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All Forum Posts by: KC Pake
KC Pake has started 17 posts and replied 166 times.
Post: What are some specific challenges or concerns that homeowners face
- Investor
- Orange Park, FL
- Posts 169
- Votes 106
Quote from @Erick Armando Gonzalez:
What are some specific challenges or concerns that homeowners face when selling their homes on their own?
One major hurdle is setting the right price without the insights a real estate agent might offer, potentially affecting your home's marketability. Marketing a property effectively becomes solely your responsibility, requiring you to explore various platforms for visibility, which might not reach as wide an audience as a professional's network would. Additionally, negotiating with buyers directly demands a level of expertise and emotional detachment that might be difficult for homeowners with strong connections to their property. The legal and regulatory aspects of selling a home, including managing the necessary paperwork and ensuring compliance with local laws, can be a bit overwhelming. This entire process demands a good deal of time commitment, from staging your home to aligning with potential buyers' schedules. While going the FSBO route saves on commission fees, it's essential to weigh these challenges against your ability to manage them effectively.
Cheers,
KC
Post: military tax rule 2/5
- Investor
- Orange Park, FL
- Posts 169
- Votes 106
Quote from @Kelli Powell:
My son bought a house in September 2022, lived in it, and then was deployed in March 2023. He will be returning soon but will be PCS to another state in the summer.
Questions:
He has been renting the house while he was deployed and only lived in the house for about 9 months after purchasing it. It will continue to be rented out because of his location change. Will the extension of the 2 out of 10-year rule apply to him if he decides to move back to Colorado and live in the house in the future? My understanding is that military can receive an extension of the "must live in the home 2 out of 5 years" to 10 years.
How does this work for taxes?? Does he have to report the income he received this past year and declare it a rental event though he would like to move back in eventually?
Will he still have to pay capital gains if he sells?
What are the options here?
Thanks!
**NOTE - I am not a Tax or Financial Advisor** but I will pass along my understanding. Hopefully, other professionals can jump in and correct me, or verify.
Since your son is in the military, he gets a special break when it comes to selling his house and not having to pay taxes on the profit. Normally, you have to live in your home for 2 out of the last 5 years to get this tax break. But for military folks like your son, they can stretch that to 2 out of the last 10 years if they're deployed or on duty far from home.
Now, about renting out his house while he's away. Yes, he's gotta report that rental income on his taxes. It's a must-do, even if he's planning to move back in down the line. The IRS wants to know about any money coming in, but he can also deduct some costs of renting it out.
If the time comes to sell the house, whether or not he has to pay capital gains tax depends on how long he ends up living there when he's back. If he manages to hit that magic number—living there for 2 years out of 10—then he might not have to pay taxes on the profit up to a certain limit. If he doesn't, then yep, the tax man cometh.
For options, he's got a few. Keep renting it out and deal with the tax implications, move back in and aim for that tax break on selling later, or sell and possibly pay capital gains tax if he doesn't meet the criteria for the exemption. It's a bit of a juggle, but talking to a tax pro or financial advisor can really help him figure out the best move. The Military has several tax/financial resources he can call on 👍
R/
KC
Post: ⁉️ 📲Your Most Expensive Lesson in Real Estate Investing: Share & Learn 🏢
- Investor
- Orange Park, FL
- Posts 169
- Votes 106
Quote from @Bjorn Ahlblad:
It is on you. It is your YOUR responsibility! If it succeeds, that's you! If it fails, that's you too. A while back we had a PM who did not inspect a certain property because of the dogs. She was very smooth about not being pinned down. Anyway when the tenant moved out one dark and stormy night it ended up costing me a bundle!
Whose fault was that?
You learn fast!
I learn fast too I check everything now!!
Good insight, tough lesson learned for sure. Thank you for sharing!
Cheers,
KC
Post: ⁉️ 📲Your Most Expensive Lesson in Real Estate Investing: Share & Learn 🏢
- Investor
- Orange Park, FL
- Posts 169
- Votes 106
Hey BiggerPockets Colleagues,
Real estate investing is a journey filled with ups and downs, twists and turns, and, inevitably, some lessons learned the hard way. While we all aim for success, it's often our mistakes that offer the most valuable insights. This thread is dedicated to sharing those expensive lessons or mistakes we've encountered in the world of real estate investing.
The purpose here isn't to point fingers or bash each other for the decisions we've made. Instead, it's about creating a supportive environment where we can share and learn from each other's experiences. By discussing the obstacles we've faced, we can help new investors be more aware of potential pitfalls and navigate their investment journey with a bit more foresight. I will share my "Most Expensive Lesson" in the comments.
To kick things off, here are ten examples of expensive lessons or mistakes in real estate investing:
Underestimated Repairs: The classic pitfall where the cost of repairs and renovations far exceeds initial estimates, impacting the overall budget and profitability.
