All Forum Posts by: Chris Evans

@Keenan Fitzpatrick Thanks for adding that! The other sources I've read about this neglect to mention any grandfathering. 

Congratulations on your first deal! I'm very interested in learning more about this style of investing but have stayed away because of the permitting requirements. Would you please answer some questions for me?

1. How was the Special Permitting for operating a rooming house? 

2. What is the ballpark cost for the insurance policy and what liability limits did you use?

3. How do you handle the parking situation? Did you expand the drive? The photo doesn't show. 

4. How fast is Atlanta's permitting right now? I've heard horror stories about the turnaround. 

These numbers are not something I'd shy away from.

Your invested funds - 141k
Free cash flow - $15,600/year

Thats a cash on cash return of 11.06%. This is an extremely competitive deal for the Atlanta market right now. 

When rates level out you should be able to refi and free up more of that cash flow which will increase your return significantly. 

So long as there's no systematic risk with the area I'd be comfortable with that return every day of the week. 

Take a drive through the valley and every other property has 3-4 short term rentals PLUS a primary residence for the permanent resident. This move will flood the rental market with new long term rentals and risk a complete collapse of the rental market. 

We have a rental in S. Anchorage and two in the Valley. It's still taking us 20-40 days to place a tenant. Things don't move fast up there. Opening the "quickest way possible" is a knee-jerk move. 

There's not enough time in session this year, but the push is a real risk for next session. 

Hi Ro, 

Thats a great position to be in, but not without its challenges. 

Benefits to selling:
- Your current equity will be tax exempt if sold under the primary residence exclusion. 
- Selling can give you cash to buy both another primary home and an investment. 

Challenges to selling:
- Your current home likely has an interest rate that you won't see again in your lifetime. Now you'll have two high(er) interest loans, or one high interest loan and one small rental paid in cash.
- Investor grade financing rates are very high right now which can reduce or eliminate the ability for free cash flow on a market rental, especially if purchased in rent-ready condition.

Benefits to keeping your house and renting it behind you: 
- Low debt servicing costs may allow for increased cash flow to offset taking out another mortgage at a higher rate, until rates drop.
- Renting your property will allow for 75% of the gross monthly rent to be counted as income when qualifying for the next home. 
- Owner-occupant grade financing is at preferred rates 1-1.75% below investor financing. This minimizes the total outflow paid in servicing costs. 

My wife and I kept all of our properties as we moved and rented them behind us. We only sold them to reallocate the portfolio to another state. It worked as a solid strategy for us, but it also required moving a few times in the first 5 years before we got enough equity to start the refi and buy strategy. 

GA is going to recognize the contract that the parties sign without regard to where it comes from. With that said there are good contracts and bad contracts. A clearly written and defined the terms of the contract will be less likely to end up debated in a courtroom, so the two best options will either be a GAR (Georgia Association of Realtors®) contract or one drafted by an attorney who specializes in the area of RE contract law you are endeavoring in. 

Any Georgia REALTOR® or real estate agent who licenses the GAR forms will have access to the full database of forms, which may be modified through stipulations to meet your exact needs. 

My .02 is to avoid the RE Forms contracts that are available in our state. They offer more ambiguity which can lead to more problems that are easily avoided. 

Welcome Orlando! 

I would encourage you to attend as many events and read as much as possible. In addition to Bigger Pockets meetups, Atlanta has lots of resources for REI. Be careful, though, because there are plenty of people who just want your money in return for teaching you how to invest. Atlanta Real Estate Investing Association (REIA) is a great organization. There's several chapters around the metro which makes it convenient.

I'd recommend creating an investment plan that targets the type of property, the available capital for purchase and for improvements, and a target ROI/or a projected cash flow model to determine what the best type of investment is.

If you'd like to discuss further - send me a message. I'm happy to put you in the right direction. 

Great question! My wife and I consider that our "Base Camp 1" as in relation to the first camp at Everest. In full disclosure, we're in professionals in the real estate industry, so I don't have a 9-5. 

Our requirements were 150k/year in gross rents with zero debt. 

This is going to be a very early retirement for us so we will be paying off all the debts before leaving our daily responsibilities so we remove most of the risk from the portfolio before taking the leap. 

The LLC is fairly easy. You can create one within 2-3 days. Cost segregation is used in larger assets (portfolios, commercial), but can be beneficial under the right circumstances when the cost is justified. Bigger Pockets has a great book called Advanced Tax Strategies. Have you read that yet?

When you say you can't use a 200k CONV loan, is that due to eligibility issues?

If the seller has a gov. backed loan (FHA, VA) then the loan may be assumable. In the event that it is, you would still have to qualify for the loan by going through underwriting. The remaining payment can be set up as owner financing, cash, or second mortgage, but may be subject to the loan standards as equity requirements for the assumption. For example, an FHA loan may not accept the assignment if you're 0% equity in the deal and the FHA MIP is no longer on the note. In that scenario, they may require at least a 20% cash contribution from you to reduce the default risks.

Beware of any "wrap-around" plays. There is no scenario in a wrap-around where the seller may keep debt on the property and you own the house with a clear and insurable title. You will always have a risk of default if the mortgage does not get paid. You also have the risk of liens being placed on the assets of the seller. A wrap-around would expose you to potentially catastrophic financial risk. 

Did this provide an answer to your question? If I'm misunderstanding your situation, please elaborate.