All Forum Posts by: Account Closed

Looking for insight from those with real-world experience working with builders on in-fill lots or multifamily in Houston. A bit above builder-grade (definitely not Luxury). What are your average costs to build per sq/ft and what is your typical time frame? Does more sq/footage reduce the cost per sq/ft? Also, how involved are you in the building process? Finally, aside from the cost of the lot, is the cost all-inclusive with the builder (i.e. Foundation up)?

I am not a CPA but I am in a similar situation. Essentially, the operating expenses and depreciation you incur nets against your rental income. It's likely that you do not show a profit on paper and, therefore, earned rental income but do not have to pay taxes on it (or very little taxes).  

Listening to a relatively recent BP Podcast I recall hearing the interviewee talk about buying properties online via auction but that you have to be careful because some of them (Auction.com he called out specifically) will bid against you in house. So my question is, which sites will not bid against you? Seems to be unfair to me. 

@James Cash your scenario isn't unique to just fourplexes, rather, it's all FHA Home Loans for owner occupants. When you close, you sign an FHA Home Loan Occupancy Affidavit (not the exact name, however) where you acknowledge that you must be in the home within 60 days and live in that property for a minimum of one year, full time. It likely boils down to the intent at closing. If you sign this with no intent of living there, then you expose yourself to Fraud.

Below is a historical thread that delves deeper into this concept:

https://www.biggerpockets.com/forums/49/topics/114510-fha-owner-occupancy-requirements---less-than-one-year

I am from Houston but the market has changed A LOT in the past few years since I left. I am looking for non flood prone areas where I can achieve at least 1% of the market value of the property in rent. Any suggestions on which areas and neighborhoods to focus on? 

@Timothy Albright it all depends on how active you want to be. If you do not want to be very active, then yes it is too little because you will need to either invest 1.) money or 2.) time to see real results. If you have the time, go knock on doors and driving for dollars. Find a deal and get it under contract. Work your numbers so that you can use your $15k to get a hard money loan and rehab the property. Flip or rent (cash-out refi) the property per your own investment philosophy. Repeat!

@Aaron Gilbert underwrite the deal yourself from the ground up. What are rents for similar units going for in the area? What is the vacancy for similar units in the area? Use 40-50% as your baseline for expenses. You can also check online and see what typical cap rates are for C/B MF properties in that area (or call a local broker and simply ask). With that information, you can back into a fair market value. My minimum cash flow per door would be $100, bar none. Also, how long has the owner been interested in selling it? If it's been a while, offer him 15-30% less than his asking. At least then you can anchor to a lower price in negotiating. Personally, with a boarded up house across the street, this sounds closer to D class than C and far from B. B class to me is blue collar stable - can you confidently say this is the tenant mix?

@Ashish Acharya Thank you for the answer!

I have a flip I am finishing up. My wife and I took out two 401(k) loans - $50k and $30k - to purchase and rehab it. Let's say the ARV is $120k. Would the basis be the ARV less the cost to purchase is ($50k) and the cost to rehab it ($30k) or would it be the outstanding balances of these two loans? On paper, we paid cash and there is no mortgage so I am inclined to say that it boils down to the purchase cost and the cost of improvements, not the outstanding balance associated with the loans. I am asking this because if it is the latter then we will have more taxable income on the property. Also, this seems like a grey area because, well, we are paying ourselves interests on the loan so it seems like double dipping but also seems legit too. Thoughts?

@Matt M. awesome - what were the loan terms?