All Forum Posts by: Arthur C.

You cannot use a LLC to own a property and run a STR. It has to be under your name. You could consider getting an umbrella insurance for greater protection in supplement to your primary liability insurance coverage. Should cost less than 200-300/yr. Bottom line, you have to live in the property to be able to turn your basement into STR. Otherwise, you're going to get caught eventually and get penalized.

Good Evening,

Does anyone know which lender that can do a HELOC on an investment property under a LLC in Washington, DC? Been looking but it seems difficult to find those lenders who can. I would certainly appreciate any inputs you have. Thank you!

Arthur

@Russell Brazil

Actually, I believe it is 5% for the condo conversion fee. That’s already included in my calculation toward to mid-200Ks range in net profit. Still pretty good. So, I’m not understanding why @Mark Cruse doesn’t think that could be a profitable project. Let me know if I’m missing anything else as I’m looking to get started with a project at some point later during the year.

Most costs will come from:

*5-6% real estate agent commissions

*5% condo conversion fee unless property either remains vacant or is used as primary residence for one full year that will exempt the condo conversion fee

*1.45% transfer and recording taxes for seller’s portion

*Loan interests

The rest of all others should not be as big as those above.

@Mark Cruse @Russell Brazil

I have seen where single family row houses, particularly in Trinidad neighborhood, were bought for $475-500k range and did the third floor pop up and with the slab being dropped then did the condo conversion with each unit consisting of two floors. Let's say if full gut costs $400K, which you think is kind of too high. The ARV for the upper unit is about $700k and lower unit at $650k. That's $1.35M total and will get to $450K net ($1.35M minus $900K total investment costs) but not yet including the closing/holding costs, taxes, and etc. Still, to me, that's pretty good amount of money left that one can generate after factoring all those other costs. Upon my calculation, the net profit should be about mid-$200K. Is that not enough for you? :)

@Mark Cruse

I thought 300-400k is reasonable for full guts of two units building. If it was a single family home, then I agree 100-150k is typically the ballpark number for full rehab.

Your reply seemed to indicate you thought it should be lower? I’m curious about what number you think it should be based on your experience. I think I have seen your comments around in BP before and I believe you have done several, if not many, RE projects.

@Tyrone Marson

I did mine with $142.5K spread. The property didn’t require much work and rehab took about less than just 4 months. It depends on every property and how much work is needed. The longer it takes, the greater spread it should have to make sense to do it. Have you done any fix and flips before? I would suggest starting a small project before jumping to a big project. In regards to capital, if your capital is too low for DC, consider partnering up with someone who you trust and go from there. It did well for me when I did the ground up construction of two units condominium project.

@Ron Gallagher

Ron, just out of curiosity, why wouldn’t you want to live in Trinidad? I know there has been a history of crimes over there but believe me, the neighborhood area has significantly improved the last few years. I have lived in the area since 2011. Never did I feel intimidated living in the area. I feel Trinidad has so much potential — pretty much which I called the heart of all good stuff that have been happening. Ivy City, Union Market, H Street development, and Bladensburg Road development is heating up. There has been a massive plan for the area of the Montana Avenue/New York Avenue/Bladensburg Road, which is nearby the Trinidad neighborhood. That will help bolster the value in the area in the next decade.

@Russell Brazil

I don’t think it’s a multi family. If I recall correctly, they split 50/50 on all utilities. One of the investors is a well known developer. I don’t want to name him but if he’s a developer, he should have known this is illegal, which is why I thought it’s okay to rent two separate units. It is definitely a single family home but just that it has no stair connection from basement to the main floor.

@Russell Brazil

Interesting... because I know a couple of investors in Capitol Hill and Trinidad neighborhood - both zoned as RF-1. They rent out both the main floor and the upper floor as one unit and the basement as other dwelling unit separately.