Avoiding Investor Overlays in a pack of 27 properties and what becomes of their portfolio.
Hedge funds offer a unique financing option that can work as individual loans for each property or a blanket loan for all properties. You may choose to include some properties in small blanket loan.
“Choosing to make some of the properties cash rich businesses, several were converted to Bed and Breakfasts, while others were turned into Residential Elderly Care Facilities.”
Each property has tenants, so adjusting the properties that were going to be repaired with those that were better off to be sold was the first step. Completing the repairs and raising rents in a larger portion of the low to mid range properties occurred. Each property has been re-structured. Many of the up scale to mid range properties were converted into Bed and Breakfasts, while others were turned into Residential Elderly Care Facilities. These properties were where the bulk of the monster gains were accomplished, yet the after completed properties that operated as businesses are now poised to be sold as businesses. Not the actual property will be sold. The sold businesses, will be leasing the single family residences for a profit - strikingly, if the businesses fail - you may wish to operate those businesses again. This cycle is almost ancillary, so profiteering continues.
"A ten bedroom single family residence, can produce north of $30,000 per month. Why it makes sense to buy it? Buying an income of $30,000 for $150,000 makes sense. When that business also leases the premises from you, you have an above market rent".
Some Fix and Flips Were Sold
Having completed repairs, value increased. Selling at a tad under market still yielded profit. If you have investors, you are in the mix of paying the contractors and loans off, then the investors.
Choosing to have financed the repairs, not making monthly mortgage payments for the property, you may have utilized credit lines instead of investors. You may be paying yourself back at that point, for a tidy profit and tax write down on the interest. Truly appreciating the depreciation that is short lived.
Bed and Breakfasts Depend on Location
Choosing to have some of the more premier locations operating as bed and breakfasts, the income can be very attractive. Keeping in mind you may have more of a seasonal income, it is still more than a tenant occupying the property on a monthly basis.
Elderly Care Facilities
Elderly Care Facilities are cash rich businesses that can make $3,000 per bed. At two per room (partition walls installed), a standard four bedroom can make in the upswing of $12,000 / month.
"There are properties that have ten bedrooms, believe it or not, you can make north of $30,000 / month while having a mortgage payment of $5,000."
Providing additional income for you - if you can be of more assistance to your inhabitants- your income per bed can ascend to $3750 / bed. Two or more in a master bedroom and it is easy to see the allure of a true promise land.
Coupling that with possibly selling this business of providing care for your elderly tenants, from the person who is currently managing it for you, is common. The managers of these facilities cannot afford to buy the house, but they can buy the business from you. They can make a payment for the business and lease the premises at an above market rate.
When They Buy The Business and Lease It From You
A property that has turned a five bedroom house into a monster ten bedroom single family residence, can produce north of $30,000 per month. Why it makes sense to buy it? Buying an income of $30,000 for $150,000 makes sense. When that business also leases the premises from you, you have an above market rent. Justified in the reasoning then, you may expect to lease it above double the mortgage payment, while receiving scheduled payments of the $150,000 business sale to you.
If you stay saavy in the day to day operations of the business, you may know when you either have to sell the business (if it is failing from the manger who bought it from you) or take it back, operate it again, and re-sell to someone else. It is tough to say this would never happen, but if it did, it isn't exactly tough to sell an income of $30,000 to another facility or manager who runs another one.
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