All Forum Posts by: Bob Woelfel

@Jason Martin so from the looks of things you're roughly 9-10 years into paying this down on a 30 year loan?  What's your rate?  

If you sold now you wouldn't have any Cap Gains tax.  Your rent and cash flow appear pretty strong.  You may not want to sell based on what you told me, but I'd be curious what the terms of your loan are.

Like I said I think it just comes down to what the highest and best use of the money.  Long term loans and debt are a good place to be if that's the case for you.  Hopefully you can save a bunch of that cash flow for future deals.  

@James Dean-Howell...if you are looking to live in one of these properties then the first thing you should do before anything else is to go to a mortgage lender and get pre-approved for a mortgage.  Full Stop!  They will let you know how much house you are approved for and what the different options they have available for rates, terms and down payment.  You can do this today or tomorrow and have an answer within a day or two.

When you get a first call from a seller you have to remember that it's just information gathering.  You aren't buying the house from them that day so don't put so much pressure on yourself.  Getting their name, address of the house, beds, baths, and any other additional information about the property is easy to get on the first call.  Why are they looking to sell?  Does the property need work?  What are they looking to get for the property?  Try to actually have a conversation with them about the house and why they are wanting to move.  Most "motivated" sellers are happy to share much of this info.  Once I have that I typically do one of two things.  Based on my experience there are times when I know exactly where the house is at and I know it has the potential to be a deal.  If that is the case then I will try to set an appointment to go see the house right away.  If I don't know then I tell them that I'm going to do some research and some work on this and I will call them back within 24 hours.  

As an owner occupant your selling proposition to them is that you're just a guy who wants to find a house to live in.  You love the area and are looking for a house that has potential and one that needs some help to make it shine again.  

As a wholesaler I think you've got to get a few more things in place before actually going to contract with someone.  I would not advise asking about or going into an owner finance deal with a seller when you yourself have questions about it.  Many sellers are depending on investors to perform and actually buy their house.  Sadly, this doesn't always work out well for them.  I wish you the best.

@Jason Martin...you will probably get a lot of different responses here as well. Without knowing your cash flow number or the terms of the loan you have in place it's somewhat difficult to say. If it were me though I would probably sell and here is why. Assuming you and your wife lived in the house for at least 2 years before vacating and renting you won't have to pay any capital gains tax at sale. All you would have to do a pay for depreciation recapture of one year and the rest of your gain is tax free. I did this on my old primary residence that I rented for a couple years and we did really well. If you were to hold onto this property for the next 2 years or more then whenever you went to sell you would have to pay capital gains tax on your profit. This will take a decent amount off the top of your profit. I think what you really have to find out is what you are going to do with those gains and are you further ahead by selling? Play with the numbers a little bit. One option with you selling and one with you taking out a LOC. Best of luck.

@Todd Mason based on that information I would not be in a hurry to jump on it.  I would stay firm with where you want to be and explain to the agent that based on the numbers this is what you feel is fair.  I would then start looking at other investments and maybe they come back to you and maybe they don't.  As @Marcus Auerbach said, don't fall in love with a property.  Particularly when the numbers aren't strong.  Best of luck.

@Gus Tsesmeloglou...I would establish an LLC and have a very clear operating agreement in place. This agreement should spell out who is responsible for what in your business or flip. It will establish how funds are handled, how you will liquidate and what work each partner is responsible for. Really spend some time with your partner on this so everything is on the table. Relationships change when money is involved. Best of luck.

Hey @Andy R....it sounds like this is heading south.  You're getting frustrated and it doesn't seem like he or his new girl really have any clue that their behavior is becoming an issue for you. You could always talk to CJ one on one and explain that even though you like his GF, the rental agreement is with him and not her.  There is a chance that he will understand this, but he will still have to talk to his GF about this and based on how they are behaving now I can't imagine it will go well.  You'll end up being the bad guy.

I think as others have said you need to figure out if you really want him there or not.  If you do, then figure out what $$ increase makes sense and if they agree to it be happy and move on.  I"m guessing that even if he (they) agree to it the nature of your relationship will be changed.  They will probably feel more entitled than they currently are right now.  

