All Forum Posts by: Derek Martin

Thank you @Mehran K. 

The lienholder was a state government agency. They were actually rather pleasant to deal with. Once I reached a decision-maker, she was very responsive and helpful. However, things moved slow and I was never sure if they would settle. I had to provide them with a BPO and justify the low offer price. I had to provide proof of EVERY additional closing cost. I was not allowed to provide any funds to the seller. I gave them my "final and best" offer a number of times and threatened to walk away from the deal. 

I wouldn't say it was overly difficult. It was just long. But I'm very happy I stuck with it and pursued a deal that seemed impossible.

Yes, the ARV is very similar to the other properties. It will cashflow well even with the cash-out refi. The thought of "flipping" is fun but I need to keep thinking long-term. I really appreciate your input.

I often drive through Austin on my way to work. Although, I try to avoid it. The answer to your question is one word: CRIME. 

Yes, there are some areas close to Oak Park and Elmwood Park that are livable. But the majority of it is just too dangerous.

http://www.chicagomag.com/Chicago-Magazine/The-312/July-2012/Austin-Chicagos-Deadliest-Neighborhood/

We recently closed on our fifth property. For those interested, here is the story and numbers. I would love to hear your thoughts and advice regarding whether to flip or rent.

Acquisition:

The property is in the same neighborhood as our rentals. The single-family home was abandoned because the seller had gone into assisted living. We spoke with her about acquiring the property. She was interested but informed us that there was a lien on the property. After investigating, we found that the lien was $107,000! The property was in very bad shape and was only worth $30-40k in its current condition. ARV would be about $100k.

I decided to pursue it anyways and after 2 months of negotiations with the lienholder, they accepted $5500 to release their $107,000 lien. I was extremely happy with that! We also had to pay all fees, back taxes, and closing costs. In total, we spent $15,500 to acquire the property. The purchase and rehab are all cash.

Analysis:

We are estimating $40,000 in rehab. We are converting it from a 2 bed, 1 bath to a 3 bed, 1.1 bath. I'm figuring an ARV of $100k but a conservative sale price of $90k.

Our long-term strategy is to build a portfolio of rental properties that produce significant monthly cashflow. 

FLIP:

This would be our first flip and it's hard to accept the idea of paying all those taxes. And I'm not convinced that is the best wealthy-building strategy. I really identify with the thoughts here: 

http://www.biggerpockets.com/blogs/3122/blog_posts/39457-why-im-not-a-flipper-dont-kill-the-goos

RENTAL:

We own & manage 4 other rentals in the same small neighborhood. Adding a fifth would not be a problem. The property will rent for about $1300/mo so it would be well above the 2% rule. Also, our lender will do a cash out refi at 75% LTV after 6 months of seasoning. So in mid-2015 we could pull out $85k tax-free and use it acquire the next property.

Our overall strategy is to build a portfolio of long-term rentals that produce significant monthly cashflow. 

As you can probably tell, I'm leaning towards keeping and renting this property. I'd love to hear the BP community's thoughts on this. Am I missing anything? What other factors go into your "flip vs rent" decision?

Also, here's a "before" picture.

Thanks @Will Porter & @Ivan Oberon all good advice. But I have to believe there's other investors out there who have a series LLC and insure their properties. I'm going to call around to some other local insurance agents and see if they can help. At this point, I'm just looking for good information. I'll update this post if I find anything helpful.

That's pretty clever! All my tenants pay via Chase QuickPay. It's convenient and doesn't have any fees. But I do miss that "new check smell." Thanks @Wendell De Guzman 

I recently established an Illinois Series LLC. I created a series for each rental property (single-family homes). I also created a "management" series that will sign leases, collect rents, and make repairs.

I am in the process of transferring everything into the name of the individual series. For example, the properties owned free & clear will be deeded to their corresponding LLC series. The ones with mortgages will be transferred once I pay them off or figure out how to avoid the "due on sale" clause. There are plenty of forum posts about that.

My question is in regards to property insurance. Should each insurance policy be in the name of the individual series? Should the master LLC hold all insurance policies? Should the management company hold them? What are the advantages/disadvantages of each? I'd also like to add an umbrella policy over each property.

I've spoken with my insurance agent but he wasn't very helpful. Maybe that's a sign that I need a more "investor friendly" insurance agent. Any help is appreciated. Thank you!

Quick Update:

We closed on this property yesterday...finally. After about 2 months of negotiation, the lienholder accepted $5500 to release their $107,000 lien. I was extremely happy with that! We also had to pay all fees, back taxes, and closing costs. In total, we spent about $15,500 to acquire this property. We are estimating $35,000 in rehab. We are converting it from a 2 bed, 1 bath to a 3 bed, 1.1 bath. We estimate the ARV to be $90,000.

This would make a very good flip, but it's more likely that we will rent it out for the long-term. For those interested, here's my thoughts on that: http://www.biggerpockets.com/blogs/3122/blog_posts/39457-why-im-not-a-flipper-dont-kill-the-goos

Thank you to everyone that chimed in with help. We did close at a title company and both parties used attorneys. Very excited to begin rehab! Here's a "before" picture.

Congratulations @Danny Duran 

We once had a contractor recommend Rainbow International (http://www.rainbowintl.com/orlandpark). They have an office in Orland Park. I can't comment on their work or pricing as I've never used them. But figured I'd pass along the name. Good luck!

I spoke with @Mark Nolan at www.mysolo401k.net today about setting up an account. He was extremely patient and helpful. He didn't pressure me into signing up at all. He just educated me. Most of the comments here lead me to believe they run a reputable business. I think mysolo401k.net just gained a new customer.

I spoke with the lienholder again today. They stated that, once they release the lien, there is no recourse against the seller, property, or anyone else. It would be released entirely. I was glad to hear that and thank you for bringing that to my attention @Joel Owens & @Wayne Brooks . BTW, the lien is own by the Dept of Health for some time the seller spent in assisted living.

@Paul Z. I did the smart thing and both parties hired lawyers today. They will write up the HUD1 and I will submit it to the lienholder early next week. As far as I can tell, they're fine with the seller making money on the transaction, they just want a fair settlement. Fingers crossed. This would be a GREAT deal for everyone involved.