figured in.  no sign on fees.  I pay electric on the common area laundry.  water and trash are mine .  Both are unverified but these are in line with my other 5 units.   

Maybe, but that doesn't help you if they tear up the place,  or move out right away leaving you with 3 empty units??  after all they are his friends/family not yours. It sounds like the seller doesn't have much landlord experience.  I would be checking this one out very thoroughly! 

RR

Better be ready for some vacancy's if your going to try to raise rents on $600 dollar units to $700.  That's 17% and many tenants won't stand that.  I would look at why the tenants don't have deposits??  are the units hard to rent??  what's the turn over?  are the renters long term, with leases that have run out and gone to month to month?  why is the property below market??

RR

Matt

The CAP is 8%. that's the net operating income/sales price. $10964/$135000. Net operating income (NOI) is the total potential income minus vacancy minus operating expenses. There are property analyzer calculators both here on biggerPockets, and online. check out dinkytown on the web.

I forgot to say the hard money lender is only a 2 year loan.  Sorry old age kicking in.  The 2nd would be behind the hard money loan, which would pay the banks current loan.  Most conventional mortgages (if not all) have a due on sale clause.  If the seller sells me the property without paying the existing mortgage off, it would trip that clause and the mortgage company could foreclose on the property, and we both would loose out if he could not pay the loan off, so yes that's why the hard money lender is needed.  He pays off the existing first mortgage.  Cash flow is about $169 a month witch at 50 dollars a door is a bit lower than I like.  That's why I'm not sure about this one.  I normally have a 20-30% down that changes all these numbers a great deal.  In this case im borrowing all or most of the down. 

I am looking at adding an out of state triplex to my rental properties.  Normally I can figure This stuff out on my own.  This is my first time trying it with non conventional financing. 

  Before we get all excited about not trusting the sellers word on things, I am aware of doing my due diligence, and will get  hard numbers before proceeding with any offer.  The numbers I have used here assume a full price offer of $135,000 and I am also aware that I can negotiate for a better price.   

1)  The seller found the Hard money Lender.  Is this a Normal thing?  How can I check the lender out?  I have not spoken to him yet, the seller told me the man had done loans for 6% in the past. for purposes of discussion I have used this no.   

2) The seller will carry a second loan for $23,750 for interest only (118 month) as well.

3)  I will put $10,000 down at closing.

Here's the numbers.

Hard money loan for $101,250.  at 6% this is $607 per mo.

Buyers 2nd is $23750, for a payment of $118 a mo.  (interest only)

Annual rent $20,400

Vacancy $1700 (1 month rent)

taxes $65 year (hard number)

Insurance $1500 a year (hard number)

Management $1870 (hard number incl. vacancy's)

Repairs/maint. $1700 per year

electric $480 per year (sellers number)

advertising $100 a year

water $984 (sellers number)

Trash $452 per year (sellers number)

Is It prudent to pursue this farther, Assuming there is no rehab, and remembering all units currently  are full with 1 year leases in place?

furnaces are less than 5 yrs old, most flooring is new, and there is little carpet throughout.water heaters, several windows and 1/2 the roof is new.  property is priced at close to full value.

Thanks in advance!

RR