All Forum Posts by: Ross Yeager

@Chris Carroll those are great rates!

@Elon Baigel the terms seem pretty reasonable and they seem professional, however, it is definitely not typical for a PM to not take more on the leasing side of things. That’s a nice up front cash bump for PMs. Also, 5% management fee also is definitely on the low end as well. 

UPDATE: I misread that they do collect vacant lease fee of full month's rent, so they are on par with industry standard.

Both of those things bode well for the landlord, but I’d just be wary that they may try to make up revenue elsewhere because unless they have massive scale or are very highly automated, they won’t be making much money with those terms. Would encourage you to do more due diligence on this group before proceeding to make sure you’re not sacrificing quality for savings. In this political environment and in a pandemic, you really must have a knowledgeable PM to legally navigate these new waters. 

I've used @Kevin M. with Otter Property Management since the beginning of the year and couldn't be more happy with the service I've gotten. He keeps costs low and brings a sophisticated, in-depth knowledge of the rental environment while also being able to navigate the unprecedented complex and fragile tenant scenarios that 2020 has brought along with it.

I’ve use a couple of Philly PMs, and all of them have been around 7-8% monthly management fees and first months lease. It sounds a little bit like too good to be true based on the many PM groups I've seen both in and out of Philly.

@Harjot Singh there are a lot of very old properties in Philly. Really make sure you understand the structural situation of your property or it could be costly (speaking from experience). In this hot market I’ve found inventory quality dropping with good deals requiring more and more work. Make sure you do your due diligence there!

Separately, make sure you have enough margin. We’re in a rising market so it can be tempting to overpay.

@Khaled El Dorry I found my mentors through business partnerships. I helped them with their business as I grew mine. For example, one of my mentors is my private money lender. The other is someone I’ve whole sales a few properties to.

@Jason Appel sign up for utilities is pretty straightforward (same as if you had to). People are generally pretty motivated to sign up to avoid gaps in utilities coverage. My property manager also provides info on how to do it all.

@Steve Babiak that’s a good point. I signed up for the landlord program for gas (only one of mine uses gas utilities) but totally worth mentioning as it’s not necessarily obvious.

@Chris Teti yes exactly. It is a bit risky, but I had the cash to back it up at that point but was unable to get a large enough business loan so this was a good alternative. 

I was going to refi, but as I mentioned I like the extra cash flow and it is my only free and clear property which helps my DTSR for other loans so all in all, it still works out well. Even unleveraged I'm still getting good returns on it.

@Will Fraser definitely did!

@Daniel Brantley I've built up 15 units over the past 2 years in the Philadelphia area. I am a remote investor so am always looking to build my team on the ground. Shoot me a DM and we can connect or sign up for a call on my website and we can chat more (can be found on my profile).

DISCLAIMER: I would never recommend anyone else doing this. I did this as a financial hack to see if it could be done knowing that I could cover the deal in cash should anything have gone sideways.

Yes, you read it right: for one of my properties back in early 2019, I purchased a property using only credit cards!

Here are the details...

The Property

On my third property, I found a rather inexpensive buy and hold rental from a wholesaler in the Philadelphia area. It was going for an all in cost of about $63k and was pretty much turn key. Nothing fancy, but definitely an as-is rental for the area. The area had a target rental of $1100/month and would therefore cash flow well.

The Financial Mechanics

Here was my strategy going into this "experiment".

1. Use a business account to purchase the property and establish the credit. This gives you the protection of an LLC for your rental while also establishing business credit history, which can be very useful down the line as your revenue increases.
2. Get approved for enough business credit cards with 0% intro rates to cover the cost of the purchase. Sometimes this might not be possible. In my personal situation, I was able to do this. Make sure you don't sign up for any cards with annual fees and that the introductory period is a reasonable amount of time (typically 1 year or longer is desired).
3. Use a credit card liquidation company to liquidate your credit cards (reach out to me for more info). I was able to do this for a 5% fee, so my effective interest rate was 5% which is better than most commercial loan rates (at the time) and would cover 100% of the loan to cost (LTC).
4. Use the liquidated cash to purchase the property
5. Get it rented out and cash flowing
6. Use a cash out refinance to transition into long term debt and pay down the credit cards, with down payment being paid down by the extra cash flow until the cards were paid off. **
7. Have a property "for free"

** Once I had it rented out, I ended up choosing to not refinance in order to maximize cash flow and to improve my DTSR for future purchases

The End Result

This property has turned out to be pretty good! It's appreciated substantially and brings in about $490/mo in cash flow and at this point all of the credit cards have been paid off. We've had no issues in rent collection through Covid and have had a generally low maintenance tenant. It also did allow me to scale up a little faster as I was able to start two more projects during this time due to my leveraged positioning.
Here are the stats as of today from my Stessa portfolio tracker:

My original goal was to refinance out of this property, but given how well it cash flowed and how long I had to pay back the credit cards, I ended up just keeping it free and clear in order to maintain a solid cash flow stream (it's currently the only property I own that is free and clear).

In the next few years as the area continues to gentrify and appreciate, I may do a "BRRRR" on my own property (minus the B for Buy) using a renovation loan in order to raise the rental income to the next tier where it could support a refinance while producing similar (or better!) cash flows.