All Forum Posts by: Sarah Brown

 Yes!  Absolutely!  Do yourself a favor and amortize the loan out and see how much interest you will pay for the life of the loan.  It will astound you! Don't let anyone tell you it's too complicated.  It's not.  And once you do it once or twice, you'll be able to think through the deal a lot quicker and decide what it's worth and what it's not.  Also consider, is he a managing partner or a silent partner?  If you are putting in all the effort to build and managing the unit, is his 25% financing really worth 25% of the equity?  That's for you guys to figure out, but just some other things to consider.  

If the tenant caused the damage, then technically the tenant is responsible.  That being said, collecting fees from a tenant can be challenging (impossible), and the PM is not likely to agree to be out the funds until they can settle the security deposit.  I would call and talk to the PM about this and verify their process, but there is a very good chance that you are getting charged and reimbursed from security deposit at move out. 

I love Hawaii! Particularly the big island.  Congrats and good luck!

I am guessing he prefers the equity position because he sees great potential in the STR you are putting together. However, why, if you are giving him an equity position, would you make him whole before you made yourself whole? In an equity position you guys own it TOGETHER. That means you should split the gains and loss accordingly to ownership. I don't usually give up equity positions, however when I do I take into account the amount of risk each person is putting into it. Consider a couple scenarios:

He inputs $100k cash, you put in $300k ($50 cash, $250 finance).  You have put up 3x the amount of risk (not counting interest) than he has.  

He puts in $100k cash, you put in $50k cash, and you both are on financing for $250k.  It's a lot different situation than the first one I mentioned.  

Even if you set up a business entity such as LLC (which you should, with an operating agreement), when you get a loan, at least one of you will have to put a personal guarantee on it.

Neither of these scenarios take into account sweat equity, however if it's important to you don't discount it.  Sweat equity is A LOT of work. 

Anyway, this was a long note to say consider your structure and both your inputs.  Share by percentage what each puts in in gains and losses.

Be careful with the bridge loan.  We don't really do them out here any more.  You can get yourself in a bit of trouble, especially if you decide to keep your condo.  Bridge loans are designed for people who are selling their house.

Math seems decent.  Doesn't seem like you will end up upside down.  The other investor could have backed out for any number of reasons.  He lost his financing, it doesn't meet his niche, he has more to work on than he can feasible handle, not his area of expertise, it was his first investment and he got nervous.  Make sure to do extra due diligence to make sure there are no other lurking liens.  Title can run those checks for you.  Good luck!

Do you not have your own agent?  If not then this agent is not advocating for you (normal).  She may be in over her head, or she may simply be trying to collect a commission.  Either way your contract is valid and you can hold the seller to the fire to make her close on the deal.  I would recommend going to the agents broker and having a conversation with that agents broker as a good starting point.

Side note you can have that stuff tested for mold if you are really concerned.  Bring in your professionals and get their input on risks and expenses

So, are you more concerned about the black "mold" or the roof? You start with mold but end with roof.  2 things.

1. That black stuff just looks like soot to me.  It doesn't look like mold.  I am unsure if exterior mold is common in NY, but might be worth it to just have it pressure washed and see what happens.  You'd be amazed at what a good pressure wash can do to a property.  

2. Analyze the deal to determine if it is still worth while.  I am not sure what cap rates are in your area, but here 7% is pretty decent.  Is there room to raise the rents, or are they already at market?  Do you simply not have the cash and need to find a way to to creatively get it added?  Then you can find a way to negotiate it in there.  The roof is 6% of the cost, so really not that much, and it's a cost of doing business. I wouldn't necessarily call it a deal breaker.  

I do my own detailed move in report, and the have the tenant do their own as well.  I then do a detailed move out report.   I also have a price schedule for the cost of repairs that is accessible to them so they shouldn't be surprised when charges crop up.  I have been fortunate enough to stay out of court so far.