All Forum Posts by: Rob Bianco

So I guess my next question is when is it not a good idea to attempt to refinance on a commercial loan and pay the balloon? Would it be if the bank isn't offering better terms or if the economy is doing poorly and the property value is less than it was years earlier?

I'm trying to get into multi-family investing but I have some questions about commercial lending since I've never had this type of loan before.

For instance, if I am interested in a 25-unit apartment complex and have acquired a commercial loan to obtain the property with a 5 year balloon, is it relatively common for investors to refinance the commercial loan if they aren't ready to make the balloon payment? In this hypothetical, let's say I renovate every unit with the intention of flipping the complex, but couldn't find a buyer before the loan was due - would it then be prudent to refinance? Would that even be an option that late in the game? 

What if I do find a buyer and sell the unit before the end of my loan agreement (which might include a pre-payment penalty)? Would I then be subject to penalization?

Alternatively, if the apartment complex is brand new and doesn't need renovation and there is no opportunity to add value to the property would a lender allow me to refinance? 

Please correct me if I'm wrong, but are investors who intend to hold onto properties (vs flipping them) just refinancing, refinancing, refinancing indefinitely? At what point would it make sense to have full equity in a large property, if ever... 

I've been at the real estate thing for about 18 months and so far so good, but I would like some opinions on whether it would be a good or bad idea take out a mortgage on my rentals which I own in full. 

I currently have 5 multi-family properties and buying cash has been better since deals have been hard to come by but after taking ownership I never took out equity on the properties for various reasons like being a newbie and the units always needed a few repairs, as well dealing with bad inherited tenants. Up till now it never felt like a good move since I didn't want to be underwater with the mortgage but now I've got the units mostly stabilized and this would be an appropriate way to scale? 

My math on paper basically shows that if I take out 60% equity on each property that by reinvesting it into more rentals I not only scale long-term through more appreciation but my rental income as a whole comes out greater? Right now each unit has a net monthly income of about $1,400. I looked at a mortgage calculator to estimate that removing 60% of my equity creates a $500/month expense per property (based on an average of $170k value per property). So while I'd net $900/month per property I can take my $340,000 from the bank and repeat this process another 5 times before I spend it all? 

If yes, does that mean if those properties also generate a net of $1,400/month then after I take out 60% equity on those properties I'll have a total of $900/month x 10 properties total = $9,000/month net ? Currently I'm only getting  $7,000/month net so I'd be a fool not to do this, yeah?

Sorry for the long-winded post. I just need someone to tell me I'm not crazy.

@Carnet Williams

My property manager is open to all lease options including 6 months, but typically anyone interested in a year long lease we may try to extend it to something like a 14 month or 15 month agreement just so when their lease ends if they move out I can prevent this from happening. It does seem like less people move in the colder months and it appears seasonal. I guess it sort of sucks when you spent the money to renovate. 

Also, I believe the standard practice is to have 6 month leases with higher rent from the jump due to their short-term flexibility so in all likelyhood the rent would remain the same if someone went from a 6 months lease to a 12 month lease (with me raising rent)

Yeah, I'm not sure mine is the one you're referring to @Tammy Dobson because it doesn't sit at the bottom of a hill.

@Eka Linwood Well I bought cash and won a bidding war on the property that was being sold cheap because the owner needed the funds quick for some other opportunity. Probably if I had paid market value I think it'd probably be an 8% cap but even if I get this unit rented out @ $750/month it's a 12% cap so I would say it's more than reasonable based on the circumstances

I've heard Grandview is similar to Raytown, but I'm not from either area so I'm not 100% certain

Based on Rentometer $750 is right in the middle. Lower rent would be $625 and High rent would be $900

About a year ago I picked up a fourplex about half a mile down the road from Robinson Elementary School in Raytown, MO. All units are 2 bed / 1 bath at 850 sqft. I've had a tough time filling a vacancy since September 1st after I had renovated the unit; I pulled up the carpet to put down vinyl flooring, re-painted, and added stainless steel appliances. 

When I took ownership the unit was already vacant and the other tenants had rents at roughly $650-$700. I raised rent across the board for all the units to $750/month. One tenant didn't like that so he moved out in July but I was able to find someone to move into his unit by August 1st (without renovating anything). 

However, for the existing vacancy my property manager said we could get $850/month especially after I renovated the unit. After a couple months of no bites we just brought it back down to $750/month just to get someone in there but I'm still having no luck. I'm beginning to think this unit is cursed... Not to mention at one showing apparently someone pooped on the bathroom floor....?!?...

The property manager has had some feedback that people thought $750 was too high or they didn't like the area, which I find odd since the area is pretty decent and $750 seems appropriate. I wonder if maybe I'll have better luck once Spring arrives. 

With that said, those who have been interested have had a terrible history with evictions and credit score. Does anyone have any advice? 

I may be the outlier, but first chance I get I'd call them to let them know the situation that their rents are far far below market and that you plan to raise them. You don't have to be dick about it, but how much money and time did you put into getting this property? Is Real Estate your hobby or your business?

If it's your business, do what you have to do, and let the politicians have the bleeding hearts. 

I would also mention that just because they're old doesn't mean they're helpless. I actually had a tenant who was elderly and without a car who paid my increase in rent before ultimately leaving at which point she paid the penalty to break the lease and leave. She didn't make a fuss over it either... Don't judge a book by it's cover .. because you don't know what people have or don't have.

A bit late to the thread, but based on personal experience trying to figure out something similar I ended up giving up on the idea of house hacking and just moved across the river to Jersey City

Frankly, the city income tax wasn't worth it and neither are the anti-landlord laws. You're better off investing your capital somewhere with high cashflow to instead off-set your mortgage. 

There are some moderately affordable homes in Queens near Rego Park/Forest Hills or if you're really adventurous: Elmhurst .. but ultimately for the reasons above this is why people don't invest locally here. If you can find a rental elsewhere for a 10% net return I'd take it and run. 5% is less than what I earn just leaving my money in a Mutual Fund