All Forum Posts by: Jason Rogers

Any ideas on how I can get this driving for dollars lead nailed down? Owner is deceased. I contacted the wife and it’s a bit of a mess. It was his mother’s house and she quit claimed it to him prior to her passing. Now that he has passed, his will had stated that it was to go to his brother. However, the probate court would not accept the will because he used a signature stamp instead of doing something as simple as making an x with a pen. So it remains in his name and they can’t do anything with it. The wife has been advised by her attorney to not pay the property taxes and let the county foreclose on the property. It seems like she thinks that she can just go pick it up at the tax auction for pennies on the dollar. I’ve been to the tax auctions and she can’t. I am going today to try and speak with the brother. Any suggestions? My current thought is could I possibly get both of them to sell it to me?? Do you think it’s even worth chasing, or am I leaning my ladder against the wrong building?? Thanks in advance for any input.

Hi Matt, 

I know a few guys in the area. Are you looking for a GC to do a renovation? What all does your project entail?

Investment Info:

Other other investment in Grass Lake.

Purchase price: $22,000
Cash invested: $2,900

Home run deal! Thirty eight acres of vacant land netted out over $100,000 (before taxes). I sure hope i can do a few more like this one but it would be tough to top. It wasn't without ups and downs. The owner who I put it under contract with was actually not the full owner. It was tied up in two estates and a trust totaling 7 heirs. The title company tossed it out the first time I brought it to them. I then brought my broker on board and he was able to pull together all the heirs in a purchase agreement via Dotloop. We got it back under contract and it took months to sort out all of the heirs and estates but when we closed we went close to close in just over five weeks. The land had some garbage dumped on it so I had it cleaned up and back on the market quickly. We listed it for $115,000 and quickly received two cash offers , one of which had an escalation clause. We countered to the offer without the escalation clause at $145,000. They accepted and in just a short time, we were staring at a massive profit!!

What made you interested in investing in this type of deal?

Great deal!

How did you find this deal and how did you negotiate it?

Direct mail. The seller called me and told me that he would sell the property for $20,000

How did you finance this deal?

Cash

How did you add value to the deal?

Removed trash and debris

What was the outcome?

Roughly $105,000 profit

Lessons learned? Challenges?

Title process was rough due to amount of entities and heirs. Broker helped tremendously bringing purchase agreement together as well as negotiating a sale price $30,000 over asking!

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

Absolutely! Tim Creech - Tim Creech Team - 5 Star Real Estate - Jackson / Brooklyn, MI

Investment Info:

Other other investment in Grass Lake.

Purchase price: $22,000
Cash invested: $2,900

Home run deal! Thirty eight acres of vacant land netted out over $100,000 (before taxes). I sure hope i can do a few more like this one but it would be tough to top. It wasn't without ups and downs. The owner who I put it under contract with was actually not the full owner. It was tied up in two estates and a trust totaling 7 heirs. The title company tossed it out the first time I brought it to them. I then brought my broker on board and he was able to pull together all the heirs in a purchase agreement via Dotloop. We got it back under contract and it took months to sort out all of the heirs and estates but when we closed we went close to close in just over five weeks. The land had some garbage dumped on it so I had it cleaned up and back on the market quickly. We listed it for $115,000 and quickly received two cash offers , one of which had an escalation clause. We countered to the offer without the escalation clause at $145,000. They accepted and in just a short time, we were staring at a massive profit!!

What made you interested in investing in this type of deal?

Great deal!

How did you find this deal and how did you negotiate it?

Direct mail. The seller called me and told me that he would sell the property for $20,000

How did you finance this deal?

Cash

How did you add value to the deal?

Removed trash and debris

What was the outcome?

Roughly $105,000 profit

Lessons learned? Challenges?

Title process was rough due to amount of entities and heirs. Broker helped tremendously bringing purchase agreement together as well as negotiating a sale price $30,000 over asking!

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

Absolutely! Tim Creech - Tim Creech Team - 5 Star Real Estate - Jackson / Brooklyn, MI

BP Community I need some help. First off I understand that you are not a tax professional (and even if you are you are not giving me professional advice). I plan to speak with my tax advisor on Monday but I need to classify some expenses and be a bit more educated when I talk with him. So I have a couple of questions. Any help is appreciated. 

1. Cash or Accrual Method? Background- I flipped a piece of vacant land and netted over $100k in profit in 2018. I also flipped a house in 2018 that was sold in 2019. It was a huge rehab (around $130k). All costs with the property took place in 2018. It went on the market in late December and closed in January. If I am understanding Cash Method Accounting correctly, then I would show a loss of $30k in 2018. However, I would then not be able to claim all those costs in 2019 against the sale of the property. I am under contract for a small apartment building which I plan to cost segregate to assist with this as well as some equipment purchases and vehicle depreciation. 

