All Forum Posts by: Alan Taylor

Local REIA (network with whoever shows up -- a great way to find buyers), call a real estate brokerage, ask if they have agents that regularly work with investors, look for homes undergoing major renovation -- ask the contractors on site who they are working for, see if you can find who bought the property (they might be interested in buying other properties to renovate). Look for recently-renovated houses just sold on the MLS (Redfin, Zillow, Realtor.com), and look up property records to see how owned it beforehand -- maybe they are looking for another project?

Just closed a deal by calling a local real estate brokerage -- great agent, happy to work with them again. 

That's totally fine -- all of the agents came, not with a dialed-in price, but with a price range, which they then cast in terms of "if you finish ___ you can probably expect to get offers around ____".  They didn't just have a pre-determined figure, and stick to it.  

That's *part* of the information we're factoring in to the decision.  

Do you have any input on any of the thinking/scenarios above? 

Current position: 

We bought a house in Manassas, Virginia in 2019 for $290k (single family split-level 3/2 [can be 4/3 once the basement is finished] on 1 acre) -- we bought it as a project house, with a plan to live there for 5 years and renovate gradually.  We refinanced to a 30 year mtg at 2.875% about a year after moving in - still owe $280k.  We also (unwisely, in retrospect) borrowed $45k to help expedite the renovation, so we 'owe' $345k in total. The market exploded less than a year after we'd been there, and we're astonished at how much equity has gone up, way before our projected timeline. 

We are re-examining our initial timeline, and asking ourselves "Should we get out now, and take the equity into other (lower-priced) markets we'd rather be, or would that be 'killing the goose that lays the golden eggs'?   We would like to capitalize on current price levels, but we are not yet finished with all the renovations we had intended, but might be able to finish it within 1-3 months if we hire contractors, and hustle.  

Goals:  

1) Move to a larger property (acreage) somewhere in central or western Virginia to use as our primary residence (out from under the 'mushroom cloud', in the event of WWIII)

2) Build our passive income through rental property

3) Maximize realized gains from rapidly growing equity in current property

Challenges:  We currently live in the property, and having been doing most of the renovations ourselves (with permits, inspections, etc.) -- but realize that we might not be able to finish the renovations with enough time to take advantage of higher values. 

We've talked with 3 local realtors - two of them have had significantly different opinions for strategy and potential sale value:

A) "If you finish the top-floor renovations, you could probably get $420k for it", to 

B) "If you finish the top and bottom floor, we could list it at $480k, and you'd probably get bid-up to near $500"

C) (didn't come prepared with CMA - shooting from the hip) "You could probably get $400k from it, renovated, but that is totally from the hip, I need to do more CMA"

Options we've considered: 

1)  Expedite the renovation by hiring contractors, to finish top and bottom floor, sell, and put some/all of equity into future primary residence (risks: take our chances with much higher interest rates later in the year, get slammed by higher prices/supply chain issues that suddenly increase costs or delay contractors finishing in time to hit real-estate market selling prime-time)

2) Do a cash-out refinance -- pull out enough equity to renovate to 'rental grade' -- move into a short-term rental to facilitate renting it out (very few comparative rentals in this area - as in, no single family homes for rent within 2 miles from Zillow) -- keep as part of a rental portfolio.  (risks: higher interest rates and higher mortgage balance might make it harder to make money on as a rental, if rent prices drop)

3) Finish-top floor renovation, sell, and move into a rental, in the belief that the market will 'crash' -- keep realized gains in higher-liquidity account, counting on there being a market 'correction', and be better-positioned to take advantage of. (risks:  inflation -- liquid cash may drop significantly in value, and commodity markets may prove volatile given overseas conflicts)

4) Stay put, stay the course -- keep lower interest rate on mortgage, don't cash-out refi, slowly finish renovation, build capital for another purchase by doing wholesaling as a side-hustle, wait for the market to regain some semblance of sanity (risks: we miss out on higher property values, and lower interest rates -- and instead are faced with paying higher interest rates on with less-valuable dollars, and our options for taking out equity become a little more limited -- we are still 'borrowers' in a market where cash is king) 

We also happen to have a friend who would likely let us stay rent-free in their currently vacant home while they are away, through July of this year.

