All Forum Posts by: Ryan Detig

@Bradford Myatt

I personally have had better luck here in Texas buying properties with my LLC and then personally backing the loan. I found that commercial loans have both a positive and a negative to them but to me the positives outweigh the negatives. The negatives include higher interest rates (I pay 5%), interest rate adjustments after 5 years, loan balloons after 15 years, and the loan is amortized over 25 years instead of 30. The nice thing about commercial loans, or at least the loans I can get from the small Credit Union I am using, is that they are willing to loan up to 80% of the tax assessors value without an appraisal. This means that if I find a property that has a tax assessment of 100k my bank will loan 80k to the house without having to pay for an appraisal. They will loan this amount even if the purchase price of the property is 70k. Using commercial loans this way has allowed me to purchase 4 cash-flowing property in the last 6 months. I have only had to use negative $4500 to purchase these properties. That is right, the bank's loans have been $4500 more than the sum of the purchase price and the repairs needed for all of the properties. Obviously everyone's situation is different and not all markets or Credit Unions have the same lending criteria but I would definitely make some phone calls to your small local banks and see what options they have for commercial loans for your future rental purchases.

@Jessie Nunley  Hey man check out Biggerpockets podcast show #206.  I actually just listened to it and it came to mind because you said you were full time military.  I recommend it along with all other podcasts.

Also @Adam Detig 1st, well done on such an interactive post that brings people into the conversation and is getting people involved. 2nd, super proud of you little bro for jumping headlong into your first REIA meeting tonight right after moving. My advice to you and all of the "Lurkers" out there is that when going to a REIA meeting and connecting, try to bring something of value to the group. This can be time, knowledge, deals, cash, or sweat equity (willingness to work for free). The quickest way to be taken seriously as a new person, willing to learn, is to offer to work for free for 10 hours to people you talk to help you learn.

Hey @Chris Heeren  Did anyone give any advice on this privately?  Have you thought of using a Series LLC to complete this?  You could have your series LLC with each of your multiple properties as a separate "series" within the one LLC.  Each "series" would be its own entity and protected as such but your LLC might be able to get the large 750k loan (depending on the bank).  Please note I am no expert on this but from what I understand of the Series LLC offered here in TX this might be a possibility.

Also, I just listened to the podcast 197 with your interview. Very well done. I am very impressed with the progress you have made over the last 3 years. Where you able to quit your 9-5 in March as planned? I would love to pick your brain if you can spare 15 min and I will be more than willing to share what I know of series LLC (note i'm an engineer and not a lawyer). If interested feel free to PM me.

A lawyer's info about series LLC can be found here

@Tim Moore  Great that you are thinking of this and wanting to get started in real estate.  I recently had this discussion with a friend of mine actually.  He was a big proponent of paying all cash up front.  For most people, myself included, there is not several hundred thousand sitting in the bank that we have access to use.  Being able to leverage has been the only way I have been able to purchase 4 rental properties in the last 6 months.  Currently I am young enough that taking on the loans now should allow me to have free and clear houses in 10-15 years that are cashflowing well so I can get rid of the W-2 job.  Obviously if you are independently wealth and buying 2 or 3 properties with cash is only a small percentage of your available capital then that seems like a good idea.  But, if you only have the cash to purchase 1 rental, for example, but could us that same cash along with leverage to acquire 4 rentals with loans, I think you will find the cashflow will be very similar if not better and the equity being made makes it a better financial decision.  Note, I am not familiar with your market.  The thoughts above are just what I have learned here in this Texas market.  

@Anthony Barbato Obviously the market you are in will play a roll in the answer.  I personally have had great results using a wholesaler ( @ Jim Gallen ).  I have currently purchased three properties with him that all averaged 65% of tax assessors value.  This left me with plenty of room to put some money into it and refinance all of the cash back out of it.  

I think networking is the key to finding a good wholesaler.  A good wholesaler will know the numbers and know what they need to get the seller down to (and be willing to "sell" at that price) to make it appetizing to buyers while still making their minimum on the assignment fee.   

@Scott Graham Thanks, I have been very fortunate.  I borrowed money from my Dad first to do my first flip.  He is pretty care free with his money and it was not doing anything for him (he literally had it in cash, wow) so there was not much hesitation there.  After that I borrowed money from my brother, @Adam Detigfor material purchase on the same flip.  At that point I had turned him onto real estate so he was up to his ears in research and learning using bigger pockets so he was super excited to get involved.  

Later I borrowed money from my mom to buy a 'buy and hold' property. I was able to return her money quickly after I refinanced the property into my LLC. She was also not too hesitant to loan the money. I verbally talked through my out options with the property and made sure she understood what I was doing and what options I had if something went wrong.

Because I was able to repay her quickly with more than expected interest (I threw in an extra $500 when I repaid her) she was more than willing to send me a check to purchase the flip house I am closing on tomorrow.

While an over the phone discussion worked for Mom, Dad, and Brother, I took a much different approach when asking to borrow money from my grandparents.  They had loaned me school money in the past which I had faithfully repaid over the last 5 years so there was some history established.  When approaching them I wrote a very long email giving them the who, what, when, where, why and how answers.  I broke down the cash flow and even double or tripled my expenses in the analysis to show them that even being super conservative it is still a good deal.  Thankfully I was lucky enough to get a 85K property that grosses 2250 a month in contract so I had plenty extra to inflate the expenses and still show a good positive cash flow.  After the email was sent we talked via facetime 2 or 3 days later and they said they were willing to loan me the money but 5% (which is what I purposed) was not going to work.  They would not take over 2.5% interest.  

So far this process as been extremely smooth with no issues, which I am very thankful for.  My first flip goes on the market tomorrow.  I am a little anxious to repay the loans as this is my first flip I know it is not truly successful until the check is in hand.  After that closes and I can repay some of these loans I am sure the confidence with my family will increase which will hopefully lead to future borrowing opportunities.   

@Scott Graham I have had great success borrowing money from family.  I keep it very simple and sign a promissory note for the amount borrowed that states the terms we agree to.   So far I have borrowed 220k from multiple family members including grandparents, brother, mother, and father.  This has allowed me to acquire 2 flip properties and 4 buy and hold properties in the last 5 months.  The great benefit from borrowing this way is my family members are very happy with 8% return (grandparents would not take more than 2.5% on a 5 year 15k loan) and no points.  This has set me up to make more money on flips along with getting into cash flowing buy and hold properties with no money down because I am able to borrow the down payment.  

Another benefit of having built the confidence with family members is how fast private money can be acquired.  Last week my realtor brought me a deal that had to close by tomorrow.  I went and looked at the property, made a phone call, and had a 60k check in the mail the next day.  I am closing on the flip tomorrow and expecting to clear 25k on the deal.  These types of deals could potentially be missed if I was unwilling/unable to borrow from family.

CAUTION: While I have not personally experienced any issues with my family and borrowing money, I have seen personally how money can tear families apart.  Please make sure that you are well educated in the deals you are completing and that you treat the borrowed money as if it was your own money.  Be prepared to pay it back over time if for some reason the deal goes bad.  Make sure you communicate everything with the borrower and have the "What if" conversations before borrowing.  

@Josh Autery did you use McPherson Hughes Bradley as recommended above?  How was your experience?  If not did you find another firm you recommend?  I am new to the area and am planning to start investing in the next 3 months or so and am trying to form my investing team.

thanks