All Forum Posts by: Pete Harper

@Eric Loredo

PM your email and I will send you an invite to our next meeting in Palestine. We had five people for our first meeting. I plan to organize another meeting after the holidays in January.

@Tyler Kortz

I bet she doesn’t have a bank account. If you maintain a small balance the bank charges you up to $30/month in fees. It is cheaper to pay western Union for a money order. The ACH fee is not the issue.

@Karl B.

I know it’s hard to believe in this day but many people do not have bank accounts. If you have a low balance the bank fees eat you alive. The majority of my tenants pay by money order.

@Andrew Zannotti

For Killeen search Bell County Tax Auction. There is a law firm that manages the auction. They publish a list of properties a month before the auction. You will need to cross check names and addresses off the county CAD website. It takes a little digging. You will also want to search the county clerks office to see if there are liens. All this can be done from home from your computer.

@Andrew Zannotti

I’ve been thinking along the same lines with Tax Foreclosures. I’ve noticed that the better properties on the Sheriffs Auction list come off the list at the 11th hour. I’ve do all my due diligence only to find the property has been taken off the auction list the morning of the auction. Asking around I found that people make a small payment against the tax bill to be taken off the list. Frequently they show up on the next auction list.

If eventually they do go to auction and the property is sold the owner gets nothing. I was thinking if I reach out and work with them before the auction I could buy the property for the back tax bill plus couple grand to the owner. This is a win win. I get a good property without having to compete against other bidders and the owner gets a couple grand in their pocket.

I’ve started targeting these properties on my yellow letter list. So far I received one call back. Unfortunately the property was too far gone. Upon inspection the roof had fallen in over the kitchen. It was her parent home, they were both deceased and she couldn’t keep up with the taxes.

@Lesley Resnick

I don’t see cash going away any time soon. The majority of my tenants don’t have bank accounts. When I ask them why they say the bank fees are too expensive. It is cheaper to deal with all cash and buy money orders to pay rent and other bills.

@Kyle Moore

As others have said, call around, you can find better terms.

Private money lenders will do investor cash flow loans where the property income is used to qualify for a loan. You will pay more in interest and fees but this is certainly an option while you build up a credit rating.

The other option is to seek portfolio lenders. I made a list of small to medium sized local banks and credit unions and started calling them. Ask to speak with the loan officer. This will frequently be the underwriter. Avoid the big national banks like BoA or WF. I talked to twenty before I found two willing to lend; Texas Commerce Bank and Vera Bank. I ended up going with Texas Commerce.

Good luck

We had a similar issue when starting up our real estate LLC. Most lenders want to see two years of tax returns and a credit history. The first couple loans can be tough. To establish a credit history I got several credit cards in the company name and used them to buy renovation supplies. Pay off the card at the end of the month to avoid interest. Here are a couple loan options you might consider.

1) Assuming you are the sole owner of the LLC you can get a conventional FannieMae loan in your personal name and transfer the property ownership into the LLC's name. You will need to wait until the loan is sold/settled, then you'll need to get permission from the loan owner to transfer deed without triggering due on sale clause. I took me just under a year to accomplish. Wells Fargo was a total PIA to work with fighting me every step of the way. Don't be discouraged if they say it is "impossible".

2) Look at investor cashflow loans from private money lenders.  Private Money look at the financials for the property and if you can show a positive cashflow after financing you can be qualified for a loan.  The downside is private money is very expensive compared to conventional financing.  You will have to pay upfront points, higher interest rates, and pre-payment penalties.  Many of these guys stopped underwriting loans during Covid. Good way to get your feet wet and start establishing credit.  

3) Look for portfolio lenders.  Target small to medium sized regional banks and credit unions.  Stay away from the big guys like BoA and WF.  I called 20 local banks/credit unions and was able to find two that were willing to do commercial loans.  Rates are competitive with conventional lenders but you need to do a lot of leg work.  Texas Commerce Bank is the one I went with.  VeraBank was the other willing to lend.

Having done all three types of loans I'm currently focusing on portfolio lenders.  Once you find someone willing to lend in your market they are the easiest to work with.  Frequently you are talking directly with the underwriting agent with greater flexibility when working with small business.  I was able to qualify with 1 year tax return, business balance sheet and solid credit scores.

Pete

@Blaine Alger I agree on the Baylor Bubble. I bid on a couple properties a year ago. Neither property would cash flow for the asking price. One property was owned by investors who had kids going to Baylor. The property lost money three of the last four years. I spoke with a local PM. He was good enough to tell me vacancy rates were high. He said if you are not full by August then it will likely sit empty. There is very little cross over with non-students. I imagine these guys are hurting now with Covid.

@Benjamin Bennett Personally I would be weary of any 19th century properties in Waco. I’ve looked at a couple. I’d have to look closer at the neighborhood but generally these are in the older section of town. You have to be within 10 blocks of Baylor to attract students. Generally speaking older homes are not that popular in Texas; Waco Chip and Joanna factor not withstanding.

Get a good home inspection. Anything that old will have termites. In Texas it’s not if you have termites but when.