All Forum Posts by: Bill Briscoe

I haven't lost any rent yet. Current lease expires at EOY but the tenants moved already so I've had it listed since they gave notice. 

Yes this is a hard time of year. I don't think lowering the rent would get me a better tenant pool, but more likely a larger pool of a lower quality. 6 mo lease is a good idea. 

For this prospect 50k isn't a lack of Income. That's doing pretty well, though it isn't much cushion. Her credit shows two small accounts in collections - couple hundred dollar each. I think she said one was her ex phone bill which She disputed and never paid. She says she has always paid rent on time- and no evictions are on her record. 

She did have some late payments on school loans and her car loan was once 90 days late but is now current.  

Could that be signs of a one time lack of liquidity during the divorce or of a recurring issue?

Her current rent is $1020, but she gets an employee discount. Getting into a house is her goal. 

I have 1 property which rents for an above avg $1275/mo, SFH, tenant pays all utilities, yardcare, etc. We did a full reno 3+ years ago and have a mtg so cash flow is only about $450/mo.

So far we have had 3 tenants - all of which have been very responsible and had credit scores over 700.  Now it is vacant again and our only applicant in 6 weeks has been a single mom, 2 older kids, recently divorced, and with a credit score of 540.  Income is $50K so she makes the 3x ratios barely, but that comes from 2 jobs, the 2nd of which is a newly opened bar so she only has 1 paystub year-to-date.  The other job is leasing manager at her current apartment.  She pays that rent "on time" but it is a payroll deduct, so it would be hard/impossible to pay it late.

She is very interested, and paid the $39 background fee check, so I want to work with her, but don't want to take on a completely stupid risk. Thoughts on this one? 

Would you approve her?

Ask about a co-signer?

Deny application initially but offer approval with deposit plus 2 months rent up front?

Something else?

US Bank just approved me for a 15 month 0% interest business card  offer.  I haven't received the card so I don't know what the credit limit is yet.

I saw an article on it here:

https://www.biggerpockets.com/renewsblog/2013/03/16/real-estate-credit-card/#comment-230238

and one guy in the comments said he would purchase entire homes via credit cards.

So financing the Rehab costs thru a Credit Card could be a no brainer, if you have high enough limits and low rates.

But what about the actual purchase of a foreclosure? I can probably scrape together a combined credit limit of $200K or more between my wife and I over several cards, so when would that make sense on an 80K purchase? It seems like if I could avoid doing a mortgage entirely then I can skip the junk fees – appraisal, points, underwriting, lender's title insurance, etc, etc.

But instead, I expect I would have a 2-3% vendor fee to pay by CC, right? And how would this work? Paypay, Plastiq, Venmo? Who is buying homes using a credit card at the title company? If I could classify it as a purchase and not a cash advance, it would at least qualify me for the points, which would offset some of that 2-3% vendor fee, and get me to Diamond status at Hilton or Sheraton real quick.

Is anyone doing this now?

I did a full rehab on a foreclosure 3 years ago, and have held it as a rental since. Cash flow has been good, but the Zillow and CMA from a realtor show it has appreciated by 20-25K during that time period, over and above the 2013 ARV. The current lease is ending 12/31, and while I have it relisted as a rental, I haven't approved anyone yet. The home is still in very good/very clean shape and will show very well. So I'm thinking that now may be a good time to monetize my gains by selling to an owner occupant, as they would be willing to pay more than most investors.

I've done one FSBO before and got what I wanted for it, but that was 8 years ago. So in the current market, what are some tips and tricks for getting exposure quickly/testing the market, and hopefully landing a contract during the Christmas buying season (other than paying a broker 6%)?

My LLC is owned 2/3 by me and 1/3 by my bro-in-law.

I'm assuming if we were to purchase another house together with a different ownership ratio, then we should probably open 2nd LLC to keep the ownership straight, rather than trying to rebalance ownership as .66667*Value of A + .5* Value of B, and the same on cash flows, debt, expenses, etc. Correct?

Just re-read your specific post: 

"It needs about 10-13K in rehab cost to bring it up to my rental standards."

I don't think $10-13K "to bring up to rental standards" would ever be considered an over-improvement.  You should be good to go.

No time limit.  Yes, both the purchase and capital improvements should go into your depreciable cost basis. 

However, there may be a lower of cost or market test.  If someone were to drastically over improve a personal residence, I'm not sure they could roll all their expenditures into the basis of the property to be used for rental.

For example - suppose you bought an estate for $750K as a personal residence and it had a pool and pool house with a value of $150K - and the rest of the house/property was worth $600K.  If you tore down the pool house and pool and built a garage with apartment above (at a cost of $150K), still to be used as part of your personal residence for guests, and the new value of the property was still $750K, then I don't think you could roll all $900K you had spent to date into the basis once you converted the estate to a rental.

The principle is that you disposed of a personal asset- the pool/pool house, with a basis of $150K, for a loss.  But losses on personal assets are never deductible or depreciable.  So to the extent that your renovations are replacing personal assets that still have residual value and therefore may not be increasing the market value of the property by the entire cost of the renovation, your basis increase may be limited.

Wesley - no you don't have to pay back the HELOC if you move out. Owner occupancy only applies when you are taking out the loan. Although they may not let you draw any additional amounts once you move out.

Further, you will need to qualify for a loan on your new house using debt/income and liquidity ratios that include your current debt.  Make sure your loan officer knows that you will be carrying debt on both properties at close - sometimes they assume a double closing of your sale and purchase at the same time.

Once a year - big difference.  That's not so bad.