All Forum Posts by: Tandi H.

This property has three units, a 3/2 and two 1/1's.  Current rents are 1100, 735, and 725.  I'm planning to turn at least one of the 1/1's into a vacation rental which should earn at least 1200/mo (very conservative estimate, probably higher).

Purchase price: 295,000

Down payment: 25%, $73,750

Loan term: 30 years

Interest rate: 5.375%

P&I: $1238.94/mo

Closing costs: $2800

Gross scheduled income: currently $2650/mo, I'm planning on $3000/mo minimum with STR, so $36,000/year

Less Vacancy/Repairs: 10% = $3600*

Gross Operating Income: $32,400

Less taxes ($4700 (high estimate)), Insurance ($900), and Water/Sewer ($1800):  $7400

Net Operating Income: $25,000

Less Debt Service: $14,867

Before Tax Cash Flow: $10,133

CAP rate: 8.47%

COC: 13.24%

*yes, I know that's low for Vacancy/Repairs/CapEx, thats because we do our own work and management. All three units are occupied with leases running to next summer. That's when I'll turn one or two into STRs.

Property is ideally located for tourism, walking distance to historic sites, a large park, several museums, public transit, and walkable to the downtown business district.

Thanks!

@Matt K. Thanks for the advice.  What other aspects do you take into account?  Do you try to get a certain return per door, or cost per unit, or ?

When you say 15y over 30y isn't that much, you mean the difference in monthly payments for a 15y vs 30y loan?  

For more background info, this property is a triplex, 299k list, 2650/mo combined rents, a bit "funky" spaces, no room to add square footage.  I'm trying to get good cash flow per unit, because we'd rather have fewer units to maintain.  

We just offered 280k on a listed 299k triplex, they countered with 295k, we didn't budge, the deal cancelled...

Just ran the numbers at 295k, to see if we should have offered higher, and it's 13.24% COC return. I feel like we can get 10% with passive investments, and was shooting for 15% with active rental units...what is your minimum COC return? Wondering if we made a mistake with this one by not being willing to move on price.

@Thomas Rutkowski  First thanks for all your valuable input on this thread and in PM.  My next question is not about whether WL is good or bad, I think we've heard a lot at this point.  I'm wondering how best to use the policy once you have it in place?  

You made this interesting comment awhile back:  "This simple example doesn't even factor in the tax advantage if you structure your business properly and use a commercial line of credit secured by the cash value. Now that interest is an expense! The cash value grows tax-free."

So are you saying, if you have an LLC or other corp, you can get a commercial line of credit secured by a personal WL insurance policy? Can you elaborate on this?

Also, can you give some other real world examples of how someone would utilize policy loans best?  

One idea I had is basically to use it like a HELOC. Purchase a property, take out a policy loan for remodel expense, remodel, refinance, pay back the policy loan, and keep the profit. No need to get remodel financing from a bank or private lender.

That's basically a short term loan that you plan to pay back asap.  Are there other best uses for policy loans?  Are there any situations where a long term loan makes sense, or would you generally just do short term loans?

Thanks!

@Jamie Kristjanson

What about a STR in a multi family property? It sounds like Proper doesn't cover multi-family?

Also, what if you have a triplex, let's say two units are long term and one unit is short term.  What is recommended in that case?

Here's what I was thinking of responding with:

"Hi (tenant),

I don't see your request to extend your move out date in any email. We would also have needed to accept that change. The email of Sept 10 did not request a new move out date.

We are offering you use of the garage which is going over and above what is required. We need to use the unit starting Oct 4, and need time to clean and prep it as well beforehand. Oct 2 would be the latest possible date to change hands.

It's also come to our attention that you have a dog and never told us, which is a violation of the lease.

Let's work out a compromise. It's now Sept 18. That means you have 2 weeks to pack up your stuff and put it in the garage (till Oct 2). If you are closing Sept 24, you will get the keys within 24 hours. That gives you another week to start moving stuff into your new place. Moving the basics doesn't take too long, and you can take your time to move other stuff.

We need to get in to prep the space Oct 2nd. I have set up a cleaner and will be there myself to assist.

If you can work with us we will cover the cost of cleaning ourselves and you won't need to do it or have it taken out of your deposit.

Let's make this work. We have 6 guests coming in on the 4th and it would cost thousands at this point to get hotel rooms for them during Balloon fiesta.

Thanks,

Tandi

Hey, we could use some advice on how to proceed with a tenant issue.

• First, tenant let us know on July 31 that he would be closing on a house on August 31 and moving out by the end of Sept.  Based on his move-out date, we planned to use the unit at the beginning of October for an AirBnb that is booked starting Oct 4.
• On Sept 6, I asked him if he could move out a bit earlier than the end of Sept, and we would give him a rent refund for any early days.  This would give us more time to prepare the unit for re-renting.   
• In reply to my email, on Sept 6 he let us know that he hadn't closed yet, as he had switched lenders.  
• On Sept 10, he told me he would now be closing on Sept 24.  He did not say he needed to change his move out date.
• On Sept 10 I replied saying that he could continue to use the garage to store his stuff into October if that would help him with his transition.  We just need the apartment portion of the unit.
• On Sept 13, he let me know things were pretty tight to move out at the end of the month, but did not request a date change.
• On Sept 16, I told him (nicely but firmly) that we were counting on his end of Sept move out, and that we needed the unit Oct 1st.  
• Today Sept 18, he told me that he wasn't able to be out by end of Sept.  Here is his full message:  

"Given the multiple changes and delays with my mortgage, being out by October 1st is not realistic. Per my email on September 10, the revised closing date of September 24th is my written 30 day notice. I apologize for any inconvenience this may cause. It just makes me extremely nervous to agree to a move out date of October 1st. If any other delays occur I would not have a place to live, so I can’t agree to that. I want to give you as much notice as possible that I will not be out of the apartment by October 1st so you can make any necessary arrangements. As soon as I have firm move out date I will let you know. However, the move out date will definitely be before October 10th, which is the expiration date of my written 30-day notice. If you have any questions or concerns, please do not hesitate to contact me."

What can I do?  Do I have any options?  It doesn't seem like any legal action makes sense given the timeline, and also he's been a good tenant until this.  How should I handle his Oct rent?   This unit rents for $675/mo, and his deposit is $650.  What about telling him he can use the garage into October - should I revoke that or make changes to the offer?  How much do I charge him?  

Thanks in advance.

@Lydia S. Thanks!

@David Torres Hi again David, so is the next meet up here in Abq Weds 8/15?  Is this at Domingo Baca or Manzano?

@Thomas Rutkowski - my husband and I bought WL high cash value policies a couple years ago, and I'm wondering if they were set up in accordance with the optimization that you talk about...how could I assess my policy?  Feel free to PM me if that is better.  Thanks.