All Forum Posts by: Erik Perotti

Hi Stephanie - I am a long-distance flipper, based on California, working on my second flip in South Carolina. 

Specifically, my investments are around the Charleston suburbs, and that area is certainly hot. I initially wanted to BRRRR or what-have-you, but found South Carolina to be difficult for non-owner occupied investments.

As for Mullins, I cannot say. A quick Google tells me that Mullins has no large employers, so you'd have to figure out where they commute to, and what would give them the means to buy a flipped property.

For flipping, my local realtor believes that foreclosures in South Carolina will hit the market in late spring to early summer. Of course, confirm that, make your own conclusions, talk to your attorney, or whatever. 

If you move to a new locale, I would also think about establishing your team now...would you be seen as an outsider? Or is there a realtor or wholesaler or someone well connected who could get you on the early side of opportunities. I just think these small towns would be tight-knit.

Best of luck, and feel free to reach out if you wish to discuss further.

Erik

@Tony Kohnle is correct on taxes (millage fee). I mis-remembered. Sorry for the confusion.

Hi, I’ve just completed a flip in Summerville, 19 miles north of the Charleston airport. 
HOAs are common throughout Charleston and surrounding areas, but can be from $60/year to a few hundred a month, so that is an issue to consider. it seems like everything is a subdivision. 

The real gotcha are millage fees, which it more expensive for out of state investors.

We have worked the auction scene, but not been successful yet. There are about 40 or so teams at recent auctions in Charleston and surrounding counties, so be aware.  

COVID-19 has reduced listings by 40% according to two agents. I don’t know about the day to day - I too am remote. 

Good luck, but don’t bid against me :)

Hi Lauren. 

I've worked with Bryan at www.CDHLawFirm.com and been pleased with him. He helped me get set up. In the state of South Carolina, you can:

"So, to set yourself up, go to the South Carolina Business One Stop website and create an account through the Secretary of State. (www.SCBOS.sc.gov). You'll go through the screens, make sure your LLC name is available, pay your fees, and they will mail you physical copies of your Articles of Organization and your Certificate of Existence. Check with your accountant as to whether you need an EIN if just you and your wife are going to be the only members of the LLC." <- a note from Bryan a few months ago.

Bryan authored the Operating Agreement. 

Good luck, and let me know if there's anything else I can do.
 

Last night, I underlined a few paragraphs about the flip/buy-and-hold decision when you have a great purchase. It's exactly my current decision, so it is helping me think critically about the right path for where I am. 

After listening to the podcast for the last year, I've read about ten books that guests recommend. Of those, this would be in my top three, with The One Thing and The Richest Man in Babylon. Oh, and ABCs of Real Estate Investing. My wife has been on the sidelines so far, and I've asked that she read this as her first book in REI.

Hi Don -

I am fairly new as well, just setting up shop with a hard money lender, but here's the numbers I was quoted, maybe it will help...

Purchase Price - $275k, Renovations - $100k, ARV at $485k. So, not too far from your ballparks... 90% LTV

Origination Fee - $7500 + Processing fee $500 (rate - 10.5%)

Down Payment - $37,500

Monthly Interest - $3k

 Does that help?

Hi - 

Just saw an interesting article, the punch line is that Zillow is making half its revenue from cash offers. See the story here

Digging in here, the markets are: Phoenix, Las Vegas, Atlanta; Denver; Charlotte, South Carolina; Dallas; Raleigh, North Carolina; Houston and Riverside, California. 

Anyone profiting from this? Or losing as a result? I'd love to understand if there's a win here for the individual investor. These are not markets that have already caught my eye.

Exactly @Dave Foster. You sound like my accountant!

Thank you @Dave Foster. I have no intention of holding at a loss. Its a matter of accounting (or not) for CapEx and/or Vacancy. From where this sits, this is a first world problem. There is money to be had, the question is how to best maximize that return in the long term.

Thank you @Shiloh Lundahl - I second your opinion, I have now spoken with two folks (the second this morning (a tax planning attorney in South Carolina)), and they are both strongly advising that flips should not be 1031 Exchanged. The reason is that the Government does not want them daisy-chained together to avoid taxes. Flip 6 successive houses and just hold the last $18m place for a year or two.

The 1 year/2 year question is interesting. In my opinion (and I am no expert, to be sure. Read at own peril, not offering advice etc etc) It's all about intent. As I now understand - if you intend to hold the property for two years, and your circumstances change and you decide to flip it after the first year, that would permissible. 

The cash flow question is more nuanced, in my uneducated perspective. If you listen to BP podcasts, some folks talk about cash flow as just the mortgage and so forth (especially if the house is spruced up with new infrastructure), while the more conservative investors consider cash flow to consider the other factors of CapEx, vacancy, etc. The advice I am hearing from these tax folks is the lost cash flow is more than made up for with moving away from short term capital gains.

Not sure yet, definitely two sides to the argument. Regardless - I very much appreciate your insight!

By the way, I listened to your episode on the BP podcast a month or so ago, and learned a ton! Thanks for sharing your wisdom.

Erik