2.  Income Statement expenses- Direct Labor? As a flipper, where do my costs land? Is an electrician/ plumber/ roofer direct labor? Are houses considered inventory (I know there's something here with being a dealer that I'm not quite clear on) ? Which expenses go to cost of goods sold (i.e. all costs directly associated with the property) and do they need to be broken down or just lumped on the income statement?  

I realize that these are somewhat broad questions, but I think that a bit of feedback would go a long way toward me providing my accountant with something better than the 4 spreadsheets that I have now. Thanks for your help!

@Linda Weygant thank you for that very informative and well thought out response. It really made me think. We are looking at a gross profit approaching $180k. I would think that a $60k salary would be on the lower end of the range you mentioned but would still be reasonable based on cost of living and wages in my area. Thanks again!

@Katie Neason & @J Scott thank you for your responses. J that is exactly the situation I am attempting to create (pay less self employment tax) without risking an audit. Katie, I do like the project manager idea. It does seem “reasonable.”

My LLC that I set up to purchase rental properties took a turn for the better when I landed two flip deals instead. One was a SFR rehab and the other was a land flip. They were both great deals and will bring large chunks of cash. After discussing with my CPA we have decided to elect S Corp status for tax purposes. In the single member LLC with passive rental income I did not have to be concerned with a salary. However, in the S Corp I have to elect a "reasonable" salary and then I can take the rest of the profits as distributions as I see fit. So my question is if you are flipping or investing some other way using an S Corp how much do you pay yourself??

Disclaimer: I know you are not a CPA (and even if you are). I am not asking for tax advice. I'm just wondering what the community pays themselves. Thank You for any feedback you can provide.

Jason Rogers

Hi Daniel, I don’t have a ton of experience but I have lived here most of my life and I’m very familiar with the market and neighborhoods. If there’s anything that I can do to help please let me know. Jason

Hello All, I am currently trying to get my first deal under contract and it has some pretty odd stuff going on that I need some advice on. So the back story is this was a driving for dollars prospect. I researched the property in the public records and found that the owners were deceased and their daughter had inherited it. There were a couple things going on with it. The roof is pretty bad and a few years ago there was a small fire inside (No major damage). The owner was embroiled in a battle with the township over code violations and the fact that they had condemned the house due to the fire damage and there being a hole in the roof over the garage. The owner is obviously attached to the home sentimentally and still has belongings and memorabilia of her parents in the home. She had bee approached by multiple investors and did not want to sell. So being inexperienced I just kind of let it slide. Which has since been a great lesson on following up. Up to this point there’s nothing too crazy about this. Most of this is probably somewhat common. But then Monday I was in the area and decided to drive by and see if anything had happened with the property. I saw that something had been posted on the door. It stated that the owner had pulled permits to get the roof repaired and make the home livable back in August. Since no work had been started after six months if nothing had changed by Saturday of this week the township was going to demolish the house next week. So I immediately started digging and found a phone number for the owner and called and she picked up! We chatted and I told her that I would pay her cash for the property and she said that she would think about it. I didn’t bring up the demolition and decided not to push the issue and instead follow up with the township to see what could be done. When I spoke with the gentleman with the township he informed me that the owner had to place a $10,000 bond down to pull the permits to keep the township from demolishing the structure and to complete the repairs. That was in August and no work has been done. So now the township is going to cash in the $10,000 bond and use her own money to demolish the house. The gentleman at the township adamantly stated that they will not grant her any extension as they have been dealing with this for years and nothing has been done. BUT... if I could bring them a signed purchase agreement this week, then they would return her $10,000 and I would have to post a new $10,000 bond and have to fix the place up (which is obviously the plan). So I have been talking with the owner every day this week trying to get a deal done. She is clinging to the hope that her attorney (who hasn’t called her back in two days) is going to get some sort of court order to stop the demolition. But she is moving towards selling which leads to the next couple of circumstances. The owner is legally blind. She can read because she wrote down my phone number and has called me back. However, are there any special considerations that I should take into account here? I planned to print the contract in large font, but is there anything else that I could / should do for this? Do I need to take a witness or something? I just don’t want this to cause a problem later. The house was built in the 50s so there is a good chance for lead paint. What consideration should I give to that being this has to be done quickly and I’m not sure what the township will allow me to use as an inspection period? Is it a large concern? I know that this can be state specific too, but there will be quite a bit of work being done and that could be a case for remediation which seems very expensive. So basically what I am looking at here is can I actually talk this lady into selling, get her to sign a contract, get the township to approve it and not demolish the house and then put down a $10,000 bond to ensure that I am going to complete the repairs. The house is a solid brick ranch 3/2 in a nice neighborhood with a conservative ARV of $150k. It will be a pretty big rehab so given the circumstances I am offering $10k. Which will become $20k when she gets her bond back. I’m a bit nervous about some of this but I think if I can pull it off it will be a great first flip. I think that’s most of it. I now open the floor to and ask for the wisdom of the BP community. Thank you in advance for any insight that you can provide. Jason Rogers