All Forum Posts by: Greg Scott

@Account Closed

It never occurred to me you were looking at this house as a flip.  Based on the description it sounded like a $30K+ rehab, so, I would say it is a very skinny flip.  I would only attempt to flip it if you could actually pick it up near $155K or your acceptable backup plan was to hold for a while.   As long as it cash flows and you know how to rent it, you could hold it profitably for a long time.

My original note mentioned how I was calculating the cash flow.   If you completely fix up the house when you buy it, your short-term repair requirements should be negligible, so that would be your cash flow.  Long-term I have found that I spend about $150/mo/property on repairs and capital improvements.

In my experience, NOI and CAPEX are typically terms used in multi-family. NOI is important in MF because it is directly related to property value, while in Single Family valuation is based on comps. CAPEX is important in multi-family as often the lender requires a reserve account for major repairs, but I have not heard it used regularly in single family.

Good luck and best wishes.

@Shera Gregory

Shera:

Interesting to hear your story.  You mention the two groups of investors with PIP.  I happened to be in the other group seeking the "safer" returns of yield on my tax liens.

At first I was thrilled with the tax liens that PIP purchased for me.  I had about 25% redeem in the first year, which I plowed right back into new liens.   I repeated again the next year.  What I found, however, was that redemptions taper off, and the older liens almost never get redeemed.   

I started with just under $60K investing with this company. At first the returns were positive, but then as older liens became a larger and larger portion of my portfolio, their management fees and the fees of my self-directed IRA consumed initial profits. After about 4 years I stopped plowing any remaining redemptions back into new liens. By that time my portfolio was made up of mostly 2+ year old liens.

Now I have $45K of liens with no activity at all in over a year.  I contacted PIP a dozen times asking what to do with these liens and if there was a way to liquidate them, even at a substantial loss on my part.   They kept saying they would get back with me but never did.   Now they just ignore me.

Anybody considering them, my advice is to stay away.

I have a handful of properties in the DFW market and am on the drip list of a number of wholesalers. I have actually seen deals improve over the last year or so.   The second half of 2014 and most of 2015 there was nothing that looked good.  The past 5 months I've been seeing strong deals again.

I hear that the hedge funds are paying ridiculous prices any more, which may be the cause.

Robert:

I typically look at 2 key things when looking to buy a property.

1) How much equity can I capture. Equity capture would be After Repaired Value (ARV) less purchase price, less rehab, less financing costs. At a minimum I try to capture $15K in equity.

2) Cash flow - After its all fixed up and rented, I hope to get at least $500/mo which would be rent - PITI (principle, interest, taxes, insurance) payments.

I have several properties in DFW and they have been great. I recommend you check out the Lifestyles Unlimited real estate investor group in Las Colinas.  They have a lot of good training and resources.

I had invested with PIP Group in Illinois tax liens.   I found two things.   1) The process is very complicated and it seems like there are a thousand ways one could screw up, so I was glad that I had an experienced company that could walk me through it.   2) Choosing the liens themselves is incredibly important.  Unfortunately PIP Group failed at #2.  In every batch of liens they bought for me about 25% redeemed in the 1st year and 10% the second and 5% thereafter.  I kept plowing profits back in, but now have a portfolio of very old liens that seem unlikely to ever redeem.   

In hindsight, one of the worst investing decisions I ever made.  

I have purchased some Illinois tax liens.   In some counties you can find the information online (not easy but doable.)  Others do not have that information online so you would need to visit the county offices.

I use OneProp for my DFW properties and have not had any issues.

I recommend you check out Lifestyles Unlimited in Las Colinas to get a great education and local support.

Claudia:

In DFW area, Las Colinas, are the offices of Lifesyles Unlimited, a real estate investor mentoring and training group.   If you join at their base membership, they can give you excellent advice, know the area, and give you access to a bunch of contractors that they screen and give good rates.  

The ~$500 membership would pay for itself quickly.

Seems like a reasonable deal.   

Based on what you put in your note, there were only a few things that you may want to think about:

• Did your cash flow calc include insurance?  You didn't mention it.
• If ARV is 160K, you could get a conventional refi for $120K, which would leave you $25K short of paying off your second. Assuming you save ALL of your cash flow and you are paying down the mortgage about $100/mo, you just barely get to the point where you could repay the balloon in 8 years with a new conventional loan. (I wouldn't count on appreciation because nobody really knows where things will be in 8 years.) Are you comfortable with that?
• Be sure you have reserves.  If you are using 100% OPM and the HVAC dies, would you have enough to replace it?

Jean-francois:

I've used a lawyer to create my LLCs both in Michigan and other states.  I would hesitate to use the on-line services because they often do not customize paperwork to meet your needs.  

What sort of real estate will you be doing?   Depending on your situation, creating an entity may be the absolute right thing to do, or a complete waste of time and money.   I would find a local (real estate expert) attorney to talk with then bounce it off the forum.

Good luck!