All Forum Posts by: Jeremiah B.

Be careful.

Listing a property to the open market is the only definitive way to *know* how much a house is worth.  Everything else is projections and guesses.  So, if you sell privately, you must must must be an absolute expert in your market.

1:  If you got the 1.3 and 1.4 numbers from your agent, all-but ignore them.  It's not fair to paint all agents with the same brush, but many agents will set low exceptions so that they can easily clear them.

2:  The investor putting an offer on the house will likely know the market better than the buyer.  It's that investor's job to know the market, and squeeze deals and money out of it.  In this case, if I'm the buyer, I'm following the steps described if the house is worth 1.4 - 1.8.  I'm probably NOT acting that way if the house is worth less than 1.4.  

3:  Feeling a sense of urgency is a huge risk in negotiations.  When you get the feeling in the pit of your stomach "oh no - this one might get away" - you're already in a loosing position.

For those reasons, assuming that your fees are the same regardless of whether you list it or not, I would personally lean towards listing it.  There's nothing wrong with making a deal here, a 1.4+ cash offer sounds great, but there's simply too much risk that I'm leaving money on the table.  So, I'd list, but that's obviously a risk in itself.

With that said, DO NOT ACCEPT THAT OFFER. If you want to make a deal with this person, counter!!! If the process is bid, reject, higher bid - the correct next step is for you to say "I'm happy to make a deal with you, but if we want to make this happen before listing it on the MLS, I'd need to get to 1.5M." If they say no (and they might), there's a great chance that you can still make the deal at what they have already offered.

Happy hunting, and let us know how it turns out.

Real estate aside, this is actually quite concerning.

You and the wife need a financial plan that you're both bought into.  Maybe that's buying bitcoin, or starting an all you can drink coffee chain, or agreeing to work until you're 80... it really doesn't matter.  What you need is an agreement of what you want your financial future to look like, and a gameplan for how you will get there.

My advice?  Forget about real estate - that's not what the discussion should be about.  Instead, ask her what financial life you want together?  Do you want to save for the future?  When do you want to retire?  What type of retirement?  Kids through school?  etc.  But start with the end in mind.  

Once you have some agreement on where you want to end up, you can then ask how to get there.  I hear you that real estate is appealing, but that's a decision that you both need to make.  If you're asking her to consider options beyond 15K worth of shoes, you need to consider options beyond 15K of real estate.  So talk - but be sure to ask and listen - and yes - even compromise.

@Rod F.

I've never talked with someone who had the LLC protect them. That's actually pretty cool. Without getting into specifics, can I ask some questions?

I'm assuming the litigation was from a tenant (or someone else who was harmed at/by the property) and that the plaintiff was awarded a settlement by a court. I'm also assuming that the court awarded damaged that exceeded the value of the property and that the property was awarded to the tenant, along with debt to the LLC which is unlikely to be collected. If so:

1- Would liability insurance have covered you here (either on the property or in an umbrella plan)?

2- Beyond filing the LLC papers and paying the fees, what have you done to keep the LLC solvent?

3- I don't need specifics, but was the award significantly higher than the value of the house?

I don't mean to pry - I'm just very interested. 

Congrats on your purchase.  And good luck with your growth plans.

Even if you want for this to be your company, I'd shy away from LLC's for three reasons:

1- Cost

2- I have heard of several cases in the last few months where banks are calling loans due when a deed was moved from the owner to their LLC (due on sale clause).

3- A lot of LLCs are not set up correctly to protect their owner. This may require such things like bylaws, annual meetings/minutes, separate financials, etc. It is quite common for the LLC veal to be pierced by either internal or external lawsuits.

I personally prefer offensively high liability coverage, and I sleep just fine at nights.

Happy hunting.

YOU CAN TAKE THE MONEY OUT OF YOUR 401K BEFORE 65!

BP is the best resource on earth for real estate investing.  But we don't know much about 401(k)s....

You can leave work today and access your 401k using the 72(t) rule.  In short, you can take the money today, without penalty, as long as you promise to take the money in a certain way. 

If that doesn't work for you, you can roll that money into a Roth (which requires you to stop deferring some taxes) and you gain access to a bunch of that money.  

Or - worst case scenario, you can pay the 10% penalty for early withdrawal.  This is real money, but should not be a barrier to the 100% match you would be getting from your plan.

You can also access these plans at 59.5 (not 65).

And please understand the money vs cashflow distinction beyond the talking points.  Ultimately, we all need cashflow, but converting a pile of money (such as in a 401k) into a stream of cashflow is extremely easy.  Real estate can do both, and increase your value while also giving you a monthly check, but so can a lot of stocks.  And some popular RE gurus do not get that money is money...

