All Forum Posts by: Damien Hall

I would take option 2, larger profit, and do like Bryan said...hire a project manager to deal with the day to day.

@Justin S. and Nemi:

Not sure how would Option 1 would be more profitable in the long run. Option 2 is $300K net profit,every year. Option 1 is $72K gross, every year. Even if Option 1 is profit, still would catch up.

Grant:

I agree with Mitch on not having to refi sense you did live in your house. We did the same where we moved out of our house but kept the mortgage. Unless there is something in your mortgage specifically stating that you have to refi then keep it as is.

As for depreciation it does start when you begin to rent your home and it becomes, in essence, a business. According to IRS you would base the depreciation on the lesser of fair market value or the property's adjusted basis on the date of conversion. The adjusted basis is the purchase price plus any improvements made to the property.

Hope this helps.

Jerrold:

I wasn't confused. I just think looking at a broader sample is a better way of analyzing the market. I certainly agree that sold properties are the best way but I wouldn't discount the other paramaters to give you a feel of the market. When it comes to purchasing the property, your investor will want an overview of the entire market. If you can provide him all of that info within your wholesale packege then that will be key. I've seen great packages where everything I needed to know was in the package.

Also as Curt indicated, if the deal goes far enough, an appraiser will come out and provide the ARV. I'm not an appraiser but I believe they take into account more than sold properties to get the ARV. Once again, from your investor's perspective, that ARV is the key to his lending.

Jerrold:

IMO your broker is giving you a broader sample to look at. I think he lead you in the right direction. I do believe that pulling comps based on what is sold is the best way to do it. But pulling comps and formulating ARVs is really more art than science.

The active listings will show you the current competition on the market. If you want a quick sale then you know you will have to come in at the lower end of these properties no matter what the sold comps were. You can also look at the specs of those houses and compare to your subject. Price changes can let you know the activity in the retail market. If something is priced too high then that criteria will give you an idea of how the market is valuing properties. There's really no "one way" to pull comps.

But I think your broker did you a favor. And of course you can still get other Realtors to check your work even after your broker has.

Ok that sounds good. One bit of advice...make sure you and your partner form an Operating Plan. That way if you aquire any properties together, your plan will disclose how any profit/expenses will be handled. I assume when you both leave Japan you may go to different places. Your Operating Plan will help protect your RE company as well as your friendship. I've heard horror stories when things weren't accounted for properly. The devil is in the details and by having a plan, both of you will agree to some basic scenarios in case you have to dissolve the company after Japan.

Good luck Jackie!

The Complete Guide to Buying and Selling Apartment Buildings by Steve Berges

This book is technical. It helped me learn how to analyze apartment buildings. Helped me understand financial statements of a building and different financial ratios. By understanding the ratios you can determine your purchase price or sale price. It also helped me to understand exit strategies for buy and hold properties. You sell after you've added value to the building.

Rich Dad Poor Dad by Robert Kiyosaki

It's not about RE investing per se but it was very inspiring and motivational. It will get you off the fence and into RE investing if that's what you really want to do.

Jackie:

Jon is right. It's better to be close to your investments, especially when just starting out. I lived in Wash, DC and had a property in Baltimore (approx 1hr away) and it was hard managing from that distance. Now I live in Guam and have a property in DC. We have a PM and it's still difficult because of the timezone alone. Fortunately I have a relative who helps me out. If I have any issues with my PM, I call my relative to follow up. If you don't want to invest in Japanese RE and can not wait until you come back to the States then have someone you trust on the ground.

As for your question, it sounds like you would want a project manager or an agent that works with RE investors rather than a PM. That's a lot of upfront work for a PM.

Speak to a Realtor in your area.

50K sounds a bit low for the renovations. I'm assuming that's a complete gut for the interior as well as repairs to the exterior (roof/porch at the least). If you include appliances I think it might go over 50K. I did a renovation to a SFH (about 1400 sqft) and it came around 65K. We didn't have to make repairs to the roof. And your property is a duplex. On face value, I think you will have thin margins. I would definitely get a contractor to come by and take a look.

Did you verify if renovation costs would qualify for 50% tax credit? If it's true then I would take that into account.

Is that ARV based on comps in the area? Would you flip it or rent it out? This would determine how much money you put into it.

Joanne:

If you are wholesaling, I would figure that at the point of sale, your financial stake would be less important to an investor (buyer). If it's a good deal leaving the investor within his target ROI, your skin in the game would be less of a concern.

In your example, the only thing the investor would take into account is $50K purchase, $40K repair and the ARV. The ARV will probably need to be a little higher in order to make it a good deal. But on your end, investing $5K to make $50K is well worth it.