What I'm looking for is input -- is there anything I'm missing?  Are there other options we should be considering?  Is the 'moment of opportunity' already past? (local news reports home sales are already cooling, with higher interest rates, but prices aren't going down because inventory is still very low).  

Welcome your thoughts.  

LLCs are formed for specific reasons -- and the operating agreement that goes along with each LLC should reflect that.

If you formed an LLC to contain an insurance brokerage, the operating agreement would look different than an LLC that was formed to facilitate real estate investment -- and that's a good thing.  However... that means that, to some degree, an LLC might not be well suited to operating in a different business, just because it is a 'business entity'. 

You don't need an LLC for each property -- you *can* do that, but generally, that can turn into more of an administrative (and costly) headache than it's worth.  

You can, however, create land trusts for each property, which is much less expensive -- and name an LLC as the asset owner.  

I would listen to this guy's presentation about LLCs, and consider taking an approach that is similar to it.  

If your LLC was set up for a purpose other than real estate, it can still 'own' real estate assets, but, if you ever face litigation, the operating agreement may not stand up in court (the expectation with LLCs is that you operate it according to the agreement, and if you aren't... are you really running an LLC?), which may expose you to more risk than you'd like.  

I am not a lawyer, but this is what I have gleaned from listening to various attorneys, and real estate investors explain their thoughts on it.  

You should definitely consult your own attorney and accountant before making any decision about what to do. 

I would seriously consider going through an attorney experienced in real estate here, rather than a DIY filing.

If you're going through a DIY site, then the questions you are trying to answer are essentially taking a formulaic approach to creating the 'operating agreement' that will define your LLC.

Why go with an attorney?   

The operating agreement from a 'DIY' site will make you 'official', but it won't necessarily stand up in court -- especially if there is a slight mis-alignment  between the purpose of your business, and what is said in your LLC operating agreement.   Let's hope your company never faces litigation -- but in the unlikely event that you are up against a plaintiff with deep pockets and an iron-clad animus, their legal representation will be going through your Operating Agreement with a fine-tooth comb -- and going through a "DIY" site stands a high risk of leaving more 'chinks' in your armor than going through a real estate attorney. 

One more thing to consider -- if you plan on using your legal entity for a while, or if you are simply using it as a liability shield while you assign contracts, you might consider going through Anderson Advisors, and setting up a land-trust kit.  This might be something to consider down the road, as it's about $5,000 up front, but it streamlines a lot of the process where a double-closing might otherwise be needed. 

You'll probably want to learn a bit from Lauren Hardy  (YouTube: This Mom Flips)  - she lives (lived?) in Southern California, where competition is pretty stiff -- so she started virtual wholesaling, and teaches other people how to do it as well.  

If you have your system all written out, and optimized, you might be in a good position to bring them on.  If you don't know how to do it well, yourself, you can't expect a virtual assistant to be better than you are.  They are probably going to be about 70%-80% as effective as you are - so unless you are *rocking* the phones, don't expect that a virtual assistant will automatically be the best move, at this point. 

If you are just getting started out, it's probably more money and trouble than it's worth. 

Max Maxwell:  "You Don't Need a Virtual Assistant"

Google and YouTube.  Go down a YouTube rabbit hole for three weeks.  When you can explain the difference between a double-closing and simultaneous closing, you're on the right track, keep at it.  Come back here when you've got more specific questions.  This is largely a self-help business - no one can spoon-feed it to you. 

I've been going through Nhan Lam Academy ($20/month) for training - he is based in Northern Virginia, but the methods he teaches work anywhere in the US, really. You can also learn from Max Maxwell (his Facebook learning content is available here), Sean Terry, Wholesale Hackers (Real Estate Roundup on Facebook), etc.  Wholesaling, Inc podcast is also a great way to get started.  

There are tons of low-cost or free education options out there -- go dive in for a couple of weeks, get a 'degree' from YouTube University in Wholesaling - listen to different people explain the same concepts in different ways, and when you feel like you're good enough to explain it to others, find more concepts that you have learned, and repeat the process.