All Forum Posts by: Christopher Brainard

Hi @Chris Igard and welcome to BP

Most of the questions you have here don't have a single answer, but rather depend on the situation you are in and the lifestyle you want to live. There is nothing wrong with keeping the home you bought last year and renting it out, the ROI will be fine, but do you want to be a landlord? If you sold that property and realized a $50k profit, what would you use that money for? Would it be a higher ROI than renting it out? The same analysis should be used for your PMI - if you put down the extra 17% vs a FHA loan, how much money does it save you? If you invested that capital elsewhere, what type of return can you get? Always pick the option with the higher returns.

Also, there is nothing wrong with buying a short sale, if the price is right. It doesn't really matter how long you intend to live there, as most banks only have a trivial amount of time where you can't resell the property (if any). 

-Christopher

Hi Towanda and welcome to BP!

The best way to find real buyers is to find a good deal. If it is truly a deal, you'll meet serious buyers and be able to build a relationship with several in the area. Most serious buyers don't have time to meet with newer wholesalers, so the deal functions as bait for your hook.

If you're just like to network with some investors, there are many REI meetups across the DFW area - pick one that is close to you and go. There is also a Facebook page for Dallas Investors. You can also post your deals here in the marketplace and chat with other investors anytime.

-Christopher

Hi Jared and welcome to BP.

There was a topic about this some time ago, but should give you the insight you're looking for. I personally do not believe that this is a sound method for investing, but to each their own. You can also accomplish getting the credit lines / credit cards on your own, if you would rather invest the time instead of paying the $3.5K (or whatever it currently is) fee.

-Christopher

So, bad news, but flipping properties is a long series of miscellaneous problems and dead beat people. You're going to run into thieves, unscrupulous contractors, terrible vendors, lying real estate agents, and even awful buyers. If you're seriously agonizing over this issue, you may need to rethink how you're doing things. Otherwise, your blood pressure might rise to a smoldering boil. 

Now, about your specific issue, unless you're flipping properties in Class A areas (and maybe even then), you should secure your property with an alarm system. They sell portable ones now that you can setup anywhere, anytime. If the police know who the culprit is, you need to press charges against them. We've had to do this multiple times and its not fun, but its necessary. Also, you need to plan for unanticipated situations. Always have a reserve budget built in before you buy to cover problems like this, or unexpected foundation problems, hidden mold, a contractor that runs off with his deposit, etc. Being prepared won't stop you from being disappointed, but it will cut down on the homicidal desires :)

-Christopher

@Raul Flores

If the seller is angry with you, its probably isn't because of the offer but how it was presented. Homeowners often have an idea of what they think their house is worth (in this case $55k) and part of your job when you're building rapport with the seller and/or presenting the offer is to explain to them why you're offering what you're offering. 

Using this case as an example, If your conversation was "Hello, here is your cash offer for 50% of what you think the house is worth.", I don't think that you're going to get very far. If you explain to them that you need to invest $20k into it to get to that 55k value (listing all the items which need repaired and/or replaced as you tour the property), it will start making sense at the end. I also remind everyone that I do this for a living, so I need to make a bit of profit as well to keep food on the table.

-Christopher  

@Chris C.

There isn't enough information to make a definite decision, you should use the rental calculator to determine what your overall cost would be. 

With the available information, this sounds like a pretty bad deal. Even at the market rent, its probably going to be cash flow negative. I'm a big proponent of not buying houses where you need to mail a check in every month. Also, since the seller isn't motivated, the likelihood of you getting a good deal out of this is diminished.

-Christopher 

@Nick Monge

Hi Nick and Welcome to BP. 

1) You can't 'buy' any properties with a pre-approval letter. The letter just gives you the guidelines on what the bank thinks they will be able to finance you for. For example, it may say that you're pre-approved to spend up to 400k. Most sellers require this letter because they want to know that you can afford the property you are buying. Financing won't be certain until after you complete the underwriting process.

2) Depends on the bank. If you financially can support both properties, then I'm sure there won't be an issue. If you need to rely on the rent from one or both buildings for your DTI, you will need to follow the banks direction on how they would fund them.

3) Private Financing, Hard Money, Owner Financing, Etc. There are hundreds of ways to acquire real estate. 

4) You shouldn't have any issues offering on many properties at a time, as there is no guarantee that your offer will be accepted by any given seller. You do need to ensure that once you have your capital expended, that you cancel any outstanding offers that have not been responded to. Its the right things to do :)

-Christopher

@Jesse Daconta

While retail stores are necessary to sustain growing areas, I think retail stores are generally a trailing indicator of growth. Walmart will build a store when the population of a city hits certain criteria. Walmart does not build a store and hope the people will come. Additionally, you're talking about adding low wage jobs, not ideal for an explosion of real estate growth.

-Christopher

@Max Malec

You should consult the CPA/Attorney that set this up for you :) 

With that being said, if you formed a single member LLC, its likely that the master LLC entity was setup as a disregarded entity with the IRS (IE: has a single IEN, doesn't file its own return, and appears on your Schedule C and/or E). This is how we used to have things setup. The physical location of the money is pretty irrelevant to the IRS, you owe taxes on the rental income as it comes in and on any sale of the assets that you make, just as if it were in your own name.

Alternatively, I have a friend that gets a new EIN for every property and files every tax return separately, but (to me) this defeats the purpose of having a Series LLC and becomes very costly at tax time.

If you want to have W2 income and have a bonus (ie: dividend) to lower your SE Tax liability, you need to look into S Corp taxation. This could potentially lower your overall tax liability, but may make things slightly more complicated from an administrative perspective. 

-Christopher

@Brad Bellstedt

A couple of things for you to consider, as a former condo investor in Las Vegas :)

1) Your capex and repairs look low to me. We used to budget 4% for repairs and 5% for capex. Our experience was that tenants in Las Vegas tended to be more transient and less responsible than in other areas, which required more repairs between tenants and during occupancy. We also noted that although we had no responsibility to the exterior of the units, our main capex costs were related to HVAC units. It would appear the harsh and long summers there have an adverse effect on the cooling units, which should seem obvious, but was something we didnt budget sufficiently for when we started out. I suppose the good news is these are only a few years old, I don't remember exactly when they were built, but it was like 2015. 

2) Your taxes will continue to increase at the cap limit every year unless they are back to market value. When the crash hit Las Vegas, it was devastated and the assessor reduced property tax values across the board for everyone. The market has recovered completely, however, the taxable value on the properties hasn't, so taxes will continue to increase every year. I don't remember what the cap is, but I do remember its more for rentals over a certain monthly rental rate than owner occupied or affordable housing. For us, that only amounted to an extra $50 a year per unit, but when you multiply that by 45 every year, it will start to add up. 

3) The return is pretty sad. I like the area these condos are in (our house used to be off 215/Gibson), however, you're probably going to see less than a 4% CoC return, which is almost savings account levels. This is more or less why we left Las Vegas and cashed out. If you're looking at a 30 year plan and only considering Las Vegas, I think you'll do just fine, but if your horizon is 5-7 years, there may be much better investments out there.

4) I'm not sure what the electricity costs include. Hopefully, the seller isn't including power with the rent. That would be a very poor setup there, as the summer months would be brutal. We had one unit where we included utilities for a VA renter. We wouldn't ever do that again.

5) You should defenately get the tax returns and a breakdown of all the unit expenses for two years. 

Good luck with your purchase

-Christopher