Tax Liens: Failing to account for or being unaware of existing tax liens on a property can result in unexpected financial burdens.
Contractor Liens: Not settling payments or disputes with contractors can lead to liens against your property, complicating sales or refinancing.
HOA Fines: Overlooking or violating Homeowners Association (HOA) rules can lead to significant fines and headaches.
Bad Loan Products: Opting for loan products without fully understanding their terms can lead to unfavorable financial conditions, such as higher interest rates or unfavorable repayment terms.
Ignoring Zoning Laws: Investing in a property without a clear understanding of local zoning laws may restrict its use, affecting your investment strategy.
Overpaying for a Property: Lack of research or getting caught in a bidding war can result in paying much more than the property's worth.
Neglecting Due Diligence: Skipping thorough inspections and background checks can uncover unpleasant surprises after the purchase is finalized.
Poor Tenant Screening: Failing to properly screen tenants can lead to unpaid rent, property damage, and costly evictions.
Underestimating Market Risk: Not considering market fluctuations can lead to investments that don't pay off as expected, especially in volatile or declining markets.
We've all been there in one way or another, facing setbacks that seemed daunting at the time. But it's through these experiences that we grow and improve as investors. So, let's hear it—what has been your most expensive lesson or mistake in real estate investing? Share your stories and what you've learned from them. Remember, this thread is about learning and helping each other to avoid common traps and pitfalls.
Looking forward to hearing your insights and stories!
Best,
KC
Post: Creating the ultimate Seller / Owner Financing Checklist
- Investor
- Orange Park, FL
- Posts 169
- Votes 106
Quote from @Zak Cooper:
Hey BP peeps,
Newbie here, in discussions for my first Seller Financing deal!
Apologies in advance if there is a forum post similar to this, but I couldn't find one with a checklist-style format. As such, I am asking if there is anything you vets out there would add to this checklist. The areas I am most clueless about are where the attorney/notary gets involved to authorize the transaction and make things legally binding. Thanks!
---
SEE MY CHECKLIST BELOW:
---
1. Purchase Agreement:
- [ ] Property Description
- [ ] Purchase Price
- [ ] Down Payment
- [ ] Financing Terms (Interest Rate, Repayment Schedule)
- [ ] Closing Date
- [ ] Contingencies (Inspection, Appraisal, etc.)
2. Promissory Note:
- [ ] Principal Amount
- [ ] Date
- [ ] Payments Schedule
- [ ] Interest Rate
- [ ] Prepayment Terms
- [ ] Default Consequences
3. Mortgage / Deed of Trust:
- [ ] Property Description
- [ ] Mortgage Amount
- [ ] Interest Rate
- [ ] Repayment Schedule
- [ ] Default Terms
4. Title Insurance Policy:
- [ ] Coverage Details
- [ ] Policy Amount
- [ ] Effective Date
- [ ] Exclusions
5. Closing Statement:
- [ ] Purchase Price
- [ ] Down Payment
- [ ] Closing Costs
- [ ] Total Due
- [ ] Payment Method
6. Credit Check or Financial Information:
- [ ] Obtain and review the buyer's credit report or financial information.
7. Legal Assistance:
- [ ] Seek legal advice to ensure compliance with laws and regulations.
8. Insurance:
- [ ] Buyer obtains property insurance.
- [ ] Seller may require additional insurance coverage.
9. Due Diligence:
- [ ] Conduct property inspections.
- [ ] Obtain appraisals, if necessary.
- [ ] Review any other relevant documents or information.
10. Agreement on Default Procedures:
- [ ] Define default conditions.
- [ ] Agree on default consequences and procedures.
11. Communication and Documentation:
- [ ] Thoroughly copy, print, and notarize documents and all agreements/discussions.
Thanks BP.
Fantastic checklist - very thorough! Here are a few additional considerations and elements that you might want to include to ensure a smooth and legally sound transaction. Not all of these are absolutely necessary, but they are good to add to the discussion.
Escrow Account Setup: For the handling of down payments, monthly payments, and other financial transactions. This can add a layer of security for both parties, ensuring that funds are properly managed and disbursed according to the terms of the agreement.
Legal and Financial Representation: Both parties should have their own legal and financial advisors or representatives. This ensures that both the buyer's and seller's interests are protected and that the agreement complies with all state and federal laws.
Title Search and Clear Title Guarantee: Before finalizing the deal, conducting a thorough title search to ensure there are no liens, encumbrances, or legal issues with the property title is crucial. The seller should be able to provide a clear title guarantee.
Property Survey: Including a recent property survey in the transaction can help clarify the boundaries and dimensions of the property, avoiding potential disputes later on.
Home Warranty: Consider including a home warranty for a certain period after the closing. This can provide the buyer with peace of mind regarding potential appliance or system failures.
