All Forum Posts by: Jake Wiley

The short answer is yes for both if you can find it and it gets you in the door.

I'd just be very thorough in understanding the lease option language for you personally.   Unlike traditional purchases with bank financing, where there are protections in place for you as the owner, in a lease option, it's a lease until you exercise your option to purchase, and more likely than not the landlord will ensure the terms are very favorable to them.   

In fact, there are some landlords that do lease options knowing that there will likely be a late payment along the way which voids the option to purchase, and thus they get to keep the option payment.   

Good luck, read the docs carefully and pushback if it doesn't look good to you. 

 

@Dan Marl - Did you get an inspection?   Do you have any concept of how extensive the damage really is?   Do you know what kind of termites they are?  Is it localized to just one area, or is it spread out all over?   

Fascia and soffit damage isn't a real concern unless it's letting water or pests in, but the real concern is how much damage they've done behind the walls and areas you can't see.   If they crawled their way up from the ground, they've had a lot of wood to eat up on the way up to the soffits.    If they are all over, it's not a localized problem that you'll be lucky to catch with the tenting.   

Haven't heard of Hilltop.   I'd also note that a Private lender looking for 5.5% with a 30 year period seems low to me.   It doesn't hurt to be persistent and keep asking, maybe it's a 1-year loan with a 30 year Am schedule, but the numbers still don't match up.  

I can't speak for everyone, but folks lending money generally aren't sloppy.   When they are it's usually not in your favor.    

@Donyelle Keith - From a wholesaling contract perspective, you are writing a contract with the seller that has all the terms of the sale as if you were going to buy it, however, you have the right to assign the contract, so whatever closing date you put in the contract to purchase governs the closing date.   

The wholesale contract simply states that the assignee is stepping into your shoes in the purchase contract so it should actually be that simple.   Lessons learned while wholesaling, keep it super simple!   

Not sure if this is just a pro feature - but there is a rental property calculator that would help you get your arms around the things you'd need to consider.   

Generally speaking, you want to understand the purchase price, plus any repairs needed to calculate your initial investment.   

Then you'd want to understand your operating expenses, including taxes and insurance and maintenance reserves plus your debt service costs, and compare them against market rents.   Keep in mind taxes will likely change/increase once the sale is recorded and insurance you'd need to get your own estimate, not base it off what the seller has in place. 

This will help you understand if you are going to have a positive cash flow for a high-level analysis of the property.    

The cost seg would likely need to be completed prior to filing the 21 return, otherwise, it would start to get expensive amending prior year returns based on new depreciation schedules.    Based on the timing of the completion, sounds like that wouldn't be an issue.  

Agree with @Ashish Acharya that you'd need to determine if the accelerated depreciation would help you out.   In this case, you are taking an expense this year that you will likely have to pay back when you sell down the road, so it's not a free ride as it is often portrayed.   

Quote from @Mason Hickman:

@Pavan Kovvuri

The downside is that if they all have low credit scores, you don’t have that one advocate with good credit that will keep the other tenants in line. Another thing to consider is local laws; there are some ordinances that restrict how many non-related people can live in the same house.

If credit is low and doesn’t match your documented criteria, I would pass.

 Agreed with @Mason Hickman.   They say you are the average of the people you surround yourself with, and this whole group has low credit, there's not a collective of responsibility here.   Sounds like they run in a pack, so if one decides to up and leave the who group would likely follow.  

An option would be a larger deposit, but the ideal would be to find a tenant that has both the income and the credit you are looking for.    

@Tuli Green - Here's my process that has evolved over time.   I go over to Redfin and Realtor and pull up sold listings in the past 6 months in the neighborhood where the property is.   If there are not many that show up in the 6-month range, then go back a little further.   Using a spreadsheet I look at who the listing agent was, the days on the market, and sales price per square foot for every property that is in the area and mark which ones are most comparable.   

When I am done with both sites I eliminate the duplicates and should have a pretty good list that I then resort by the listing agent.    I am then looking for the agents with the most volume (experience in the area), shortest days on market and highest price per square foot.    Ideally it will be clear who the top couple agents are, then I pick up the phone and call them to explain what I am looking for and get their experience.     I have found that if I call two to three agents I will know which one is right and have the confidence they know the area.    

With the market the way it is today, its probably they may have buyers, or know buyers agents that have buyers that are looking for properties in the area already because they submitted offers on previous listings.   

The great news is that these days the research is easy and free.    

Hopefully this helps. 

Quote from @Andrew Postell:

@Dario Cruz if the seller has agreed to sell the property for $20k less than what he owes I would suggest closing on this deal asap. I would NOT suggest taking on seller financing and allowing the seller to keep that extra $20k in place. Remember, that comes out of your pocket now if it's financed "subject to". A standard Hard Money Loan (HML) should lend you 70% or 75% of the ARV so make sure you are prequalified beforehand to know how much money out of pocket you will need on this deal. Hope all of this makes sense.

Agreed - try not to ever add complications to a deal if you can help it!   Also, a lesson learned the hard way is to keep your mouth closed once a seller has agreed to terms, because if you seed them with the idea there may be other options they may get stuck wanting to explore them.    

Good luck!   

Erandi - Congrats on the progress!

1). Will likely be no change unless you are using a homestead exemption for tax purposes on your primary residence.   I would get a lease, as that is how you will show you have income from this property when approaching your lenders, otherwise, it will look like you have debt but no offsetting income.    The lease will also give your parents the documentation they need to deal with typical stuff like utilities etc without having to get you involved.  

2). I'll leave this one to the house hacking pros.   

Congrats again!