All Forum Posts by: Ross Yeager

I currently need to setup an LLC to be eligible for various private lending programs. That being the case, I had a few questions regarding an LLC formation for REI.

• Where should I form the LLC? My property is in PA (I live in CA) and I plan on having several others there, so I was planning on forming the LLC there.
• I was planning on using an online filing company to do this, but when signing up there are so many bells and whistles that they try to get you to purchase. What is the recommended minimum amount of items that I should be paying for through one of these online LLC formation companies?

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Many top investors are positioning themselves for an upcoming correction in the market. Here are some rules to follow to mitigate risk if buying at this point in the cycle:

Buy for Cash Flow

Make sure your asset is spinning off plenty of cash to the point that you can experience a year at double the average vacancy rate and still be cash flow positive. Know your break even occupancy, compare it to the average occupancy rate from the last recession in your market, and be sure you feel comfortable with it

Long Term Permanent Debt

Look for Financing from the likes or Freddie/Fannie who offer 30 year amortization with 10 year terms. Be very careful with bridge loans at this time. I repeat: Be very careful with bridge loans at this time. Refinancing in a soft market can leave you in a very bad spot if you are not careful. If you do go that route, refinance into long term debt as quickly as possible.

Adequate Reserves

Liquidity wins when things get tricky. Raise plenty of capital up front and have reserves for any of your current properties.

Do Not Over Leverage

Some experienced investors are purchasing at 65-70% LTV (Loan-to-Value) instead of the normal 75-80% to give them the extra cushion. What this means is that they are leaving in more equity in their investments to mitigate the risk of being upside down if it becomes necessary to refi/sell in a down market. This also means that with a larger down payment, the monthly debt service is less, thus increasing cash flow. Finally, from a lender's perspective, lowering the LTV percentage increases the DSCR (Debt-Service Coverage Ratio).

Manage Well

If things get scary, do NOT stop implementing your preventive maintenance plan, as that can lead to a downward spiral. Maintain the property and begin implementing strategies that promote tenant retention before you need it.

Buy in Fundamentally Strong Markets

The temptation is to chase yield in speculative areas without a strong local economy, but don’t fall for it! These types of properties typically only trade when the market is nearing the top, making it a challenge if forced to sell. In addition, these are the areas and demographics that are typically hurt the worst during a downturn. Economic occupancy will suffer, and the asset can be very difficult to sell if forced.

@Jason D. I purchased the property in all cash...It seems to me from searching around BP that with a cash purchase the seasoning period may not even be needed? 

I just purchased an all cash deal that I'm rehabbing and will have an ARV that I'll be able to finance and get back my initial investment (LTV 75%). I purchased the property and fixed it up all in cash, but in order to finance it to get my investment back, I believe I'll need to wait the minimum settle time which is ~6 months. I was able to purchase and rehab within a few weeks time, and I'd like to take advantage of that and move on to the next property. Is there anything I can do here to get financed sooner than the typical 6 month settle period? I realize I can just wait it out and cashflow nicely, but I'd like to get the ball rolling on additional properties here at the beginning (happy to hear arguments for/against that too, btw).

The solution I was thinking of was to do some sort of intermediate loan with private money until the 6 month period is over and then go with traditional lending at that time.  I'm sure there are other creative ways to do this, so figured I'd ask!

Originally posted by @John Elliott:

Can also confirm Zach Evanish is a human being 

 "Clap clap" :)

@Tim Johnson sounds like you had the bad luck of everything going wrong that could. Sorry about your experience! I have spoken to @Zach Evanish several times so I assure you he isn’t a bot. I also had prompt and proactive conversations with them after my deal went south so it is surprising that you’re having the communication issues. Regardless, I’m really glad that I haven’t gone through Roofstock for my fIrst properties and now goIng for the BRRR.

@Zach Evanish with solid customer service as usual! Keep up the good work!

@Zach Evanish can probably provide some clarity here...

@Amanda Wallace, Home Union had higher priced homes with similar yields, which means their cash on cash is generally lower which is what I consider most important. I think of the two, I found more deals on Roofstock, but don't have a ton of info beyond that on Home Union. I liked Roofstock and their service is great if you can find a good deal.

@Anandakumar Elumalai, to be honest, doesn't seem like too bad of an issue. They refunded your marketplace fee, offered to waive it the next time, and you did not have any loses involved.  I used Roofstock before, and although the deal fell through on mine, I'd still recommend using them if you find a good deal.