If you do not really want them there or can't see it working long term then you need to ask them to move on and here is why.  If you don't really want them there, but both of you agree to raise the rent you won't have really fixed the main issue.  The main issue is that you're annoyed with them being there and taking over your house.  That bump in rent is going to feel insignificant the longer time goes on.  The small stuff they do like 5 showers a day and not cooking or cleaning is going to push you over the edge anyway.  Figure out what you want first and then find a solution for it.  Best of luck.

@Jeff Nydegger I agree with the others in that it sounds like a great value add opportunity.  You already know what issues are and as long as you have a plan in place and know what its' going to cost to fix the issues and improve the building then I would say go for it.  Once you get it stabilized it should cash flow very well.   Buildings of that age I normally look heavily at the foundation, supports, electric and plumbing to make sure you don't have any expensive surprises.  I would make sure you have a plan for the heat as it sounds like it's an issue.  Just know up front what you are going to do to improve it.

We have a 6 unit where we pay the water bill, but we bill back all the tenants a flat fee of $25 per month for water. It doesn't completely cover the bill, but it certainly helps us offset the cost and increases our NOI from when we purchased it.

It sounds like you may not want to hold long term so my last question would be is if there is a market to sell in a few years after you get it stabilized and performing the way you want?  Any idea what Cap Rates are in your area or what stabilized building trade for?  If you're getting it for less than 250k, but have to put 100k into it are you confident you'll get enough out of it at sale to compensate you for turning the building around?  I would imagine you would based on the rents, but just something to consider.  Best of luck.

@Michael Geraci  Without seeing the inspection report it's difficult to tell.  I would first talk to the inspector and get his/her gauge on how bad it is.  How much time is left in your inspection period?  If you've got a few days yet I would get a foundation company to take a look and give you a bid.  You could have a plumbing leak which is causing the water, but most likely it's either gutters or a drainage issue around the foundation.  These are relatively simple fixes if that is indeed the issue.   They should be able to take care of the support issue as well.

Are you buying this to live in, flip or hold long term?  If you flip this most of these issues will need to be handled right away.  If you live in it or hold it long term you can fix some of these things over time provided they inspector isn't saying they need to be addressed immediately.  I would try to find a more permanent solution for the heating issue, particularly if you are holding this as a rental.  You don't want to have to be worrying about this constantly during the winter months and having to visit the property to make sure everything is ok.

@Todd Mason Not knowing your market but these numbers seem tight to me.  It's good that you think you can bump rents, but if that's the case then I would argue that upside should be yours and not the sellers.  If the bump in rents was so easy to do, then the seller should have already done it.  A lot of sellers know the rents can be raised and they want a price that favors them with that in mind.  The question is how much is it going to take in renovation to get those higher rents?

How long has the property been listed?  When you say prices like this are non existent do you mean it's priced super low for your area or super high?  Knowing this will help determine if you are right to stand firm or if you are going to need to come up to get it done.  I think you just have to decide if after you get rent raised to where you think it should be will you be happy buying it at the price they are offering?  Best of luck.

@Marissa Perez...congrats on taking action so early in life.  You are already so much further ahead than most of us on this site at your age.  

I would start by educating yourself as much as you can on the topic.  Rich Dad Poor Dad is a great book to start with as it helps give you the foundation for how to look at your life and finances as it's shifts how you view things.  It's a must read and it changed my life.

I would then take some time to really think about what area of real estate you want to invest in.  Do you see yourself as an agent, buy and hold investor, flipping houses, etc?  

Get your personal financial house in order.  If you have any debt try as hard as you can to get rid of it and work on building your credit.  Most people your age start incurring lots of debt over the next 5-10 years with student loans, credit card debt and auto payments.  Although I'm a college grad and it can be great from a pure financial perspective it's a liability when you incur that debt.  If you don't plan on going and you start building assets by buying a house hack or investment property you are going to be significantly ahead of most of your peers.  

Lastly, if I could do it over and start at your age my first property would be a house hack.  Don't buy a condo or single family house to live in by yourself.  You are young, get roommates and let them pay your mortgage for you.  It'll be the best financial decision you make.  Best of luck.