All Forum Posts by: Anthony Dooley

I don't use Brandon Turner's criteria because my worst deal makes me more than $200 in cash flow per month. $200 may be good in California, but in normal America, you should be getting at least twice that in cash flow. If not, you are buying the wrong properties or you are over-leveraged. To answer your question, zero. Equity is only good if you are borrowing against it or selling the property. Otherwise, equity is just a number on paper. Cash flow is the life blood of any business. The more experience you get, the less Brandon Turner's opinion will matter because your local market is different than his.

Equity looks nice on paper, but it doesn't pay the bills. Cash flow is the most important number in the equation for me. You said $1000/year, but I hope you meant $10,000 per year. You will not retire on one property. You need at least 10 cash flowing units. BRRRR isn't really applicable in the scenarios that you give here because there isn't much equity and interest rates on investment property is about 8%. You have to find off market deals that cash flow after repairs.

There are no tax advantages to holding the property in an LLC or your name. It's the same. It's a flip, right? So you won't own this long enough for it to matter and since there are no tenants in your project, liability shouldn't be an issue. Forming a corporation may be something to consider if you are doing 20 flips per year or more, but for one flip it's not worth the hassle. You are overthinking this. Most flips are done by mom and pop DIYers that spend zero dollars on legal entities and complicated tax structures.

It's almost always cheaper to buy an existing house than to build one. Cheaper means less debt and better cash flow. Personally, I would never buy out of state or even out of my surrounding counties, so I wouldn't advise anyone else to do it either. Your interest rate on an investment property will be about 8% currently, so factor that and rent increases in the near future will be slow due to the record run up of the last two years, which has outpaced wages. There are so many distressed homes and probate deals out there, so building isn't even a question for me.

The cost to get them up to standard would probably be #1. Permits, cost of materials, labor, inspections, etc. on top of the cost of the building. Lenders typically will not make a loan on a property that is not in livable condition or if it needs extensive repairs.

This sounds like a legal question that you should consult an attorney in your state about. Treat people the way you want to be treated, be honest and you don't have to worry about going to jail.

This is a great question. You should go to a local lender and discuss your plan with a loan officer. They wil advise you on the best way to do this because they want to make this loan to you. The only advantage to using FHA is a lower down payment.

That being said, I doubt that you can create any positive cash flow from your current home. Will it rent for more than $2900? After management and repairs, will there be any money leftover? Instead of turning your home into a rental property, why not buy an existing rental property? Shop around in a neighborhood that you wouldn't really want to live in and buy it at a price that results in positive cash flow after expenses.

When you buy it with FHA, you will sign more than one document that states this will be you primary residence. Some people say it's for at least a year, but there is no term of time on the documents. You can move whenever you want, but understand that lying in order to get a loan is mortgage fraud. You are signing legal documents and the FHA is a government agency. House hacking is a great move if you do ethically.

Gathering more information is the smart thing to do. Deals like that are pretty common in the South, but just because it's cheap doesn't make it a no brainer. It is a low income area, which is what section 8 is all about. The question you should ask is, "why havent' the local investors already bought it?" I see wholesalers from out of state do this all of the time in my area. They get a beat up rental under contract because it sounds cheap, then list it for sale without rehabbing it using comparable sales information. Needless to say it doesn't sell. If you are going to hold this property and use a professional manager, this could be a good deal for you. Do you trust your friend enough to buy it blind? Why doesn't your friend buy it?

How much did you spend on the purchase and renovation total? How much is it renting for? Even without knowing those numbers, I can tell you that holding it is the best answer, long term. Keep in mind that most leases are for 1 year. After that, the lease is up for renewal and you can increase the rent. Also, you can list it for above market rent if your renovations make your property look and feel better than the average place. What about pet rent? You could save 10% by managing it yourself. Selling is a bad option because your only buyer is another investor, and investors never want to pay retail price.