All Forum Posts by: Doug Shapiro

@Wesley A Sanderson

Here are some basic things you’ll probably want to do prior to showing the unit to prospective tenants:

1) deep clean of entire place

2) make sure smoke alarms are installed

3) paint walls

4) fix anything that is broken

5) clean up outside and make it look amazing

The better your property looks/shows then the higher the rent price you will get. Also, you will tend to get better tenants.

Hope that helps.

Hi @Jonathan Vargas,

Those numbers and percentages look decent. Are you sure the property just needs 5k in repairs?  If you are, then I say go for it. 

Hi @Cody Hunt,

Here is one approach you can take:

1) You and your partner to both sign a tenants in common (TIC) agreement (you can find templates for this online) and to add in terms that are specific to you and your partner that are not covered in the boiler plate agreement.

2) Depending on lender requirements, you can both form LLCs separately, and then apply for a loan under the two LLCs. The LLCs would give you greater protection and anonymity and would allow you to do a 1031 exchange in the future and go your separate ways. If both of your names are on the deed and you want to sell and buy something else in the future, then you would have to buy with your partner for 1031 exchange purposes (which means that if you have a falling out with your partner then I doubt you'd want to invest in something else with them in the future). 

3) If you can't apply for a loan under two LLCs, then just apply for loan together (just make sure you trust your partner). If your partner just stops paying their share of the mortgage, then you would be in a difficult position. In the tenants in common agreement, you can have verbiage that specifies this situation, like "if party A is 30 days late on their half of the mortgage payment, then party B can make this payment and party A will lose 1% of their share of ownership until they pay party B back plus 20% interest". Something like that. 

4) Form a joint bank account so that you can both contribute equally to this account and then pay your mortgage directly from this account. Under this same account you can also get a credit card to only use for property expenses. 

Those are the main things I would do. The most important is really knowing your partner, because if the relationship sours, then you are stuck with that. In the TIC agreement you should also specify what happens if one party wants to sell their shares and the other one does not - there should be a buyout clause.

Hope that helps. 

Hi @Jake Dyer,

Without crunching the numbers, 150k seems like a good target. However, you should crunch some numbers to find out the following:

1) closing costs to purchase

2) holding costs until you sell (mortgage payments, taxes, insurance, water, electric, etc.)

3) how long rehab will take

4) how long you/real estate broker thinks the property will take to sell

5) selling costs including closing costs and real estate broker fee

Hope that helps. 

Hi @Henry Wells,

That deal looks okay - not great, not bad. 8% return on your investment is a solid return, though most investors on this forum will say 10% is the target.  Sometimes you are just not going to be able to get really high returns because of the market you are in.  As long as you've done your research on the area and this is the best opportunity you've seen in a while, then I'd say go for it. Your estimates seem very reasonable and safe too, especially your rehab estimate, which is important. Just remember, the first year you will see a negative return because of the rehab. 

Good luck!

Hi @Michael Romanowicz,

Those numbers look really amazing - go for it!

Thanks

Hi @Rashaun Labeau,

Is the current worth of the house 85k or is the ARV 85k? Do you know how much it would cost to remodel the entire house? And why would your mother sell to you - can she not afford the place now because of the 2nd mortgage?

Thanks,

Doug

Hi @Brad Dickinson,

I definitely think selling is the right move.  For having only invested about $23k, making $100k is amazing.  Selling also seems like the best option because it means you don't have to carry any risk with the renovations like delays or extra costs, as well as downturns in the market or anything else.  

If you do sell, consider doing a 1031 exchange (if that is at all possible for your co-purchase situation).  

Hope that helps. 

Doug

Hi @Andria Kobylinski,

I personally prefer the HELOC option because you get to keep your cash (and get more with the HELOC!). I'm not a huge fan of re-financing primary residences because there is the refinance cost and the not-so-obvious long-term refinance cost. By not-so-obvious I mean you will probably extend the life of your loan, and you pay more interest earlier in the amortization schedule.

I believe getting a HELOC will impact your credit score, so keep that in mind if you're thinking of getting a loan in the future. The HELOC is also nice because you can keep that line of credit open for other things in the future.

Hi @Sam Garcia,

Yes, using AirBnb is a legitimate strategy. If your property belongs to an HOA that does not allow short-term rentals, then you will have an issue, but multifamilies tend to not belong to an HOA.

Thanks!