All Forum Posts by: Rhett Kelton

Quote from @Caroline Gerardo:

@Rhett Kelton all the hard money guys I know will not do a loan with sales price under $200000 - and they want huge down payment

Maybe just a California vs Tennessee thing?  I haven't had problems- but it has been a little while since I have needed to go that route.  I do think I probably had to pay 4-5 points though.  But that still isn't too bad on a sub 100k loan.

@Michael Dickinson

Following up. I am assuming your purchase price is in the 50-75k range.

1. Try going the friends/family route first. Next option will be the HML route. These 2 ways will normally cost you the least in upfront costs, and some will finance the rehab costs as well.

2. There are a number of DSCR lenders online (look through biggerpockets for a lot of options) that will give you some different options. You will likely have to borrow through an LLC so just know that is an additional cost up front.

The biggest thing, at least in my case, would be finding the multiple deals that work for you, that you can take down at the same time.

@Michael Dickinson

At that price point, have you looked into family/friends money? As long as you make the terms clear and on paper, it hasn't been an issue for me.

Otherwise, I would talk to a couple hard money lenders first, and see what they can do. Especially if you would pay the 2-3 points up front. Or get 2 properties under contract l, then borrow against both. If you have the experience, there will likely be several that would do this. And several I talk with will cover a large portion of the closing costs. But everyone of them want at least 10-20% of your own cash in the deal. But at that price point , that will be fairly minor.

Once you hold the hard money loans for the seasoning period the portfolio lender requires, just roll over into that.

First of all, like Greg said, probably be best to get a lawyer and CPA involved.  In my experience, It is usually worth the couple hundred bucks to get that advice.

I am not a lawyer or CPA, so this isn't law/accounting advice. Just my opinions. Also, I am usually on the deal/labor side of projects.

1.Fairness is in the eye of the beholder.  I have usually offered my lenders my preferred terms and cash amount of the loan (and I usually do it as interest only loans, payable monthly or at the end, but P&I payments have  worked as well), but with the option to negotiate.  As far as timeline, I have done 6month, 1 year, 2 years, 3 years,  5 years, 5-7 anticipated , and 10 year. I think the timeframe is usually how long you will be fine having the money tied up.

2. I prefer to have my money partners just get a guaranteed rate of return.  It makes documentation and understanding of the deal much clearer. If this a friends/family partnership, this is a lot less likely to make the next Thanksgiving/ tailgate awkward.

3. For me this would normally be the most difficult, stressful and potentially damaging to any relationship. I will not set this up.  Everyone will have different ideas about where/when to spend any money, what the value might be, etc. For example, you might need a new HVAC unit in year 3.  Since you are paying for it, who would still make the final decision?  Does it go up to a vote?  Does everyone try to find the best price and go with that?

One caveat. I have thought about giving an investor a lower rate of return ( say 3%), then a 40-60% return on the sale of the house. If they were to refinance, it just needs to be clear what bank/appraiser/whomever will be defining the ARV.

4. You should have the first lien on the property.  For any changes in the dynamics, this needs to be in the partnership agreement.  The lawyer can really help you word this. But I would be very careful, in my opinion, relationship dynamics are always changing, especially over a 5 year period.

5. Look into cost segregation/ bonus depreciation.  I'm not sure if it will be beneficial in this case, but that is the first that pops to mind.  I'm sure there are others.

So, 

A. Set it up so you are getting a guaranteed rate of return.

B. You hold the first lien on the property.

C. Set up the terms for as long as you are comfortable not having access to the cash. 

D. Give that information to the lawyer to draw up the agreement. 

There are also typically other clause's, the prepayment agreement is one that pops into my mind, that the lawyer should know and understand and can guide you on.

Hi All,

I have a property that is under market rent. Tenants have been good tenants for the past 3 years. They started paying $1500 and are now at $1850, market rents suggest around $2300 - rents have risen drastically in Nashville in the past few years. I value good tenants but I feel that there’s a good bit of difference between current rent and market. A $500 increase in rent seems steep, any suggestions on how to offer their next lease? I have a management company actively managing the property so I don’t have direct communication with tenants. Thank you. 

 One thing that was suggested to me was to let the tenants "set the rents". Ask them to check Zillow or Rentometer and find out what the what the new rent should be.   Tell them that they're great tenants, but that it seems like the rent is undermarket value and you need to raise it.  Might want to negotiate just a little (maybe $25) once they come back with a number, just so they don't feel like they are screwing themselves. That part doesn't really matter, but want to make it feel like they are still "winning".

I tried this with one of mine (in Franklin) and got significantly more than I had anticipated, while also keeping the good tenant and not having to deal with vacancy.  Also, the tenant feels some sort of ownership towards it and so they won't be as upset if it is a large jump.

Quote from @Jamie Jones:

Try Hywater Title. They are based out of Murfreesboro but will meet clients anywhere for closings. All of their owners are investors themselves so understand a lot of in intricacies.  

https://hywatertitle.com/

 I second Hywater Title.

Tim Holmes.

Holmes and Stafford. 615-295-2782

They are on Thompson Ln close to Medical Center.  I have used them for several years.  They seem to know real estate tax really well.

Quote from @Coy Pence:

A buddy of mine has recently listed about 70 acres murfreesboro for sale. If there are any real-estate developers out there I'd love to send you his way and see if there a relationship that can be forged through this.

Has this already gone through a wholesale or auction company? I feel like I've seen a 70+ acre lot before recently. If it hasn't, I might have a couple guys who I would forward it to that might be interested.

If you are going to do a quitclaim deed for it, almost any lawyer who you are friends with would do it. Or could just show you how to do it. I've transferred back and forth a couple times and it only takes a couple minutes and then the  filing fees.

Maybe even the Register of Deeds at the county office.  I found them pretty helpful in other situations.

Quote from @Mason Jeffries:

Do you already own a property in Murfreesboro? Just curious, why Mboro for a STR? I love Murfreesboro for many reasons but when I think of going on vacation, Mboro never comes to mind.

I always thought the same thing. Still do to a degree. I just have started my first STR/MTR here, but I know multiple people here that do fantastic with the STR in Murfreesboro. Houses, apartments, townhouses. All of them have said 75%+ occupancy.
But between MTSU, weddings, sporting events (multiple youth soccer tournaments is what I know the best, but I know basketball and baseball also have pretty big tournaments here), corporate rentals, etc,  I could see it