All Forum Posts by: Darnell J.

@Marisa Rowe Congrats on finding a great deal. After reviewing the comps and that area I don’t have much confidence in that $200k bank valuation; low to mid $100k seems more aligned with the other homes in that area. However, if the bank valued that property at $200k you should cash out refinance ASAP if you have not already done so. Normally the window on appraisals are 30 - 120 days. If you’re still inside that window I would highly recommend a cash out refinance ASAP. If you financed and put down 20% of $72k for downpayment, you should have a loan value of about $58,000. Normally banks lend anywhere between 65 - 75% CLTV on an investment property. So you should get about $72k to $92k in cash out. Thats great capital to go purchase you next deal. That’s a pretty good outcome to me. The property won’t cash flow after you pull out the equity in it, but that’s the other side of the brrrr coin. Congrats and I wish you continual success. I would be interested to know how the market trends in 6 months to a year play out and how your cash out refinance goes so please do post an update. Thanks for sharing.

@Ashish Acharya

Hi Ashish, do you mind me asking what application you're using in your screenshot images; it looks great. Would that system happened to be available in the BiggerPockets Pro toolkit?

@Jay Ragland

The house look great. Would you mind sharing your numbers and some before pics? Thanks.

@Curtis H.

Try AtHome stores in Atlanta. Their prices are just slightly higher than IKEA, but the quality is far better. It's basically a one stop shop for home goods and decor. You can get any and everything you need for you STR from an AtHome store. They also have a delivery service. Best of luck.

@Brandon Ribeiro I’m not sure this sounds like a deal you should stretch yourself for. It doesn’t sound like a great deal to me. I would suggest running your numbers again and make sure to account for capital expenditures because even on newly renovated homes something is bound to go wrong. After closing on a property, I would say you want to have at least $10,000 in reserves for Murphy’s Law.

Hi @Todd Powell, I do require my tenants to have renter's insurance. It's a requirement in my lease and I do ask for a copy of it to be sent to me. I do not however follow-up with them throughout the lease term to make sure it's always active. It's more of a CYA for me. I think its beneficial to require renter's insurance because it helps mitigate the threat of a lawsuit and keeping me out of court--when damage occurs to a tenants belongings particularly when it's caused by their own fault and the renter doesn't have renter's insurance, there's a high probability the tenant will try to claim some type of landlord responsibility or reimbursement for damaged belongings. If the damage is severe and requires temporary relocation, the last thing you want to have to deal with is negotiating lodging accommodations on your behalf. If the tenant has renter's insurance than they do not to have to rely upon your goodwill or ability to pay for their temporary lodging and can just make a claim against their renter's insurance to take care of their damaged belongings and temporary lodging. Basically, don't make yourself the first option of allayment. Most tenants will take the path of least resistance, if they have renter's insurance they will certainly choose that path for reimbursements of damaged belongings and temporary lodging first. 

...and if you're prospective tenant puts up a big fuss about having to pay for renter's insurance they're probably not the type of tenants you want. If someone can't afford to pay the low monthly rates of renter's insurance, than how close to the edge are they really living. One bad budgeted month would more than likely result in a late or non-rent payment. 

I don't think it's something to bring the hammer down on, but it is a good thing to put in your lease as a CYA.

Originally posted by @Rick Baggenstoss:

Atlanta tends to lag behind western markets.  If you're looking for a national flip from buyer's to seller's market, then I'd watch Phoenix and Vegas.   When they slow/change, then Atlanta, for example, will turn several months later. 

Anticipating more of a headwind, I'm restructuring my debt, culling my portfolio of less desirable properties, and accumlating cash as a result.  I'm still buying rentals and flips, but only taking on high profit projects or solid longterm holds.

I agree that Atlanta seems to mirror in a lagging fashion to the Phoenix market (for whatever reasons); and from what I can tell, both seem to still be doing pretty well at the moment. The switch from seller's market to a buyer's market doesn't just happen overnight. 3 key things I pay attention to determine if the seller's market is ending are the following:

1. Absorption rate: Basically this is how many months it takes to sell listings in a certain housing market. Real estate experts estimate the average months on inventory is about 6 months. In my market in Atlanta, we're still below 4.

2. Multiple offers: I'm technically a millennial and a lot of my friends are buying homes (some buying starter homes and some upgrading out of starter homes). Every one of them have mentioned either getting multiple offers on the homes they're selling or the home they're purchasing having multiple offers on it. My real estate investor associates also say they're still seeing multiple offers on homes. As long as you're still seeing multiple offers on a lot of homes, it's still a seller's market. 

3. Rising prices: Overall I'm still seeing rising pries in my market. One anecdotal example is, 10 months ago a friend purchased a townhouse; starting a new family he and his wife decided to sell their newly purchased townhouse to upgrade to a larger home...it sold for $50,000+ more than they purchased it 10 months ago. That's more of a random example and not a systematic scientific evaluation, but nevertheless a personal observation. Prices aren't rising at the speeds they were a few years ago, but I'm still seeing some ridiculous prices out here.

With all that being said, I think its hard to say the seller market is over (for Atlanta anyway), however I do think we're coming up on some corrections in the market in the next year or two. Things are starting to get a little out of hand now and when that happens...things fall. Right now I'm just waiting to pick up the pieces when they do. As Baron Rothschild says "when there's blood in the streets, buy!" 

I think good investors make money in buyer's and seller's market and welcome both. Diversify your portfolio, don't get over leveraged, have some reserve cash on hand for great deals and you'll do well in a buyer's and seller's market. The change in markets is not a time of panic to me, it's just a different kind of opportunity.

Congratulations on your first flip. You guys did an excellent job. Thanks for sharing the photos.

Great insight. I’m definitely buying his book.

I have actually gotten permission from the mortgage company prior to moving my homes into my LLC. Of course, that is a bit of a risk because if you ask permission, you will be opening up a can of worms. Typically the mortgage company wants money at every opportunity, even if they give permission for the change. However, I used the same lender for 3 deals back to back and established a pretty good relationship with the lender and they didn't give me any hassle about a refinance or "due on sale clause". Most people just make the transfer and don't tell the bank. Like the old saying says...its better to ask for forgiveness than to ask for permission. 

In the case that you have to ask for forgiveness because the mortgage company figures out you have been moving property to an LLC, it can be an uncomfortable situation. I've never actually met anyone whom this has occurred to though.

How do they find out you ask? Well if the tax notices aren't in your name anymore and in the LLC's name is one way. Additionally, the insurance will probably have to be changed, and the mortgage company will probably see that change. Make sure that the insurance will still be good when you change the property ownership to the LLC. The last thing you want is to need to file an insurance claim and figure out that the property isn't covered, because they insured your property, and it isn't your property any more.