All Forum Posts by: Stanci March

Looking for security system recommendations for a 35 unit apartment building in downtown KC. Bootstrapping this project so wondering if I can install in phases and what other owners see as the essentials versus things that can be added later. Thanks!   

If you're ok with the price of the deal, I love seller financing for any portion of a deal. As long the rates are competitive they are great because you don't pay origination...and it doesn't show up any place as a liability since it is just a contract between two individuals. Shouldn't affect your traditional lines of credit to do more deals with. Also, no impact to your credit should you be the unfortunate victim of circumstance and be forced to default.   

Honestly, I would be fine with your $110k debt. The amount is small enough that I wouldn't worry about paying it off quickly unless you don't think you can beat that return on your REI (if you don't think you can beat 6.5% I would question why you're wanting to get into REI).

The $40k is fine too but I don't like the variable-rate. See if you can get that fixed but the rate on such a small amount is less important. Going from 8% to 6% or 8% to 10% on a 30-yr am is like a $4/month difference in payment amount (I'm being facetious but it's minimal). Better to keep that money out of the bank and into RE than to pay it off quicker at this point IMO.

House hack 3-4 plexes. Rent out the best units while living in the crappiest unit for 6 months while renovating it. Then move to the next crappiest unit (offer that tenant your newly updated unit) and repeat until fully updated. Then cash out your sweat equity (and principal paydown), find another small multi., wash, rinse, and repeat for 6 years...then take a much needed vacation and decide what you REALLY want to do with your life. You will be surprised at the options you'll have in front of you by then, sitting on 3 or 4 cash flowing multi family units with equity to boot.   

No, I don't care who they are or what experience they have. I don't even care if they are from a Russian troll farm in a St.Petersburg office complex paid to sow discontent, and destabilize Western Democracies. 

If it's posted on the forum, I make the biggest financial decisions of my life based on them. No questions asked, no further due diligence required.  

I reward good tenants with stable rents, unit upgrades, and honeybaked hams for the holidays (not joking).

Depending on the unit: By the time you factor in advertising, showings, taking apps, and prorated rents; basic turnover (normal wear and tear) runs equivalent to about one month's rent and goes up from there, in my experience. That's 8% of total annual revenue! In most markets that is equivalent to about 4-6 years of rent increases saved in a single year by keeping a good tenant in place and avoiding turn costs.

I have even gone so far as offering decreasing rents for multi-year leases. That's better than discounting at the beginning IMO because multi-year residential leases can be hard to enforce (in my state) and because people's plans often change. So your rent may start out at just slightly above market (i.e. $1,000) then drop in year two ($975) and again in year three ($950) at which point I offer to hold it for three more years. Tenants feel like they're getting a great deal and have incentive to stick around and not violate the lease terms. If the tenant's plans change and they decide they'd like to leave after year two or three...no problem. I let them out of their below market $950 lease and repeat the process with a new tenant starting at whatever market rent as at that time.  

Taxes and Insurance maybe. Did you ever figure it out?

I'm struggling with understanding why it appears that the principal paydown is largest in the first two years. That baffles me.

@Andrew Johnson, my bank president lender tells me that fixed rate loans for rental property is making a comeback, he's hoping to have some options possibly within the the next 3-6 months. 

@Andrew Johnson, I went back and re-ran the monthly debt service based on various interest rate scenarios. I'm not going to do this deal (as it's currently constructed at least) and I owe you a debt of gratitude for that. At a 7.5% APR, I could end up underwater by about -$1,500/mo. I could likely survive that for a couple of years before getting the building sold, but way more risk than I'm willing to take.

 

@Ingrid J., I agree with you completely. If I was seeking precise advice I would definitely want to share exact numbers. 

 Great advice. Just to clarify; are you saying I should run the scenarios with different percentages but keep on the same (20-25 yr) am schedules? Would that be typical on a commercial loan?

The loan balance would be smaller after 5 years of principal reduction. Not sure how much that offsets potentially higher interest rates but certainly important projections to calculate in advance.