Investing is always better than not investing.  And real estate is an awesome investment.  But the the correct decision for you always depends on your situation.

Happy Hunting!

(I'm not a tax person, lawyer, CPA, CFP, MBA, RN, etc. so please don't take this as professional advice.  just my two cents)

Hey Kevin,

I'm in Portland - not far from you.  If you ever want to grab coffee and talk shop - just let me know.  I own 6 out of state rentals, though I opted to not use turnkey after some rather extensive research. 

Buying turnkeys is a very complicated discussion, but here are quick hits:

Chris Clothier and Memphis Invest is simply the gold standard in turnkey providers.  I have never used them, but if I ever go turnkey - they will be my first call.

Using a buyers agent is an option - but is not common and you will likely need to pay for them on your own dime.  If you go this route, get a RE agent who has worked extensively with SFRs, and expect to pay 2%-3%.

Instead of using an agent, I would post the specifics of the deal on BP - including the address and price.  The community is both big and well informed, and my hunch is that you will get a good review of the deal.

Turnkey providers DO charge a premium.  That's how they stay in business, and have the money to fly prospects out, rent them cars, etc.  This premium may be worth it - but be sure to understand the amount of that premium.

Remember that turnkey is a business - and the providers are in the business of selling.  So, always remember that it's your job to look out for your best interest (not theirs).   

Happy hunting.

Grats on your first deal!  Sounds like a good one!

It's a good strategy - but be sure you talk with a lender early in the process as there are several pitfalls to watch out for - and your options will often depend on how you purchased the first place.

Generally speaking, I understand that there are two options (verify the specifics with your lender):

1- Traditional cash out refi.  This is only an option for investor with 4 or fewer mortgages.  If you hold a house for six months, you can have the house appraised, and then pull out something like 75% of the new value. 

2 - Delayed financing.  This is a special type of cash-out refi that can be used for properties 5-10, and MUST be done within 6 months of purchasing the house.  The house is appraised and you can finance something like 70% of the appraised value.  You must have paid cash for this to be an option.  It is also quite rare to find a lender who can do this, but they do exist (PM me if you need someone).  This is the strategy I've used a few times with moderate (it lets me buy in cash which is nice, the I don't get as much cash back as I think I should).

In either option, the appraisals often come back very conservative - and in my personal experience - have been ~ 5%-15% below actual market.   Both options also cost money, so be sure that the money is worth the cost.

Happy hunting.

I've never done a Subject to, but here's my take:

A note to the seller or cash are your only options with cash being the most common.  In theory, you may be able to find an investor who would loan you the difference, but that doesn't seem likely.  You will not find a bank to finance the deal.

Risk is a tricky concept.  I believe that no investment is "too risky" in a vacuum.  Instead, an investment may be:

1- Too risky given the potential returns.  If you're going to assume a huge amount of risk for a modest return, or for a return that you could get through a less risky avenue, than this is likely too risky given the potential return.  To say it another way, if you can make 15% on a risky investment, or 12% on a stable one - you really need to determine which is the better fit for you.

2- Too risky for the checkbook.  Cash is a wonderful way to counteract risk.  If you don't have enough cash for the deal to go south and remain on-track for your short term and long term goals, you may want to steer clear.  You mentioned that you can do a full rehab with the cash you have - but could you do that and also lose your job and be OK?  Could it go south without impacting your retirement plan?  

3- Too risky for your pysche.  If you're going to stress about things that go wrong, you probably want to steer clear of risky investments.

No one can universally stomach these considerations and everyone has a tipping point.  The key to risk is ensuring (and often, insuring) that the level of the risk you actually take is consistent with your responses to these considerations.

Let us know what you decide. 

Happy hunting!

Props for actually reading the contract!

I've only worked with about a dozen PM's, but I don't think I've seen that clause before.  It may be standard in your market, but I don't think it's standard in mine (Portland and Charlotte).

Whether you can line-through this clause or not really depends on the PM. If the PM works for a 'firm,' then the PM has probably been instructed to only use the contract as-written.  They are likely not authorized to have sections of their standard contact excluded, and will let you walk before editing it.  If the PM you're working with is the owner of the firm, you may have better luck.

I think the better question is: is this clause worth walking away over? And there's no simple answer to that question.  In the scheme of things, this is unlikely to be an actual expense - and most lawsuits would be direct at you the owner and not the PM.   However, if the clause is not standard in the market, it's as good of a reason as any to choose a different PM.

Personally, if I was confident that this was the otherwise clear-cut best PM for me, I would probably try and get the clause removed, but sign even if I can't.  Great PM's are hard to come by, and typically come with some type of added expense.   However, if the PM was just 'good enough' - I'd probably make some additional calls and try and find a different PM.

Happy hunting!