All Forum Posts by: David Miller

@Kent Williams anything that cheap will make your life miserable in cleveland.

@Thomas McTier awesome deal? How are you doing PM on the property?

Positive post Tuesday!

Long story short, I bought a foreclosure in 2014 (having no clue what I was doing) and fixed it up. Used a HELOC on it last year to purchase two properties in the west cleveland suburbs. Did some aesthetic work on those, dealt with tenant issues, and have come out the other side. Just bought a new personal residence and rented out that original house as well. While still on refi #3, i'm basically through the other side of the BRRR strategy and here is where I stand.

3 rentals
purchased at 81k +10k rehab - Refi at valuation of 125k renting for 1250
purchased at 85k +10k rehab -Refi at valuation of 130k renting for 1250
purchased at 250K+35k rehab - Refi at valuation of 385k renting for 2400

So i'm left with no HELOC, 60k in cash, and three rented cashflowing properties. Looking for the next property to continue the journey.

if you're new and wondering...it really does work. Especially when you're in a market that makes everyone look good. Thanks to BiggerPockets forums and podcasts for making all the information easy to understand and available. This community rocks. 

 The lease was not sent to me before the PM had signed the tenant.

I have a couple units in the same market. The first unit I got signed with a PM and have been very happy with them. Standard stuff, tenant pays all utilities. Water and Sewer must be in my name, but the tenant is sent a bill each month. I have had zero issues with this unit or the PMs. I brought a second unit in with existing tenants (that I inherited from purchase) that needed to be re-leased. The tenant was behind in rent after just one month, but has actually caught up. (they had a temporary job loss due to covid). I noticed that I wasn't seeing the water/sewer payments. I just was given the explanation today that the tenant is not responsible for water and sewer. Apparently when they released, the PM negotiated with the tenant to not pay water/sewer.  This property is already 15%+ under market but I had decided that keeping (what I thought was a stable) tenant in the unit was worth slowly bringing them up to market rents. Now I am hemorraging 60% of my cashflow every month to their utility bills, and they are arguably 30%+ under market rent.  I am extremely pissed about the PM not asking if this was ok. 

Thoughts?

@Nicholas L.

I am planning on keeping the live in flip, that area should appreciate well. I am more trying to figure out criteria for new investments

I am a newish investor and am struggling with how to establish my "criteria" for knowing if i buy a deal or not. Background, i bought a live in flip where I live in Maryland when i was 25 for 250k. I house hacked and fixed it up over the next few years, put about 30k into it and i've done all the work myself other than the roof and windows. I live here now with my fiance live here now and expect to rent it out when we move. I make low 6 figures and my fiance' makes high 5. PITI is 1400 and market rent is between 2000-2200. Neighbors just sold for 350k and 365k. They are more updated but i have more bathrooms, i think I could sell for 340 being a little more conservative.

I took out a 75k HELOC on the property and just purchased an off market deal just outside of cleveland, oh for $81,000 with a conventional 30-yr mortgage. Doing a bit of work on it now and expect to rent for about $1,000/month. I don't expect this area to appreciate, i am more interested in cash flow.

The strategy I think I want to pursue looks like this:  Acquire property over the next 10 years starting with smaller sfh and hopefully moving into multifamily.  Once I have a decent cashflow, assess the assets and decide what to keep, selling off poor performers and paying off high performers to increase cashflow over the next few years.  at that point either HELOCs or a portfolio loan on those properties could be used to continue to acquire more property. My "why" is to give me the flexibility to work on what I want to work on, whether that be starting my own business, real estate, or whatever make me get up in the morning.

SO...I am looking for the next deal, and am having trouble figuring out what my numbers should be. i have COC, Cashflow, Cap Rate, ROI, Debt Coverage Ratio, and some projected cashflow for future years in my spreadsheet. I have done some IRR calcs, but its a bit tough for me to trust them due to my relative inexperience and assumptions. What "numbers" should I be looking for. I would like to have a set of numbers saying if the property is a 6 cap, provides 150/month cashflow, and has an ROI of 20% then i am in, if its not meeting these criteria then maybe its not the right deal. The problem is I don't know how to establish what those numbers should be. Thanks!

David

the estimate was not broken down into labor and materials, and the last line item is "sales tax - 8%" 

Parma, just outside cleveland

I have a question of Sales and Use Tax in Ohio.  I just bought a property and it needs a bit of work before I can rent it out.  The scope covers the following:

Paint
New Windows
Repair to garage roof
Outlet Covers
Reglaze tub
cleaning

The contractor quote includes an 8% sales and use tax on the entire scope. This would include both their materials and labor.

I do not believe the contractor can charge sales and use tax. From the Ohio Department of Taxation:
Contractors and home remodelers do not collect sales tax on their work.

There are exceptions to this when the contractors are providing Tangible Personal Property; in that case the contractor could charge sales and use tax on those specific materials.

As all of the materials associated with this project will be incorporated into Real property, this project should not qualify for that exception. I could not find any use case that entitled the contractor to charge sales and use tax on their labor.

Anyone ever run into this issue?