All Forum Posts by: Andrew Gingerich

Does your town have a private group on facebook market place? Honestly, we use all those that you have listed in your original post but we get a ton of leads through facebook. Post it on facebook and get ready to get lots of interest from many people that won't qualify and a few that will. :)

Good luck

Unless you use hard money most banks are going to require 20-25% down for commercial business loans. Also these loans usually have shorter amortizations schedules say 20-25 years and typically have a 5 or 10 year balloon. These loans can have repricing in the middle of them too. Credit unions are a good source of info on these kinds of loans.

You can get a secure or unsecured line of credit to start your real estate business too. For example you can get a line of credit against your primary residence. 

Keep in mind banks are more likely to work with you once you have some experience doing deals and have a record or portfolio of success. Banks are great a lending money to people who don't need it. It's much hard to get money from a bank when you need it! :) 

Here's another resource to spend some time with https://www.sba.gov/ A small business loan through the SBA might help.

I'm not sure about the vendors you listed. 

I think your local credit union would be a good place to start.

Lots to unpack here. 

1)You may have trouble forcing a value add with a bathroom reno. At the end of the day it sounds like it won't appraise for much more than 200K. I'd check what houses on the street and neighborhood that are similar to yours, what are they selling for. 

2)I don't think you can use 203K loans for rentals. You have to live in the home for a period of time (maybe a year?)

3)You can rerecord the deed with your county for a fee and put it in the LLC, but it might trigger the due on sale clause and the lender could call the note due. Unlikely but possible. if you refi you can get a loan in your LLC's name but the bank likely will give you a poorer interest rate.

4)The bank will send an appraiser to your house when you refi. If you fire an appraiser directly the bank isn't likely going to use one that wasn't ordered independently through their loan origination process.

5)HELOCs are easier to get without an appraiser but talk to your bank.

6)Keep in mind that iff you use your primary residence as a rental. Once it is used as a rental for more than 3 of the last five years you will be subject to long term capital gains and loose the homestead capital gains rule. This is a big deal. I wouldn't want to give up my free capital gains so I wouldn't use it as rental for more than 3 out of the last five years. Said differently you need to live in it for 2 out of the last 5 to be exempt from paying capital gains. If married 500K of gains could be tax free.

7)If the home is work 180,000 what will it rent for? Can you get 1800 a month in rents? If not, I'd consider selling it and buying something with better rental numbers. Very few primary residences make good rental homes since people don't typically buy them with the intent to rent them in the future and don't look at the numbers in that critical light.

Good luck, Andrew

I prefer rental properties over flipping but I understand the attraction of raising capital by flipping. I think a local Real Estate Investment Group is a good place to start. This will help with both advice and finding a partner if you so choose. You might also reach out to other BP members in your area. You can setup a search or keyword alert on your BP account. Put in your city name and you'll see who's active.

20K for a new investor will let you buy an 80K property using conventional funding. Depending on your market you might not have enough to buy a buy and hold. Keep in mind you'll need more than 20K because of the financing costs etc. 2-5K extra. 

Hard money could work but make sure you will be able to finance out of a 12% hard money loan into a conventional and get all your money back. 

Best, 

Andrew

Can you rent the 700K house for 7000 a month? In my opinion, if the answer is no than it's not a great strategy, depending on where you want to end up in the future. I wonder if you're going to be able to cover all your costs on your high dollar purchase if rented.

Another consideration. One of the biggest values of primary residences, in my opinion, is the homestead rule, which essentially says if your capital gain on your primary residence is 250K or less and you live in the home for 2 out of the last 5 years you owe 0 dollars in capital gains. If your girlfriend becomes your wife, than that 250K gain goes to 500K. As such, my advice would be to consider selling these 'primary homes" after living in them for 2 years out of 5. You might check if your travel will effect the definition of 2 out the last 5 years. Here's an example, you buy a 700K property that is worth 1 million 5 years later and you lived in the property for two years and rented for just shy of 3 years. When you sell the home you would have a 300K gain. 250K would be sheltered from capital gains, and 50K would be subject to capital gains. If you were married all 300K would be free and clear of capital gains (since it's less than 500K). 

