How to Create Lifetime Cashflow through Multifamily Properties
"How to Create Lifetime Cashflow through Multifamily Properties" by Rod Khleif
This book was informative and free! You can download it online and it has way more information then what is contained in my notes, but this is what I wanted to remember the most:
* Business Structures:
- Keep each property in its own LLC.
- Create a holding company for those LLCs.
- Create a LLC or S-Crop to manage the properties.
- Create an S-Corp to act as your general contractor for fix and flips. Check the laws in your state for laws regarding acting as a General Contractor and be sure to buy liability insurance.
*Multifamily 2-4 Unit Financing:
- Fannie Mae and Freddie Mac limit mortgages to ten.
- The first four have easier qualifications.
- Many banks limit you to four for this reason.
- Fannie Mae's 5-10 Property Financed Criteria is:
1) 25% down for single family.
2) 30% down for 2-4 unit properties.
3) 30% equity for all refinances.
4) Minimum of 720 FICO.
5) 12 months of clear payment history on all mortgages.
6) No bankruptcies or foreclosures.
7) Two years of tax returns that show rental income.
8) 6 months of PITI reserves are required on all financed properties.
- You can get around this by financing in your spouses name, using portfolio lenders, or purchasing buildings with over 5 units.
* Researching Locations:
- It is important to buy in the right city/area. Be sure to analyze the market area data from these websites:
* Finding Properties Online:
- The top search sites for commercial properties are:
-The biggest auction sites are:
-Find a property through direct mail using these list providers:
-This book covers syndication rules, exemptions, and the general process in some detail. If you are interested in this, it is worth downloading directly. The book is available at RodKhleif.com
* Due Diligence
-What you need from sellers:
` Last 2 years of financial operating statements
` A year-to-date operating statement
` Last 6 months of bank statements (used to match against rent roll and operating agreement)
` Utility deposit register
` Utility bills for the last 2 years
` Property tax bills for the last 2 years
` IRS Tax returns and addendums for the last two years
` Rent roll for the property for the last 2 years
` Security deposit register
` Payroll records
` Each different lease type
` Written property policies such as pets and parking
` Information on all rent concessions
` Commission agreements with the leasing staff
` Current property management contract
` List of any uncompleted maintenance requests
` Maintenance and capital improvement history for the past 3 years
` Litigation history on the property for the past 5 years
` Service contracts
` HVAC reports
` Elevator report
` Insurance policy
` Insurance claims history for 2 years
` Any operation manuals
` Business license
` Title Policy
` Property Survey
` Site Plan
` Architectural Plans
` Environmental Reports
` Any mold inspection reports
` Any lead-based paint inspection reports
` Any fire system reports or citations
` Inventory of property tools, supplies and personal property
- There is a continued list of items to get from others.
The authors website is www.RodKhleif.com and he has free downloadable forms at RodKhleif.com/forms
Casey Ryan Richards