All Forum Posts by: Tim Roberts

@Derek Loveland it really does depend on what your cost is to keep your LLC's registered. You are not required to file tax returns for each individual LLC. They should roll into your personal return on your schedule E. That being said, talk to your current CPA to verify what your state specific rules are.

As Mike noted above, LLC's are used for liability protection. Different investors will tell you different ways to set your businesses up; I come from the school of each property needs it's own LLC. It is best to set the LLC up how you purchased the property. If you and your spouse bought the property together then set the LLC up 50%/50% and title the property in the LLC's name (even if there is a loan on the property). Being the property was owned by both of you, you can own the property in a LLC owned together.

Setting up LLC's require banking accounts for each individual LLC. You will want to deposit the rents inside the LLC's letting the account balances build up. You can take some of the money out once you have some reserves built up.

The umbrella is an important tool as well but you want to make sure other insurance; homeowners and auto is set up correctly.

What are your rents on your current rental?

I would cash out refi the home you purchased in 2013 to 75% LTV and use the money to pay off the $30k HELOC. Minus closing costs you should have about $59K to use to buy two or three other properties depending on the purchase price in your area. If you are risk adverse, put $10k in a reserve account just in case it is needed. You would only set the loan up this way if the rents covered the payment plus some additional cash flow.

If you are thinking the refinance makes sense, then you want to complete your refinance before you title the property in the LLC name. This is because there are lending rules if you change title how long the change in title needs to be in place before you can borrow money against the property.

The next question is how many rental properties do you want to own?  Do you want to manage the properties or use a property management company?

Sit down and create a strategy of what your ultimate goals are and then talk to a lender to see what is possible.

I would be happy to answer questions if you would like to visit.  Direct message me your phone number or email if you would like to connect.

Tim

@Tyler Hampton buying investment properties takes time.  You will start with one property, and then move to another property as you build your portfolio.  As you buy more properties your cash flow will grow.  I have many investor friends that bought 1 property every other year to start and then moved into 1 every year.  Now they have 10 properties within 7 years of time.  The more access to cash you have the faster you can buy properties, one after another.

In order to give you advise or tell you how to get from point A to point B a lender would need to know more about you, where you work, income you make, assets in the bank, and help you come up with a strategy to buy the 10 properties over the next several years.

Feel free to direct message me and I can give you a little more direction.

Tim 

@Jared McCullough it comes down to your risk tolerance.  

There are reasons to pay cash for a property and rent it out.  However that is a slow plan when looking at buying several properties.  If you have a ton of cash then maybe it makes sense.

Leveraging properties, you can buy 3 or 4 properties depending on how much cash you have available and what types of cash on cash returns your are looking for.

My suggestion would be find an investment group in your area to find people that are buying investment properties and learn from their experiences.  In Utah, there is a network called Utah Real Estate Investment Association (UTREIA).  There should be a group like this in your city.

Feel free to message me if you have questions and I can give you some more advice specific to what you goals might be.

Tim

@Kristen Kenney, When you sell your condo will you have equity (cash) to put down on your new purchase?  This would be the question before you decide on what loan program you want to use to purchase your new property.

Buying a duplex, triplex, or fourplex with a CONV loan will require 25% down, even if you move into one of the units as your primary residence.  You would qualify on your own income, plus the rents from the other units.

If you are looking at a duplex, triplex, or fourplex and planning on living in one of the units then FHA gives you the benefit of bringing 3.5% down. You would qualify on your own income, plus the rents from the other units the same as above.

Looking at a single family residence would be another possibility, but you mentioned long term cash flow?  Are you thinking about renting rooms in the home?  You would need to qualify on your earned income without any rents on this type of purchase.

Mountain America does have some interesting loan programs specific to buying investment properties if that is what you are looking for.  That being said, from what I am reading in your comments you are looking to buy a property to live in and then rent out rooms or other units.

Feel free to send me a DM and we can discuss your goals in more detail.  I would be happy to answer more questions.

Tim

@Jay Hinrichs thanks for your response. 

History has a way of repeating itself for sure. New books remind us of old strategies told in current stories. Books are good to create interest but you and I agree new investors should read the book and start using the BRRRR strategy until they talk to people who have been in the trenches, experienced the good and bad of specific purchases.

You would be a great confidant to have on someone’s team because of the people you helped and the experiences you have had.

My biggest point is for new investors get around people that are in the business, who can give advice on the do’s and don’ts and help them avoid mistakes.

The due diligence is key and keeping the basic concepts of cash flow and return on investment in the forefront of making a buy and sell is important.

Learning in a book is good but asking questions and learning form someone’s experience is better.

Tim

The BRRRR is a strategy... Buy & Hold, Fix & Flip, Wholesale are all strategies. You could also say they are systems used to grow your real estate portfolio. The key is to know what your strategy/system might be and learn. Expect to makes mistakes, however you can limit some mistakes by being around people that have done what you want to do. Join a local Real Estate Investment Association.

Build your team of experts who can give you advice on what to watch out for; Property Manager, Realtor, Title/Escrow Officer, CPA, Business Attorney, Tax Attorney, and Lender.

