I have been browsing this board for some time, learning a lot, picking up tips from the experts. Now, I think I have a pretty good idea of what I want…and I was hoping you guys could provide some info. I know some of this may have been provided in previous posts but I will try to ask it in a way that pertains me personally.
Quick Background: I have just spent 3 years working in the Middle East and have over $100k saved up. I am definitely looking to invest with an income generating property ( I may get into flipping, but some other time). Now I also may have a friend with some experience in properties and similar capital to invest join me on this. Here are some questions I have:
Should both of us be in on the LLC? Is there any benefit 1 vs 2+ people?
We are looking to start mid-range ($750k-$1.5mil) is that feasible with a startup LLC? I have looked at http://www.creditboards.com for some more info on this, but I can’t seem to find anything that answers me.
If a lender requires a PG with your LLC for a property, would you just go ahead and do it (My credit score is over 750)…than try to refinance after a period of time or try another lender?
Is it wise to use our money in the initial purchases in an LLC or should you stick with OPM?
5.I am aware of the 70% LTV for financing, are there solid ways around that?
How do you judge LTV?
a. Example: A 7 unit building in a high price area for $2mil but the tax assessment states
its value is around $750k. However rental income is over 1% of the purchase price. So
does that make it a possible deal?
b. Do you just go off of what your own assessor says?
We plan to use a Management company (initially) are there any legalities with an on-site property manager (do you just provide him with a free apartment or do you have to pay him?)
Now a lot of advice point to “getting to know your area” unfortunately both of us live in two of the highest land value areas in the country (DC and SoCA), we are looking for an area to start in. I have been using Loopnet.com most of the time. Is this a good website (In your opinions?). Do you know of other websites that provide a large area search?
I have read about Mortgage interest deductions for your taxes. Does this apply to commercial mortgages as well? Can someone post some numbers on that?
How do you go about increasing rent? I see “Below-market rent” in the sales ad but are you legally allowed to just raise the rent of your paying tenants? (Assuming no contract)
Does anyone know about US financing for foreign properties (Say Mexico or Costa Rica?)
That is all I can come up with for now. I really appreciate any help you guys can provide. Thanks!
I would suggest starting your own business, not taking on a partner. Your friend should also start his own company. Partnerships are often a great way for friends to become enemies.
I don’t know what you mean by starting mid-range (750K-$1.5million). You should be able to buy rentals without spending much or any of your own money. Having $100K is great - hang onto it for emergencies. Use it for downpayments or outright purchases and then get it back when you finance re/finance the property. You’ll probably need at least 2 million dollars worth of real estate to have enough cash flow to live on, but that money should come from the bank - not you.
Yes, I would (and do) give a personal guarantee. If the bank is risking their money on you, the least you can do is have your “skin in the game”.
I would put every property in LLCs, from the beginning. You don’t want your personal name on a bunch of deeds.
You should buy all properties at a BIG discount. Buy at or below 70% of the market value and then borrow 100% of your needed investment. The 30% equity is the bank’s security. You will normally have to use small local banks to make this work.
You need to KNOW the laws in your target investment area. Opinions are not good enough. Do whatever it takes.
Yes, you can deduct the interest portion of commercial loans.
with that type of cash - have you considered pre-construction projects?
you may want to check them out first…these are deals say in Condo’s or apartment bldg’s where the builders offer buyers ridiculously lower prices pre-building…pay you interest while it’s being built, then maybe lease back to you for 12 months after it’s done…sell it for you if you want or you can live in the sucker, rent it out or whatever.
being single, with money…if you buy wisely - say an initial investment of 50k…may net you well over 250k within 2 to 3 years…
IF you buy wisely.
and this of course could be just one of your investments.
i have spoken to several developers regarding pre-construction projects - but i’m not that well-versed in spotting the killer deal…so i’m gun-shy…plus, most cost at least about 25k cash to get into.
I was refering to a starting property price (750-1.5). You know pick up a multi-unit. I know that may seem like jumping into the deep end but it’s how I’m used to doing things.
Now…about the 70%, How do you find properties for that? You see a listing…how do you judge if it is at 70%? I guess that is my main concern. Because with full financing, that allows us alot more flexibility.
TMCG -
I have thought about pre-construction! In fact that is how my friend started out…bought one as a pre-construction. It appreciated $30k upon opening when he only put 5k down. THEN they came back to him and offered another place in the same building because they didn’t initially sell it out.
Plus, I don’t know where to look, or how for that matter. It seems every pre-construction I find requires you to live there for at least a year after it opens.
And talk about Gunshy! I hear you on that. Stock market, business investments…many times have I watched $1000’s fly away because I jumped in and out too early or not at all.
I appreciate the advice from the both of you! I just hope I don’t screw this up! ;D
if you have a plan in place - you will make money.
TAKE YOUR TIME!
i don’t care what any person on here says - your money isn’t going anywhere in a savings account. put it away, forget about it and start talking with financial planners - several.
start learning the lingo of investment, all investments.
if you want to invest in real estate - fine - do it - but what’s the rush?
seriously man - don’t jump into anything - learn about the different investments available to you. i’m assuming you’re not an accredited investor - so the door will be closed to you on many of the best investments available - but learn about them -
i would start with talking with financial planners, a good CPA, some realtors, fellow investors. just don’t go with the “fast money” guys - at all.
I really appreciate any help you guys can provide. Thanks!