All Forum Posts by: Nicholas Z.

@Kyle J. Thanks! I hadn't heard of a lender's title policy, I'll definitely look into that. We were going to wait until I found a deal that fit his interests before discussing the details of the loan, but we discussed a sample scenario of loaning $20,000 for a down payment where I'd pay 5% per year interest-only for five years. The lender I use does 5/1 ARMs, so after five years I need to make a decision regardless. After five years, he could tell me if he wants to roll over into another five years or wants his money back.

One wrinkle in this is that I don't actually need to borrow the money. I can afford to put $20,000 down myself, so my thinking was to set that money aside to pay him back should anything go sideways. This is more of a way to help him get acclimated to working with rental property, where part of the deal is I'll do quarterly calls with him to explain how things are going, show him the numbers, etc.

@Jeff S. I completely understand your concerns, and that's why I want to do everything I can to minimize the risk of losing this money. He's been open with me that he sees this as a learning experience and won't be devastated if he loses the money...but I don't want to lose any of his money and am committed to paying it back personally if necessary.

Good tip on using 125% of the value of the loan on the insurance policy, I wouldn't have thought of that.

The property will likely be in Iowa, though I assume I could find someone similar there to set up the deal?

A friend recently offered to loan me the down payment money on a rental property in return for consistent interest-only payments over the course of the loan. It's the first time either of us has done a deal like this, so I did a bunch of research to figure out the right way to structure everything. I'm buying the property as-is, with no additional construction or rehab. I want to make sure my friend's money is protected as much as possible, and so far this is what I've learned:

1.The money should be loaned to my LLC and I'll add a personal guarantee to it
2. Money should be wired directly to the title company (I should not receive a check)
3. Add lien to the property in second position
4. Add the lender as named insured on the landlord insurance policy

Are there any other important things I'm missing here?

I will, of course, go through a real estate lawyer to formalize all of this, I just want to make sure I know what I'm talking about when we have that conversation.

Thanks!

I'm still fairly new to real estate investing, and so I was shocked when I talked to a couple of more experienced real estate investors and they told me that their go-to for financing real estate is commercial. They haven't hit the 10 conventional loan limit, they just prefer to deal with commercial loans instead of conventional loans.

Here's some of what I've learned:

• Commercial loans are generally shorter in duration. The folks I've talked to tend to favor 20-year loans.
• Commercial loans generally have higher interest rates than conventional loans of the same duration.
• Commercial loans don't end up on your personal credit history.
• Commercial loans are based on the property rather than the borrower, so the application process is simpler.

I'm curious what others think about this? Are there other advantages or disadvantages to getting a commercial mortgage instead of a conventional one? Some areas I'm particularly interested in:

• Are there constraints over who can own the property? We talk a lot about whether or not you can get a conventional loan and then get it into an LLC. Any similar concerns for commercial loans?
• Do you have to get a commercial loan in the name of your LLC?

Very nice! How did you manage to put only 2k down?

@Ruth Geller thanks so much, that’s very helpful. 

@David M. thanks that’s really helpful. I was wondering about tiered LLCs.

Of course, since I live in CA, each LLC comes with an $800/year minimum tax that makes one LLC per property a tougher sell. Maybe it's time to move.

What they said is that even though the house value is $100k, it would take $200k to rebuild it completely (the tornado scenario).

Square footage is 1400 and rent is $950/month. 

I've been looking into finding a partner to do some BRRRRs, and I'm curious what sort of entity or structure people use for that?

Do you end up with an LLC with two members (you and your partner)? Or maybe something else?

Any insights greatly appreciated.

Hi everyone,

I'm in the finishing stages of buying my first rental property in Rock Island, IL. The property costs $100,000 and was built in 1930, and is being completely renovated (this is a turnkey investment). I'm investigating landlord insurance and got two quotes, and they are pretty far off from one another, so I was curious what people thought? Is one company underinsuring me and the other is spot-on, or is one company over-insuring me and the other is more reasonable? Note that this property will end up in an LLC.

Quote #1: $693/year, $1000 deductible

Dwelling $80,000
Personal Property $1,000
Loss of Rents $8,000
Premises Liability $300,000
Medical Payments $500
Water Backup of Sewers or Drains Incl.
Mine Subsidence - Illinois $80,000

Quote #2: $925.55/year, $1000 deductible

Dwelling $201,100
Other Structures $20,110
Personal Property $3,000
Loss Of Rents $20,110
Landlord Liability $500,000
Medical Payments $5,000

Note: Quote #1 is for actual value and quote #2 is for full replacement cost. I'm still unsure which of those options makes sense at this point.

I'm buying my first rental property in Rock Island, IL. It's a single-family home, purchased for $100,000. I'm just curious: what is a reasonable annual rate for landlord insurance for such a home? I did get a quote from Geico for $697/year, which includes structure, liability, and loss of rents up to $8,000. Given that my cash flow before insurance will be about $250/month, does $697 make sense or should I be looking for something lower?