Before the crash investors forgot the most important rule of investing.  Cash flow & Return on Investment is king and both should be a non-negotiable.  Everything else; appreciation, depreciation, and tax shelters will come together over time.

I would start backwards with the lender.  Sit down with a lender early in the process.  Share everything about yourself; employment, income, credit, money in the bank, access to cash, and relationships you have like hard money or private investors.  What your goals are both short term and long term.  A lender is an Advocate of you.  A experienced lender  watches the national and local economy, they pay attention to real estate both from the purchase and sell, they know if the local market is a buyers or sellers market, what values are in different neighborhoods - if appraisers are coming in high or low on the values.  A lender who deals with a lot of investors will know what the average rents are in an area.

A lender can help you determine what your buying power is, and help you build a strategy to access loans when you need them.  They can tell you what the reserves need to be to refinance an investment property.  This way you can make a good decision on buying a property, knowing what your cash flow might be and mitigate a crash.  You can be ready for needing cash to close if you do catch a low appraisal.

The other thing a lender can do is be an accountability partner; meaning telling you if the buy is good and fits your goals or maybe on the outside and you should walk away.  They know if the financing will be hard or easy based on the type of property you are looking to buy.

One thing to know is Fannie/Freddie do not have seasoning requirements currently.  This means you can buy a home for $150,000, secure it with private money, fix it up, and then refinance the home easier than you think.  A rate and term loan is refinancing the current note with no money back.  If you are looking to take cash out (get your money back out) then you need to wait 6 months (no more) as long as the remodel is done and you have a rental agreement on the property or can qualify with the home vacant.

I am a lender so I am giving you advice specific to what I know and how I have helped other investors.

Feel free to message me with other questions...

Tim

@Peter Stur I have about 40 different lenders that I currently work with.  Before you get into using a Commercial Lender to loan on any rental properties you own, you will want to have the 10 properties financed through Fannie/Freddie.

When your income covers your credit debt; primary residence, cars, toys, student loans, and credit cards qualifying for a Freddie/Fannie loan should be relatively easy.  Depending on when you purchased and rented your other 6 properties you will either qualify with 75% of lease agreements or your filed tax returns on the schedule E.  You will be better off to finance the loans before you show the costs for the remodel on your tax returns.

With the income vs debt (debt ratio) in check buying rental homes with traditional financing (Freddie/Fannie) comes down to money for the down payment and the reserves.  I generally like to work with Fannie on the 8-10th financed properties.

Specific to reserves; set one account that you have enough money for the reserves and then let it be in your account for 30 days (lenders call this seasoning). The other thing I would suggest If you have equity in your primary residence is getting a Home Equity Line of Credit and leave the balance at zero. When you buy the next rental you draw against the HELOC for the down payment and the money in your checking account would be your reserves. Once the loan is closed and funded you pay down the line back to zero (or close as you can) with the reserves in the checking account. Then build your reserves back up and buy the next property.

There are other accounts that we can use to show reserves if this requirement becomes a high number; a 401k account is allowed with proof you can borrower against it.  Most of the time, if you have $100k in an account and are vested 5 years then you can show you have the ability to borrow $50k and this becomes a reserve account.  You don't have to borrower against it, only show you have the ability.

I can give you feedback on how you can access loans more easily if you can give me a better understanding of your current situation and portfolio.  Feel free to direct message me and we can set up some time to talk by phone.

Tim

@Kathie Meyer a reverse mortgage would require more equity to set up.  I believe it's somewhere just below 50% based on the age of 62.  A reverse mortgage would not allow you to take money out unless you had the equity to pull it out; say no mortgage or small balance currently then you could do a reverse mortgage and take the equity out to buy other properties once you are 62 years old.

A lender who does reverse mortgages would need to give you better details.  I am speaking in general how this program works.

I would stay with your plan, finish the house through October 2020 while saving money for to begin earlier if a property came up that fit within your plan.  Look into private money options until you can refinance your existing home.

@Sherry Byrne glad you are not dead... looks like you have many options available to you.  Your current situation makes me want to sit down and be more definite on my own goals.

I am liking this community because it is making me think about where I want to go and how to get there.  How did you build your real estate portfolio?  Is most of your properties in one area?  Do you have other properties in other states than you currently live?

@Chandler Colyer one of my clients had a strategy to purchase a 4plex. Like I mentioned in the previous post, if you owner occupy this home you can use a FHA loan for the financing. He lived in one unit, remodeled it over three months, then moved into the next unit repeating the process until he had all four units remodeled and rented out.

He purchase another home and now had cash flow from the 4plex.  About a 1.5 years later the real estate market in Utah jumped up high.  He sold the 4plex, took the $150,000 of income made, paid the short term capital gains, and paid his wife's student loans off.

This was a great strategy because the cash flow on the 4plex was less than what he was paying out in the student loans.  When he sold the property and then paid the student loans off his cash flow went up giving him opportunity to look for other investments.  The added benefit is his net worth increased as well because he didn't have the student loans weighing down his ability to buy in the future.

Like was brought up before, set your goals, focus on a strategy, and take action.

How are your goals coming?