All Forum Posts by: Account Closed

@Clifton Grady - @James Vermillion surely knows the market better than me, but there are some solid lower/ middle class neighborhoods inside new circle. In my experience, chevy chase, beaumont, the area around chinoe rd, and the neighborhoods sort of southeast of campus are fairly nice. 

There are a lot of websites that monitor/ aggregate crime statistics. 
https://www.raidsonline.com/

Websites like raidsonline aren't perfect indicators (for example, crime rates downtown appear high but the same market supports some of the most expensive apartments/ homes in Lexington), but they can be a useful starting point. 

Hey all,


I submitted an offer for an REO property.

I was originally planning on purchasing the property with my LLC.

The bank requested information about my LLC (I provided IRS EIN, Articles of Organization, Certificate of Assumed Name) but is now telling the listing agent that the information provided is incomplete. They aren't telling us anything about what additional documents they'd need.

To overcome this issue, I was planning on just buying the property myself and immediately deeding it over to my LLC.

My LLC is set up as a member-managed (I'm single member) organization with no special tax status. 

My understanding of the law indicates that there would not be any tax consequence, since an LLC is a pass through organization (albeit there will be a transfer fee).


Thanks,
Patrick 

@Brock Young 

Let me clarify:


My question is whether additional costs are considered part of the purchase price.


For example, if a multifamily unit is listed at $100,000, but I have to pay $3,000 in closing costs,  would I calculate cap rate using $100,000 or $103,000? If not $103,000, why not?


In short, if I have to pay for the privilege of buying the property, shouldn't I include all costs of acquisition? This is especially confusing since Cap Rate is implicitly a cash flow measure (perpetuity of the NOI), and since closing costs would be paid as an initial outlay (ie part of that cash flow).

Is it considered standard to include all closing costs, capital outlays (for repairs, improvements, etc), and loan origination fees in addition to the sales price when calculating cap rates?


I know that generally, when people buy multifamily units, they're looking to improve the property in order to increase rental rates/ increase the value of the property (presumably you'd increase the rents so as to maintain the same cap rate whenever you do substantial improvements). 


It seems to me that since the buyer generally uses the previous year's NOI when calculating a fair sales price that any potential repairs/ improvements SHOULDN'T be included when calculating the cap rate.


However, since it's still cash that needs to be spent, I can see why people would include it. 


Thanks,
Patrick 

@Sam Erickson That's a good point. I don't think there's a way to separate income and expenses from different properties.

That isn't particularly troublesome for me right now since I'm flipping properties one at a time, but will present a problem once I start to acquire a portfolio of buy & hold investments.

Thanks for the reply.

Go Pack!

@Jon Holdman why would doing what OP described "burn bridges"?

Banks specifically put prepayment penalties in the loan agreement to act as a premium guarding against this very scenario. They won't "take it personally" they'll take the extra money and close the file.

If OP wants to avoid a prepayment penalty, he could negotiate a short term loan and pay a couple extra points.

Now clearly, if OP is disingenuous, and takes out a 30-year mortgage with the intention of using it for house flipping, then yes, it may be a problem.

But I don't see any potential pitfalls if he uses a normal secured business loan. Granted, he's going to need some assets/ collateral to borrow against.

@Tom Keith Waveapps is free (although it does provide a cheap monthly subscription for additional services) and the interface is more intuitive in my opinion.

It gives you more bang for your buck, but honestly, if you've been using qb you should just stick with it.

Hi all,

I'm trying to get my accounting system set up for my house flipping business.

I set up a free trial of quickbooks, but I've recently made the decision to switch over to waveapp.com

I was wondering if anyone would share their chart of accounts for house flipping.

I've constructed a one by hand, but I want to make sure I'm not missing anything obvious/ recording transactions improperly.

Thanks,
Patrick

@Brie Schmidt so I'd have to personally own each property until I've built up enough equity to finance the "purchase" through a traditional mortgage?

Is there any way I'd be able to transfer ownership without doing this?

Thanks,

Patrick

I'm new to REI but I currently own an LLC that I'm using to fix and flip REO properties.

I'd like to begin buying & holding for passive income as well.

I've read that a lot of people take advantage of FHA or Homepath loans to purchase Duplexes/ Triplexes/ Quads, live in one of the units, and rent the remaining.

My question is, would I be able to take advantage of these "owner occupied loans", live in the property for a year, then sell the property to my LLC, and repeat this process every year?