All Forum Posts by: Greg Scott

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!

@Bill Gulley gives some good advice.

My reaction to the property you described was "that must be a rougher neighborhood".  You don't often see smashed windows and notifications in the nicer rental areas.  If the property has any significant value, usually the owner will at least pay someone to board up the open windows.

In nicer areas, you don't need smashed windows.   Tall grass is a sign, but also look for roofs that need replacing, rotted wood trim, overgrown landscaping, or any sign that you may have an owner that is unable to care properly for the property.  Often the outside is better than the inside.

I have heard (but not done myself) that a letter writing campaign to properties with maintenance issues can yield high returns.

Good luck!  I hope you find a good one.

Here is an alternate way to go.  It requires more effort and is more complicated, so it may be too much for a first deal.  Still, if you can manage it, you may be better off in the long run.  This is how I have been buying single-family houses.

1) Find a house in terrible condition, deeply discounted because a retail buyer cannot get a conventional loan on the place.  The price should be cheap enough that purchase+rehab is much lower than buying the nice fixed-up one next door.  The 70% rule is a good starting place

2) Get a hard-money loan (or private loan) for purchase and much of the rehab.   Get a reliable contractor to fix up the place as fast as possible.   Hard money loans are expensive, often 10%+ with points up-front, so you don't want to stay in them very long.

3) Once the rehab is done put a conventional mortgage in place.  Be sure to talk with a mortgage broker BEFORE you start this process to know you will qualify.  It would be a huge mistake to get stuck with a hard money loan.

By doing the above, it is possible to have a deal where you have 0%-20% "down payment" instead of 25%.  Moreover, you could wind up with thousands of equity from the start.   Also, because you bought it lower, your cash flow will be better.

Lorenzo:

Congrats on getting going.  You've taken some big steps.

I noted you said make offers on things that look like deals, but it wasn't clear how you were generating your deal flow.  How were you going to generate the list of deals?  Direct mail?  Driving for dollars?   Generating deal flow can be one of the more challenging parts.

Good luck.

@Justin Fox, I do the same.  I have $1M on each property and a $2M umbrella.  I do not personally know any Single Family owner that has been sued, but heard an insurance exec talking on a podcast who said in 30 years he saw a handful of liability cases each year exceeding $100K and the biggest ever was $1M.   That doesn't mean it can't happen to us, but the odds are low.

@Marcus Kennedy, I agree with Justin.  One KEY benefit of Real Estate Professional status is it allows you to take passive losses (e.g. excess depreciation on a rental) against active income (e.g. your spouse's W2 income).  Regular business expenses can always be applied against regular business income.

I don't know your specific situation so probably best to talk with your professionals.

Early on I put my rent properties in LLCs.  Later I joined a large Real Estate group where most experienced members didn't, so I stopped.  Then when I wanted to refinance some of the early ones I had to pull them out of the LLCs for refinancing and never put them back.   For liability protection I am really relying on 1) good management practices 2) good property insurance, and 3) good umbrella policy insurance.

For accounting, I created an "agreement" between myself and our LLC (it was a difficult negotiation LOL). The LLC "manages" all our properties for us. All my cash runs through my LLC bank accounts and the finances run through the LLC books. Mostly it just keeps everything clean for tax time.

In contrast, we have done some shared deals with family members. All of those we put into LLCs, but it was as much for the contractual arrangement between members embedded in the LLC operating agreement, with liability protection as an added benefit.