All Forum Posts by: Alex Howard

Just a quick update on this.

1 partner ended up dropping out of the project around mid March and turns out we hit the market at the right time and got 50k over our original ARV estimate(roughly 105k net profit). It took a year to flip with myself and 1 other partner (who both have full time jobs) to close everything up. We ended up finding a private lender and he is financing 2 property purchases this week (1 duplex and 1 4 family) at pretty good terms. As with anything you have to stick it out because there is light at the end of the tunnel even though it is hard to see sometimes.

My wife and I are looking to sell our home and buy closer to where I'm investing. The problem is our broker told me that the HML is taking away another $900 for my flip property. This is putting us in a house buying price bracket in which we would not be interested in buying the properties. I have an LLC now but I did not when I purchased the property in November, so the HML is in mine and my wife's name. Do banks check for HML or any money coming out each money? I'm assuming other people have been in this situation.

FYI it is a $900 payment I split with 2 other partners. 

So it isn't separated? Hypothetically if I make 80k at my day job and I make 80k on this flip my tax % will be wherever 160k lands?

Bought for 79, downpayment plus renovation loan though HML was 90k. Anticipating sale of 180k. I have 2 partners as well, which we were planning 40% to the partner that provided the downpayment and splitting 60% amongst myself and the 3rd partner.

My wife and I are in the 22% tax bracket for our employment income. Is the rate my short term capital gains taxed at dependent on the amount I make from the sale of my flip or is it taxed at my income rate (including the income from the flip)?

So in my current flip property we have my partners step dad coming in and volunteering his time working on the house with us. Sometimes we are not there and he brings his wife to help or just keep him company. My father is concerned that this gives him the ability to lay claim to money either for his services or money when we sell the property. I am under the impression that since there is no written or oral contract for payments there is no issue. We are in Ohio if that helps. 

So, I figured this might be helpful to let first time buyers know the process and struggles I went through buying my first flip property. I have no background in financing, or real estate ( besides buying my own home, reading books, and listening to every BiggerPockets podcast). I could not find too many posts on essentially a newbie guide to hard money loans, and therefore I’m here to give the incoming new investors what little insight I have on the process and some of the misconceptions I had.

1. Hard money actually requires you to have a down payment

While I had read a bit about HML and listened to a couple of podcasts that had talked about them nobody ever actually mentioned YOU NEED MONEY INTO THE DEAL. I made the assumption that if I found a good enough deal, I wouldn’t need anything down besides having the property under contract. I made the mistake of thinking HML would just loan on the hard asset side of things. This is quite a bit of oversight on my end, but ultimately didn’t hold up my process.

Do not assume that since the lender is on BiggerPockets that they are on the up and up.

I had made contact with 4 different HML's through the BiggerPockets system, and had checked reviews. I settled on one company (which I will not name) and began the process. The process for obtaining the documents the lender wanted was extremely difficult, since I had not been through this before. You're likely to need your hand held through this process, or at least I did. I had no idea how to fill out a 1033, what a draw schedule looked like, that I needed a declaration page for what I intended to do with the property and numerous other hold ups. I felt like I was handled very poorly, especially with me explaining that I had never done this before. On the day I was supposed to close I had an attorney look at my closing documents, and they advised me to not sign these documents as there was a lot of , as they described, "Predatory" documents enclosed. I contacted my lender and decided to axe the deal. Had I not sent these to an attorney to review they would've showed up at closing and I would either have to sign these, or deal with potentially losing a great deal.

Talk to other local lenders

I ended up making contact with another HML that I had spoken to before I went with the previous lender. I called him and explained the situation after 4PM on a Friday afternoon and he had everything settled and ready to close on Monday. I reached out to a few local lenders and investors and they all had nothing but great things to say about the lender. My realtor and the title company praised me for having this lender involved and were so impressed by how quickly and professionally it was handled. I will not hesitate to close my next deal with this lender, and I'm sure in the future we will do other business.

Take a second look at the property

I went back a second time with my partner to check on the property. I did miss some things that ultimately didn’t alter the budget, but I was made aware of. I took Brandon Turner’s tip of videoing the walkthrough and evaluating it once I got home with my notes. I found this extremely helpful because I could go back and have my partner document what he saw, and we compared our observations. At the end of things, we both looked through our notes and agreed on a budget, and hopefully that works out for us.

Pull the trigger

I know a lot of us suffer with analysis paralysis and second guessing everything. I KNOW IT IS A BIG STEP, BUT YOU HAVE TO TAKE IT IF YOU WANT TO SUCCEED. I have wanted to buy property for going on 2 years, but I always found an excuse not to do it. I found plenty of deals that worked on paper, but I always had some excuse (usually lack of funds) to keep me from completing the purchase. On this particular deal I found the house, viewed it multiple times, and had my agent submit an offer. They took out first offer and everything was under contract. There really wasn’t much to it, and if you have an investor savvy agent working with you, it is a breeze.

I am only 2 weeks deep on this flip house, so I’ll be starting more of a project log going forward. If anybody wants to see what I ended up with as far as a renovation plan, draw schedule, declaration page, or even needs help filling out a 1033 I am more than willing to send out modified versions or help over email, text, or phone.

I hope this is the right spot for this. 

So recently my life and career have changed to the point where I have some unused free time throughout the week. I'm looking to offer my time to help local investors, or out of state ones. I'm willing to look at properties, give input(though limited it may be) and even general help on your properties. I'm an engineer by trade, and am very good with my hands, but I'm looking to make a jump into a full time REI so I can live my life the way I want. I've lived in Cincinnati my whole life, and am very familiar with the good majority of the city and its suburbs. I am just looking for a situation to learn in and potentially grow. Feel free to reach out if this seems like something that would benefit you, or both of us.

You can mitigate the costs by installing certain things on your rental properties. If you plan on renting to pet owners, don't keep carpet in the house. Porcelain tile or LVP for the whole house/ area. If they want carpet, they can buy a rug for the rooms. Steel doors for the backyard/ area where they plan to take the pet. Our dogs always barreled into our back door and would jump when they heard us coming, thus scratching at the door. Drywall is cheap, unless they chew up a whole lot. Other than that, our pups never messed up anything in the house that wasn't a cheap fix. 

So I have a disabled family member that lives in a house my Grandfather put in his will that the house cannot be sold as long as she is alive. She is mentally challenged and recently has been having seizures more frequently. My mother and my aunt have began speaking to me about buying the house, but I am concerned about the whole thing. They are current on payments, but there is an equity loan of roughly 48k, and they haven't had an appraisal. I am concerned that if I offer to purchase the property (and go through with it) that SS will come back and reclaim the remaining money I purchased the house for (somewhere in the neighborhood of 30k after the equity line is cleared) Does anybody have any experience in an ordeal like this? The house needs a ton of cosmetic work, but should rent at around 1200 or so after repairs, or sell for a profit of somewhere in the 25k-30k range. The money is required to go into a trust to fund my aunt(the disabled one) and her living expenses until death, or until the money runs out. She really needs to go into an assisted living situation, but again, we are concerned SS will take the money they net from selling the house.