All Forum Posts by: Franco Montano

I will echo the other post and say to be careful and do your due diligence when working with wholesalers or wholesale agencies. The ARV is often incorrect or the repairs may be much more than they say.

I know that a lot of investors like to find off market deals but I've actually have found a lot of success on market. I do some business with wholesalers but I buy a large of my deals on market especially right now in this market. I'm negotiating one in Tampa right now that is around 50% of ARV. That's an on market deal.

You can use deposit insurance that covers unpaid rent up to a certain limit. It also covers damage to the property from the tenant.

If you get a judgement and fail to collect on it then you can write it off as a bad debt. The key here is you have to try to collect on it. If you don't try to collect on that judgement then you won't be able to write it off. There is a lot of information about this online. 

If you don't get a judgement then yes you would be limited to only writing off your expenses.

Sorry to hear about your troubles but what you described is exactly why I've been building my rental portfolio out of state (I also live in CA). I also agree with the previous comment that you have a professional eviction tenant on your hands that is taking advantage of you every chance he can get. 

In regards to the collectability of any judgement, it'll most likely be zero chance of payment. I wouldn't completely rule out going after the judgment though. Depending on your situation you can go after the full amount of damages, which includes all your attorney fees, losses etc. You may also to be able to go after damages like environmental damage, rehabilitation of the property, etc. I would try to get all that included in my suit. Once you get your judgment you pursue your collection efforts which will most likely not yield anything then you can write the judgement off as bad debt against your income since your debt is now uncollectable. You want to talk with your accountant about this but depending on how much you make it may make sense for you.

Keep in mind you want to compare what you can write off already compared to what you may potentially write off if you got a judgement that included all additional damages and see what's the best direction for you.

Just a tip on how I turned lemons into lemonade 😉 Good luck

Hi everyone, I'm looking for a good contractor in Atlanta that could repair a badly damaged driveway. Do you have any good recommendations? 

Do any investors have knowledge or experience with Flood Factor ratings on how accurate they have been? I was looking to purchase a property that is in a FEMA high risk flood zone but the house has a rating of 1 in Flood Factor. The house is located on top of a hill and hasn't had a history of flooding with the current owner. The property is located in Atlanta Georgia.

I would appreciate any tips or information on this topic.

Theoretically you shouldn't have to decide on which homes to sell if the goal is to rotate through your inventory. Just my thoughts it may be that your buyers are gravitating toward specific types of properties or areas leaving you with properties they aren't interested in, tying up your capital. Maybe if you survey them you may be able to target your investments better allowing your property sales to rotate through more smoothly and not tie up capital. 

Not knowing specifics on your margins but I would take a look at your net margins and see how you're pricing your properties also. If you maintain similar margin percentages across all your houses regardless of area you may be under pricing your properties in higher appreciating neighborhoods or properties that have more potential. That may be causing your investors to buy those properties over the others leaving you with properties that aren't moving. By adjusting and accounting for better properties or neighborhoods you can maximize your profits and you may balance your inventory better so you aren't stuck with homes that won't move.

Hi Danny,

I'm a fellow investor here in the Los Angeles market and just thought I'd share my thoughts and my current strategy. I recently sold my primary residence after substantial appreciation at a premium due to my property having multi family zoning in a fast growing part of LA. Similar to the Bay Area, Los Angeles has started to increase dramatically in price. What I did next was run through my possible scenarios similar to yourself. 

1) House hack, use the proceeds to put 40%down on a triplex or fourplex but in a C- type of area (sold property was in a B neighborhood), and have a larger amount to invest OOS to build a larger income portfolio. This small multi family would still be a negative cash flow in my area but a lot less than buying a SFH on its own. A 5 cap in my area is considered a good deal so it's really hard to cash flow in my market.

2) House hack, Buy a duplex in an A or B neighborhood with about 40% down and invest a smaller amount OOS to build some cash flow to maximize proceeds.

3) Rent and invest a majority of the proceeds out of state and build a large amount of cash flow. 

I went with option 2 and ended up buying a light fixer upper in an A neighborhood with a newly built fully permitted 1bd/ba ADU that I'll rent out in the back. Now it really comes down to your comfortability but I felt buying in a quality neighborhood with some rental income to offset my mortgage and expenses was perfect. I also have a lot of equity in it so I could always use my equity line to juice up the funds I invest OOS. I also have the option to BRRRR it and get another property.

I didn't like option 1 because the CA eviction moratorium was a bit of a concern for me. LA is actually even worse than the state because I can't evict for Covid reasons 1 year after the emergency declaration ends. I just didn't like the risk that brought with having several units to cover expenses for over several months. I know some investors that have tenants that haven't paid for several months and they can't even start the eviction process because of the moratorium. I also wasn't crazy about moving my family to a C- neighborhood. 

I almost went with Option 3 but being able to buy a light fixer and having equity right away in a good neighborhood is really rare in my area so I grabbed the chance right away. 

I think the biggest issue you may have house hacking in northern California is finding a deal where the negative cash flow makes sense for you because prices are pretty up there. The only reason it worked for me was because I was able to roll money from a property I sold and I found the right deal that made sense for me. I'm not as familiar with the Sacramento market but if it's anything close to SF I'm pretty sure it may still be expensive so the deal that makes sense for you is key. 

@Kevin Guyden The amount of protection you need really comes down to the size of your portfolio.  Insurance is a great first line of defense as many have mentioned.

In terms of transferring property to an LLC you can look into using a land trust. Done correctly you can transfer title to a land trust then beneficial interest to an LLC without violating the due on sale clause. There's a lot of information available online on this but it may be best to consult an attorney that is familiar in this process to assist you because every state can have different rules.

Regards, 

@JasonY. You should find a lender that would be willing to do what is called deferred financing. You can look up information on that in BP. If you are buying the property all cash or using your HELOC in your case, you can refi the property without having to wait for the 6 months seasoning. I haven't done this yet myself but there's many people on the site that have that you may want to ask advice from. You really want to get out of the short term money into long term cheaper money as soon as you can.

on a side note I agree with what everyone is saying about the cost of your HELOC, it's way too high. You'll get a better deal at another bank or just go hard money.