In your situation I would also think about putting 1031 exchanges to use. There's lots of info on BP about what they are. If I were you, I'd be thinking about how to avoid taxes on sales. Consult a smart CPA for more info here. 

Final thought, "sold 5 houses in the last 8 years." I agree, selling regularly is a poor plan. Taxes, commissions, inspections, finance fees, loan origination, appraisals, transfer tax, escrow charges all add up to sink you. The longer you hold the more amortized these costs can become while concurrently getting the help from appreciation, tax deductions, and principal pay down. Most would say sell never if you can avoid it. The longer you can hold a property and have it pay for itself the better off you'll be (in most cases). 

Good luck, 

Andrew

I would say this. Do not modify your qualifications. It is better to reduce the cost of rent then give on your requirements of 3X gross income compared to monthly rent, no criminal background, or whatever you have. Taking a little less in rent is worth the piece of mind of not having a tenant that gives you constant headaches, have to pay for an eviction, is late on rent etc. 

In terms of lowering rent. Let's say you lower your rents by 50 bucks a month. That'd be 600 a year in gross rents lost. But if the unit rents for 600-1000 a month (making a guess), having it vacant for another month is worse since you'll have lost more revenue that year compared to lowering the price 50 bucks. 

Final consideration. As the summer winds down and you get closer to T-giving and Christmas it becomes harder, in most markets, to find tenants who want to move. 

My advice, lower the rents a little even if you think you're at market rates. 

Good luck

Andrew

Well I don't know the statistics most investors, especially those that survival are not investing for appreciation. They consider appreciation the icing on the cake so to speak. But if your looking for icing after finding a good cash flowing property with the tenant paying the principal down I would offer this advice. 

1. Talk to several realtors in your area and ask them want neighborhoods are sought after, and what neighborhoods are gentirfying

2. Find job growth statistics in the city or town (local papers like to publish this info).

3. Identify new businesses moving to town and if they are likely to employ many new folks.

4. What's growing in the neighborhood (E.g. is a hospital in the neighborhood expanding? Is a data center moving in?

5. What is the population growth like in the city. Is there a net influx of residence over the last five years?

6. What is home builder confidence like. Are people building?

7. Whos moving into the town? First time home buyers coming for jobs? Retirees? Both?

In the end I would suggest looking for a place with a healthy and growing jobs market that has a culture and neighborhood that is sought after by buyers. 

I'll end where I started however, investing for appreciation alone is speculation and highly risky. I think in this economy it should be your icing after finding a great deal that cashflows.

Best of luck

Andrew

Check your lease. Many apartment leases don't let you sublet or use your rented unit for short term rentals. It's a good question. I know of at least one investor that is breaking his lease since he is using it as a successful airbnb and yet his lease does not let him use it as a sublet or short term rental. It's risky and illegal. It could be grounds for eviction. On the other hand many investors are very successful at renting units for say 1000 a month and airbnb'ing for 2000 a month or more. My advice would be refer to your lease for guidance. 

With 5% down on a conventional you will have to pay PMI (Private Mortgage Insurance). With 20% down you won't have the extra monthly expense on the mortgage. Have you considered FHA? FHA is better for low downpayments but they have stricter rules about the condition of the property and you need to live on the property. I understand that you can get an FHA for a duplex and small multi units but you need to live in one of the units. You won't be able to get an FHA if you're not going to live on the property. Let me know if you have other specific questions.

Best of luck

@Austin Welty, @Daniel Hyman's recommendations are great ones. I really like Brandon Halls' website. He's answered a ton of questions on his site. You should check it out. I think you can find it at Therealestatecpa.com 

Funny you should ask about books, I am partway through NOLO's Every Landlord's Tax Deduction Guide. It's a bit dense but not so much so.