All Forum Posts by: John Brainard

Thanks @Sean Carroll .  I thought it was looking to be a tight over extension for being safe in what we do, but the prospect of doubling the business size with good rental history properties was enticing.  

The only option i see with this deal to work is being owner financed completely, with a future day pay-off clause that will allow us to get the hard equity then move to bank financing.  Even then, i think I'll need the sale price to come down a bit to make it more manageable especially during periods of tenant changeovers. 

Ok, small background.  I have a 9-5, wife works part time.  We have done a massive lot in the last year.  In the last 10 months, we've bought 5 rental properties (6 doors total) and bought a new personal home.  I don't make 6 figures, but try to manage my money well.  I've lost my job of 3+ years, was out for 3 months draining personal reserves, now back to work again.  In the last year, credit score has dropped 150 points due to all the loans, but our bank doesn't care about my credit score.  they know it, but we've done enough and I work closely enough with them they look at my portfolio and history, not credit score.  We have a signed contract to sell our old house and am selling the 1 duplex we have as the location is farther away that all my others (we renovated and gained about $20k equity above debt.

Due to all the aforementioned, I have a deal brought to me that is 3 duplexes and 1 triplex (regular duplex with basement 1 bdrm apt.) Don't have all the details yet, but asking price is $650k. negotiations haven't occurred yet, but lets take the highest number. Bank says due to my debt, they can't finance like before in a brrr strategy as this one doesn't have much to add equity to. So I either need cash in the deal OR hard equity. I'm attempting to talk to the bank about doing the following. FYI, bank likes to keep things in DSCR of 1.20 or greater. This deal was brought by someone whom he & his wife will be a partner in a newly for LLC for it.

Owner finance 25% @ 7 years

Bank Finance 75% @ 20 years (dscr of 1.63) Total DSCR of all monies is 0.94 initially

Bank Heloc of $10k for emergency work.

This leaves ~ $1400 of gross rent available per month for taxes / insurance / issues.

Thoughts? / Ideas?  

I'm new to the world of financing and like to do things really REALLY safe.  My wife and life personally of Dave Ramsey every dollar envelope budget.  We haven't always been the best with money, but this forces super safe practices.  I only say that to reiterate how I won't PUSH a deal to occur that is financially sloppy or irresponsible.

THANKS!

John

Hey, I'm new to the landlord game, but we have had great success in the way we write our lease.  We are only 6 months old, and while I have had a few here and there due to their hardships, most pay on time.  When they say anything about a hardship / whatever excuse, we tell them we're sympathetic and let them know that's why there are late fees...to help with that.  Our lease is setup as follows:

1. Rent is due on the first of every month.  (we have one exception as they draw a check that isn't issued until the 5th)

2. If rent isn't deposited in the account / check received / whatever by the 3rd day of the month, a $35 dollar fee is added on.(we put it on the tenant to make sure we have the money...any other utility you know that comes around collecting their bills!??) 

3. every day after the 3rd day, an $8 a day charge is added.

4. Rent is NOT considered paid in full until all late charges have been paid for.

5. If rent is not paid by the 7th day of the month or satisfactory communication hasn't occurred with the landlord, an eviction notice is filed.

all plain and simple. 

Hope this helps.  Don't incentivize (lose money).  Make it cost more to be late.  And NEVER EVER EVER EVER EVER waive your late fees.....like ever!  =)

My wife and I follow Ramsey's every dollar program (cash in envelopes every paycheck) for PERSONAL income and debt / life.  Our business does not follow his model as it would take a very long time to save up to that point and by then...i'll retire!  We leverage all we can in the business side, but keep all its expenses & income settled there.  We do not draw from it, live off it, or use it for any reason other than the business.  But, again, we do strictly follow it in our personal finances.  It was actually the tool that made us financially responsible to be able to move into the rental business.