All Forum Posts by: Craig Clinton

Don't forget vacancy rate of around 5-10%.  Census.gov can help you find vacancy rate for Tampa

I wouldn't close unless you have at least one unit vacant.  California is like NJ (actually NJ follows CA's lead), the laws favor the tenant.  Even if you get it in writing that they're gonna move out after closing, you just never know.  And this being your first investment purchase, better safe than sorry.

Unless you are adding a bedroom to the section 8's unit, I would try to get that person to agree to move.  I'm sure CA is like NJ too with section 8.......it's very hard to increase rents more than $25 per month unless you add at least 1 bedroom.  Even if the current rent is well below market rent, you won't be able to increase rent more than $25 without a fight.

Good luck!

Welcome aboard!

First, it sounds like you are buying a turn-key property. You should be looking for a fixer-upper at a lower purchase price that you can BRRRR (Buy, Renovate, Rent, Refinance, Repeat). I wouldn't buy turn-key. With the BRRRR method, once you refinance hopefully you can pay yourself back the full $62,500.

Also, cash flowing $250/month is not enough.  You should be looking for 3x that.  You have property management as an expense.  It's only a duplex so can't you manage it yourself?  That will increase cash flow.  Also, you can house-hack it.  Live in one side while fixing the other and then switch.

Good luck!

Cash flowing a little over 1k per month would take you a long time to get near the 1mm in equity you have right now.  If I were in your shoes, I would definitely sell and 1031 the property.  *****I am not a tax professional**** but I believe the first 500k of profit for a married couple is tax exempt (as long as it's been your primary residence 3 out of the last 5 years).  So the remaining 500k of profit would be taxed if you don't do a 1031 exchange.  Just be prepared that it's not easy finding a property in the 45 days that you have but you do get to list 3 potential properties.  Use the motivation of NOT wanting to pay taxes on 500k gain to get you to find your replacement property.  Ask your 1031 intermediary a lot of questions so nothing is left to interpret because I've found they don't always disclose everything upfront.

The good thing is that you're willing to invest out of state.  So you're selling in a really high price market and you can  buy (hopefully) in a lower priced market and get more bank for your buck.  I recommend reading material and watching videos on Neil Bawa's website.  He has good info on what parameters to look at when choosing an area to invest in.

Good luck!

I don't think the bank will do the refi if they see you took out another loan to get under the 85%.  I would just take that 10-15k and put it toward an investment.  Go with hard money, plus your 10-15k, and see if you can get a family member to lend you any extra $ you may need.  Expect to pay a high rate (10-14%) for your first deal with a hard money lender + probably 4 points.  I know it's a lot but it's part of the beginner's pain in RE investing.

Go to REI meetups too. You'll meet private lenders there. Hopefully you're successful on your first deal and then more people will be willing to lend to you privately and the HML will eventually lower their rates with you. Maybe not on the 2nd deal but by the 3rd or 4th they will.

Good luck!

Welcome aboard.

I would first figure out where you want to do your fix & flips and then study that market until you know it like the back of your hand.  Study it by driving it, walking it, touring the inside of houses, and looking at recent sold data on Zillow.  

At the same time, I would start going to RE meetups.  You'll learn a lot and meet knowledgeable and experienced people.  Go to multiple meetups per week for 6 months and you'll eventually meet everyone that you need for a fix & flip project and learn what you need to know.

Never stop learning and never stop networking.

If you sell, you're going to pay capital gains (not sure if long-term or short-term. It depends on when you bought it), unless you 1031 the property. Interest rates have gone up and they are going up again this week and probably again in June. So if you 1031 it, your buying power is less. In my humble opinion, I would keep the property. You have a GREAT interest rate and at $1,560 rent per month, you're cash flowing $700 per month. 12% COC return + you're paying down the mortgage + your tax write offs = KEEP IT.

A HELOC is a good idea to pay for the repairs. Or depending upon the repairs needed, maybe you can pay them on a payment plan. For instance, in NJ, our utilities supplier offers payment plans for a new HVAC system.

Good luck!

It depends upon your local market and how in demand rentals are.  I budget 2% for vacancy since rentals are in demand in my area and I budget $250 per month per unit for repairs.  I typically don't have any of my own money in my rentals so i don't look for a % return.  My % return is usually infinite.  I look to cash flow around $300-$350 per month per unit.  So for a two family, I look to cash flow $700 per month in total.

Welcome to BP!.  I'm in NJ too.  

First off, easy for me to say because I don't know how busy you are BUT you must do everything you can NOW to get the place rented.  You're losing income.

As far as the canned lights, yes, they're better than wall sconces but you need to look at your competition and market.  For examples, if you're trying to get $2,000 per month and all your competition is exactly like your apartments except they have canned lights, maybe it's worth it.  Also, if you're in a high-end market, then I would say yes, add the canned lights.  

Personally, unless you're in a high-end market, I would just update the sconces and try to rent it now.  If you're not getting tenants at the rent you want (don't wait past 1 month of not renting), make sure to get their feedback on why they don't want to rent it.  If they say bad lighting, then add the canned lights.