All Forum Posts by: James Gefke

Hey Bob,

Are you planning on buying these properties free and clear or getting a loan on them (using the HELOC as a down payment on the investment property)? Sometimes there are lenders who are hesitant to lend to a LLC specifically and buying them in your personal name and transferring them could trigger a due on sale clause.

Not sure why you would be running into any problems since it really shouldn't be any concern to your lender and if Schwab doesn't want to lend you have a lot of other options.

If you are taking out a HELOC on your primary residence to buy property free and clear property in a LLC that should be fine. You are still personally guarantying the loan and the lien would be against your primary residence and not your investment property.

Talk to other local lenders (i.e. credit unions/small local banks) and layout your plan and see what they have to offer. As long as your debt to income ratio supports your plan and the investments make financial sense you should be able to get financing.

Good Luck!

Hi Chris,

I haven't seen that kind of way to analyze a deal but here is a common one used by most investors in my area as well as a lot of BP members. I use 65% of the after repair value (ARV) less rehab costs to get my maximum allowable offer (MAO)

Example:
ARV: $100,000
65%: $65,000
Rehab: $30,000

MAO would be $35,000 on the property

In this example your all in costs are $65,000 and the house is now worth $100,000 all fixed up.

So now your profit would be $35,000 right? Actually, the soft costs such as closing costs, commissions, other holding costs etc.... would be deducted to give you your profit and will vary based on what the customary expenses are associated with those items in your area.

This is a fairly easy way to analyze potential deals for fix and flip and you should be safe if you follow this formula. Note: This formula starts to have less validity if you are dealing with ARV's far under 100k.

As far as comps you need to find out what places are actually SELLING for. I start my search by looking at sales of similar properties within 3 square blocks within the last 3 months and go from there. Good Luck!

Hi Dave,

There really isn't enough info evaluate this potential deal. I don't know your market but where I am houses aren't selling anywhere close to what they were in 2007. What it sold for in 2007 is really irrelevant at this point.

You need to do some research and find out what houses in similar in condition, size, and location are currently selling for to figure out whether or not it is a deal.

Sites like zillow and trulia are tools that you can use but your comps will be actual recent sales.
Good Luck

I was new firefighter with six months on the job and was at roll call when the first plane hit. We watched a lot of events unfold before starting to evacuate buildings in Milwaukee, WI. Today I represented Battalion Chief Dennis L Devlin from Battalion 9 and Firefighter James A. Giberson from Ladder 35 from FDNY by climbing 110 stories in full firefighting turnout gear and tools. Both of those men lost their lives that day. I am honored to have the ability to help keep their memory alive.

The definitive answer is to check your states landlord/tenant law.

In my state (WI) your situation would fall under a periodic or month-to-month tenancy from what you described. The landlord can simply give a 30-day written notice ending the month-to-month agreement and you do not have to cite a reason why.

This works both ways. The tenant can also end the month-to-month agreement giving 30-day written notice to the landlord.

It sounds like you just want this tenant out so review the laws in your state and see what your options are.

Hi Kenyatta,

I really don't think there are any "golden rules" for putting offers in on HUD homes and it tends to vary from market to market. In my area (Milwaukee, WI) I know some investors that have recently been able to buy significantly below (40-50%) list price. They simply put in offer that made sense for them and I would suggest doing the same. Knowing the area and comps along with accurate repair estimates is key. If your plan is to wholesale try and find out what investors are paying for those type of properties so you can give them a good deal as well and they'll keep coming back.
Good Luck!

Hi David,

While I am fairly new as well I have a couple of suggestions. Before breaking out the calculator and going through numbers and costs etc... you need to connect with the seller and find out their needs. What is the problem that you can help solve? During the conversation try and identify how you can help them out.

I would definitely discourage misleading or telling the seller something untrue. I am not suggesting that was your plan but typically I imagine you are offering to buy their property with no contingencies and settling with cash.

There is nothing wrong with citing the advantages with dealing with you rather than a realtor but again try and assess what their specific needs are and try to fulfill them. You may not even have to go there. Let them talk.

Know where you need to be with your numbers and I agree you should not be the first person throwing out a number but hopefully you will have been able to perform some prescreening so that you can tell whether or not they are truly motivated.

Finally, one thing you can ask them after you have built some rapport is "what are you going to do if you don't sell this property today?" This sometimes gets sellers to realize the reality of their situations and gets them to make a decision.

As far as wholesaling the deal you do not need to advertise that fact but if they ask you directly I would not lie and deny that would be a possibility IMHO.

Good Luck

Hey Chris,

At first glance it seems like you might be paying a bit too much for the property. Using the 70% ARV formula the most you should being paying is $92,500. (175k x 70% less 30k in repairs= $92,500)

Also, you need make sure that the extra space and additional bath will indeed increase the value 25-35k over the comps you mentioned. I don't know your market but I might suggest finding comps that are similar in size and location unless you are very confident the price per square foot estimate to be accurate.

Whatever you decide make sure you verify the information that supports your numbers.

Good luck

Hi Aaron,

I am not an expert on the subject of using a self-directed IRA's for RE investment. Just make sure you don't violate any rules that would result in making you take a significant hit. As Rob mentioned, check out equity trust company to find out the details and explain to them exactly what you are planning on doing.

Hey Jason

The numbers look great as long as you are confident with your ARV. 12.5k seems a bit low for a rehab flip to an end buyer in today's market (assuming that's what your plan is with those figures) but if you are confident with your numbers it looks like a go. Just make sure homes are selling in that price range in that area. In my market in Milwaukee, WI I've seen some steady declines in my farm area. Good Luck!