All Forum Posts by: Rumen Mladenov

@Eustace Ottey did you try WSFS Bank? I approached them a few years ago and had the opposite problem - for their non-conventional loans, they needed me to put my properties in an LLC. I decided that I would rather find another lender than deal with all the paperwork and headaches that come with LLCs.

@Niyi Odumosu I got 3 with one bank (fourth attempt was the one that got scrapped because of the $5,000 paper trail issue), then the one I purchased cash and refinanced with a HELOC, and then 3 more conventional with a different bank. 20% down with the first bank, 25% down with the second in order to get the lowest fixed rate. When I tried to get the 7th conventional loan, I realized that the requirement to have 6 months PITI in reserves on all of my properties in addition to the 25% down payment and closing costs basically meant the bank wanted me to show I have enough money to buy the property cash, so I decided to just buy it cash and it was BRRRR from there on.

Keep in mind that financing may be harder in an LLC. Insurance will be more expensive too, and if you self manage, dealing with courts may be a little harder too. I personally never went the LLC route, all my properties are in my personal name.

@Jonathon N. I did not originally plan to do BRRRR, it just happened when the bank backed off from my purchase even though I had a pre-approval letter. Something stupid about money that was taken out in cash from one account and deposited to another not properly paper trailed (How do we know the $5,000 you took out from bank A is the same $5,000 you put in bank B? You should have wired it instead!). I used credit card "balance transfer" checks, borrowed from friends and bought the property cash, fixed it up, rented it out and then took a HELOC on it, paying off my friends and the credit cards from it. By then I had a few rentals bought with conventional mortgages, and a decent credit, so it was not hard for me to convince my friends I was going to pay them back with interest. Now I no longer qualify for conventional mortgages and I do BRRRR with a portfolio lender, rates are a little higher and variable but they know me and my business and there are no last minute glitches with them. I still use the HELOC from my first BRRRR - max it out to buy a property, then pay it down with the refinance proceeds. Rinse and repeat.

Congrats! $220 all in when the comps are $280 sounds like a home run.  What do you expect to get in rent from it?

Another DE investor here. Newark and Bear are my focus. I have been doing BRRRR for a few years now, but slowed down the past couple of years because of the tight inventory of distressed houses for sale.

I do a lot of the rehab work myself, and manage my properties on my own. 

If you haven't yet, look up Delreia. They had monthly meetings for the past 10 years, not sure they still do with the social distancing thing but once this blows over that would be a great way for you to connect with other local investors. First meeting is free. 

Congrats! A great way to reduce your living expenses. Once you are ready to move on to your next house and rent both sides, this should be a nice cash flowing asset!

Do you plan to be hands-on, or let others do the renovations and property management for you?

If you plan to manage yourself, you can be sued as the manager even if an LLC owns the property.

If you need to evict a tenant, in some states the LLC must be represented by a lawyer. Sole proprietors can represent themselves.

Do you plan to buy cash? Getting finaning under an LLC is harder than in your own name, and you will probably get a higher rate even if you get it. Insurance may also be trickier.

I started as a sole proprietor, and remained that way. The thought of having to prepare a bunch of tax returns for a bunch of LLCs terrifies me. I have liability insurance on my rentals, if I get sued the insurance company will handle it. Yes, theoretically I can be successfully sued for more than my insurance would cover - theoretically a brick can fall on my head while I am walking down Main Street. I do not use LLCs, and I do not wear a hard hat when I take a walk down Main Street. 

As a beginner, you are eligible for conventional loans - take advantage of it while you can. I got my first 6 rental properties using conventional loans, fixed low rates for 15-30 years can't be beat. 25 to 50 k is enough for a down payment and rehab, if you do most of the work yourself or have someone who can do it cheap.

Fellow DE investor here. I like to stay local and self manage, so all my properties are within 20 minutes drive from my house, most are actually within walking distance. 3-4 bedrooms seem to be more in demand than 1-2 bedrooms. I stay away from condos, and I stay away from areas where I would not be comfortable living myself. So, to rank them best to worst:

1) 3-4 bedroom property in your neighborhood you can buy in distressed shape and fix up yourself

2) 3-4 bedroom property in a decent neighborhood within 20 min drive, or 2 bedroom close to you 

3) 2 bedroom in a decent neighborhood within 20 min drive

4) Condo

5) Property in a high-crime area where you would not want to live, or drive to do maintenance/collect rent

If you plan to use property managers to deal with the tenants and contractors for the work, the situation will be different. This is the ranking for my business model.

You pay transfer tax once. You pay RE tax every year...  Seems like a no brainer to me.