Getting started on securing my financial future

[Joseph M Limpert]

Hi BP Community!!!

I live in St. Petersburg, FL and am just getting started out on my real estate investment journey.  I discovered bigger pockets from my real estate agent who helped me buy my first property 7 years ago for $285,000 and paid off a little over a year ago. I know that was stupid but it is nice having that piece of mind. Since then I have been saving up to create a stockpile of funds to start deploying on cash flowing and/or appreciating assets.  Since discovering the podcast and site in January I have since gone through 60+ podcasts and am using the analysis tools daily trying to find the needle in the haystack.  After listening to a podcast about tax notes this morning, and walking my own neighborhood daily for the last 3 months (for my health, not necessarily "walking for dollars") I decided to look up the tax records on a house that I know needs some work and is visibly in distress.  Low and behold there have been multiple times since 2017 that the taxes had a certificate issued.  This is the ugliest house on my street, It has boarded over windows in the back and I'm sure there are other issues which won't allow for traditional financing, it is slightly larger than my current house which currently appraises for $580,000, and if I could get it at the right price this could be either a good buy and hold ($2800+ rent estimate) or fix and flip.  I see a huge opportunity.

How do I approach this? Buy the tax certificate when it comes up this year and continue to do so since it takes 2 years before proceedings could occur? Offer the owner? Both?

Also since this person lives almost directly across the street, how should I approach this without making an enemy.

Looking forward to any thoughts, I'm really excited to be here, and to finally have a reason to introduce myself.

[Stephen Dispensa]

Hi Joseph,

One of the first things I would say to consider is what is your plan for the property? Obviously a rehab is in order, but are you looking to flip it? BRRR it and rent it out? I'd start by trying to figure out a primary strategy and then a backup plan in the event things don't work out. Figure out a rough budget for the project, and back your way into what your max offer price can be. (Obviously don't start at your max, but know where your limits are.)

Also important in your strategy is how you plan to finance this transaction? Conventional loan in your own name? HELOC on your primary? Since the property needs a massive rehab, you need to consider the funds needed to accomplish the renovation post-closing. You could also consider hard money where the rehab budget will be included in the loan, but interest is obviously always a factor here. However, this would allow you to purchase with an LLC, and possibly offer you some anonymity while negotiating with a neighbor. Personally if you're going to be investing more, I'd recommend forming an umbrella LLC / holding company and then place individual investments into their own LLC for each property.

Next you need to look at the strategy for getting to the owner. Is the property owner occupied or are there tenants living there? If owner occupied and they're clearly facing financial issues, why haven't they sold yet? Are there mortgages or liens against the property currently? (As a real estate agent I have easy access to this information from the services I subscribe to buy you may not be able to access it as easily). Ideally you want to find a motivation for them to sell and get out quickly. I definitely understand the issue of not wanting to create an awkward situation with a neighbor, so you may want to hire a realtor to present the offer for you. Form an LLC and give someone else signing privileges in your operating agreement so your name doesn't appear on the offer or any other paperwork. Hire a real estate agent to represent the LLC and negotiate on your behalf. Build the real estate commission into the purchase price and make it part of the offer.

Finally the goal is to get that offer accepted. Ideally you want to create a situation where the seller realizes he can get the property and the current issues off his plate quickly and walk with cash. Understanding their financial situation through looking at mortgage / lien balances will provide a much better picture. If they own this house free and clear and can walk with a couple hundred thousand in their pocket it may be an attractive situation for them. If they owe 400k on a house that's falling apart, there may not really be any upside for them to sell as they're certainly not going to bring cash to closing to close out a loan. 

You've definitely started down the right path though. I'm a broker and property manager based out of Tampa but I work the St Pete side of the bridge as well. If you need any help or even just have some questions, send me a DM I'd be happy to help.