All Forum Posts by: David Seale

Hey BP!

A little backstory on why I'm writing this post... My wife and I have been together for about ten years and we've never taken this topic super seriously. What I mean is we've never sat down, wrote down our goals, discuss what we want out of life, created action items, followed up with each other on them, or anything like that. Sure, we talk often about what we want to do, big ideas we have, family vacations we want to take, etc. but things don't always get done like you hope. It's not that it hasn't worked this way, but I sincerely want to be more deliberate about the future.

SO, the purpose of this post is to ask what methods/recommendations/approaches do you have when it comes to setting goals and sticking to them? Especially with a partner. For example, I love how @Brandon Turner often talks about on the podcast how he and Heather have their annual dinner on new years day to discuss the upcoming year. And how Wendy Papasan discusses when her and Jay started serious goal planning, they created a list of questions that focused on their relationship that turned out to be the foundation for their working partnerhsip/marriage. They also discussed how they took the idea of an off-site business leadership retreat and placed a focus on family.

SO, how do you approach goal planning? How do you stick with it? Any and all comments welcome. Personal experiences, books, podcast episodes, journals, etc.

Hello everyone. I’ve been posed a question when it comes to buying some property that I imagine I should know the answer to but at the same time want to tread carefully.

Some backstory personally... In the last couple of weeks I’ve finally decided to buy my first investment property. Been scouring the mls. Craigslist. Facebook. Made a few offers. No bites yet. But I ran across an old friend that is looking to sell some property.

A little backstory on the relationship with said friend...

I met this individual at the Apple Store several years ago. Full time job for me at the time. Side passion job for him. We split ways. Every so often running into each other through the years. Never extremely good friends but always cordial and cared for one another’s personal lives. He owned and operated one of Houston’s largest businesses in its respective category. (Not real estate). He has since closed shop and retired.

I ran into him recently and he mentioned he is dealing with selling off the possessions of a very close family members passing, of which some of it is real estate. Mentioned some commercial property in the Midwest and some residential small multi family here in Texas. So I shot him an email saying I’m looking to buy something. He responds, “to give us both a reference point, what’s your budget?” I do have a budget, but I wasn’t ready for this situation.

My question is, how can I try to open this up to more than just one potential property? I’ve already mentioned “I’m open to one, few, or all”. Should I just leave it at that and leave the door open to other deals in the future? I’d really love to put myself in a position to help him unload all the properties if possible. Whether it’s just me, partnering, or finding other buyers.

At this point, I don’t even know how many properties, the condition of them, occupancy rates, nada. But I want to start off the conversation on the right foot.

What are your thoughts?

@Eamonn McElroy @Ashish Acharya Well, the said family member says it's a gift. They are not married. I know there are no implications on me, but I understood it to be on the donor and that is incorrect. 

If i understand  "lifetime exclusion gift tax" (had to look it up) correctly it means that means the donor can gift up to $11.18M in their lifetime and never have to pay a dime in taxes?

I've tapped into a family member for funding. It's my understanding that anything over $15,000 is taxable. Since 50>15, how can my donor avoid being taxed on this "gift".

Hey Mario, what is "too far"? Assuming you mean downtown and surrounding popular "in" areas when you say "main cities", is that right?

Howdy John! Nice to meet a fellow Texan. I have considered it, but swiftly turned away at the thought of such a long drawn out closing as well as rehab timeframe. I've also been under the possibly incorrect impression that 203k's are not favorable situations for the seller. Care to shed any light on your opinions regarding the 203k process? Now that I'm thinking about it, I cant put together why I wouldn't want to give it a shot. 

So, given our desire to have long term passive income, is the main reason I should care about equity so that I can fund more deals in the future? As a new investor, my immediate thoughts are "Im getting positive cash flow and I invested about $30k of my own money. It'll pay itself off over time so that's cool with me!"

Also, Matt, Jack, to your points, typically deals won't get off the ground from the get-go if the HML feels they can't or won't be able to fund it on their end, right?

@Jack Bobeck Thanks for the reply. Follow up question for you, what if the ARV turns out to be much higher than we though? For example, I mentioned using $85 per sq ft to find our ARV in the original post. However, we did see another property go for about 100 per sq ft. If that's the case, would it be worth going through the HML vetting process and paying the application fee to find out if the ARV could be upwards of $220000. If it turned out to be the case, then equity jumps up a lot.

@James C. It does help A LOT! Basically I need to ensure that I've got everything nailed down to a T. I've acquired a few more pieces of the puzzle and have created a new post for the deal I'm looking at if you are interested in taking a look. Thank you!  https://www.biggerpockets.com/forums/88-real-estate-deal-analysis-and-advice/topics/501791-interesting-subject-property-suffering-from-analysis-paralysis?page=1#p3078116

Hello BP Members! Thank you for clicking through. My fiance and I are considering purchasing a newly built duplex in Houston. Its 2200 square feet, one unit on top, one unit on bottom. Both are 3/1's. Identical layouts. The duplex began being built in 2014, is unfinished and needs almost everything done on the inside minus plumbing and electricity. Floors, walls, appliances, drywall, a/c, etc. The exterior is nearly complete. 

Currently, the only method of purchase we've sought out is a hard money loan. I wish we could leverage a conventional loan but given the state of the units, we won't be approved. We really wanted too house hack this place. As far as money, most of our savings is tied up in stocks (AAPL). All of it has been accrued through an employee purchase program and purchased at discounts of 10-15% or through RSU's. Our plan is to liquidate SOME of this stock in order fund our first real estate investments. Technically we could fund this entire project ourselves but that seems silly. 

FWIW, there weren't tons of comparable data to reference. We only found a couple of MFH's sold recently in the area so conservatively speaking we're looking at $85 SP/SF. I should also state that the owner is a couple years delinquent on his taxes. On to the numbers...

Link to photos: https://app.box.com/s/6foj92rbaxy0kifb2n59x5o0jyxm92b4

Subject Property LP: $160,000

Purchase Price: $115,000

Rehab: $40,000

Total Funds Needed: $155,000

ARV: $187,000

Total Rent: $2000

Tax Rate: 2.54%, currently about $3,000 annually (assuming a spike after refi?)

HML Fees: 12% interest, 6 months term, 3 points at closing. They'll fund %75 of ARV.

Loan Amount: $140,250

Cash Needed To Close (including fees and closing costs): $23213.75, closing costs are estimated around $8,500 and includes a $750 processing fee. There is an additional $500 application fee.

Additional expenses: Insurance, $120?. 5% vacancy, 5% repairs, 5% cap ex, 0 mgmt fee, basing everything off of recommended percentages in the BP calculators. Since everything will be new, I assume costs are on the lower end.

Monthly Loan Payments are just a tad over $1,400.

Given this info, I've tried using the BP calculators and am a bit unsure of how to plug numbers in. Specifically as it relates to the HML portion. So, I figured I'd take it to the forum and get a feeler.

My first thoughts are that it doesn't seem we build a lot of equity in this deal, at least not right off the bat. Actually, I'm wondering if we even hit the 20% mark resulting in potential for paying PMI. Second, the monthly cash flow seems to be good. But I'm not confident with my numbers. Also, I'm trying to figure out exactly how much it costs us to borrow money. Is it as simple as adding all fees incurred during HML, refi, and holding costs?

Any help is appreciated. Analysis paralysis is a real thing.