Seller’s Disclosure: A detailed seller's disclosure statement regarding the condition of the property, including any known defects or issues, should be included. This is legally required in many states and helps protect the buyer from undisclosed problems.
Zoning and Use Restrictions: Verification of local zoning laws and any restrictions on property use. This is particularly important if the buyer plans to change the property's use or develop it further.
HOA (Homeowners Association) Documents: If the property is part of a homeowners association, include the HOA documents, fees, and any restrictions.
Right of First Refusal or Buyback Clauses: These clauses can be beneficial in certain scenarios, allowing either the buyer to sell the property back to the seller under specific conditions or the seller to have the first opportunity to buy back the property if the buyer decides to sell.
Amendment or Modification Clause: This clause allows for changes to the agreement, should both parties agree, to accommodate unforeseen circumstances or adjustments in terms.
Record Keeping and Escrow Services for Document and Payment Handling: Ensure there's a clear plan for how documents will be stored and how payments will be processed and recorded. This often involves setting up an escrow service to handle these aspects securely.
Professional Inspection and Repair Agreement: Beyond basic inspections, consider a detailed agreement on how repairs identified during inspections will be handled, including who will pay for them and timelines for completion.
Involving professionals like attorneys and notaries is essential to ensure that the transaction adheres to legal standards and that all documents are correctly executed
Great Job - this will help many people get started in this space.
Cheers,
KC
Post: System to record properties
- Investor
- Orange Park, FL
- Posts 169
- Votes 106
Quote from @Mary Ciccarelli:
I’m looking for a way to document all basic and financial details of each deal we purchase (downpayment, how we funded it, lenders used, mortgage, interest rate, rent, cash flow, when it was purchased, partners included, etc). I was going to create an Excel spreadsheet but now I’m wondering if there is a software system I can use, or is this something Quickbooks would be good for?
For documenting the detailed information of real estate deals, including both basic and financial details, you have several options ranging from custom spreadsheets to specialized real estate investment software. Each option has its pros and cons depending on the complexity of your needs, your budget, and the scalability you require.
1. Custom Excel or Google Sheets Spreadsheet
- Pros:
- Highly customizable to fit exactly what data you want to track.
- No extra cost if you already have access to Microsoft Office or Google Workspace.
- Easy to share and collaborate with partners if you use Google Sheets.
- Cons:
- Can become cumbersome to manage as your portfolio grows.
- Lacks automated features like real-time updates or integration with banking systems.
2. QuickBooks
QuickBooks can be a good option for tracking the financial aspects of your deals, such as downpayment, funding sources, mortgage details, and cash flow.
- Pros:
- Widely used, with robust reporting features.
- Can track both income and expenses, making it easier to manage the financial health of your properties.
- Offers integrations with banks and lending institutions for easier transaction tracking.
- Cons:
- There might be a learning curve if you're not familiar with accounting software.
- May require customization or additional apps to track all the specific real estate details you mentioned.
3. Specialized Real Estate Investment Software
There are several real estate-specific software solutions like Stessa, Realtyzam, or Propertyware that are designed for investors to track and manage their properties.
- Pros:
- Tailored for real estate investments, offering features like tracking income and expenses, document storage, and reporting.
- Some platforms offer automation and integration with real estate market data, enhancing decision-making.
- Cons:
- Cost: Most platforms come with a subscription fee.
- May offer more features than you actually need, depending on the size of your portfolio.
4. CRM Software with Customization Options
CRM (Customer Relationship Management) software like Salesforce or Zoho CRM can be customized to track deal details, including financials, though it's not their primary function.
- Pros:
- Highly customizable and can be tailored to fit a wide range of data tracking needs.
- Good for managing relationships with lenders, partners, and tenants.
- Cons:
- Requires setup and possibly custom development, which can be costly.
- May be more complex than necessary for straightforward property management.
Recommendation:
The best choice depends on your specific needs:
- If you're comfortable with spreadsheets and have a relatively small portfolio, starting with Excel or Google Sheets might be the most cost-effective and straightforward approach.
If financial management is your primary concern and you're willing to invest some time in setup, QuickBooks is a robust option.- For a more comprehensive solution tailored to real estate investments, exploring specialized real estate investment software could provide the most benefits.
If your operations involve significant relationship management and you need a highly customizable system, a CRM with customization might be the way to go.
Before deciding, consider factors like cost, scalability, and the learning curve of new software. It might also be helpful to take advantage of free trials or demos offered by software providers to better understand what best fits your needs.
Good luck with your search,KC
Post: Building your own multi family question
- Investor
- Orange Park, FL
- Posts 169
- Votes 106
Quote from @Patrick Flanagan:
Hello,
I’m going through all the steps and making a list of everything I need to do to buy land and build a duplex to 4 plex my self. The only thing I legally have to sub out is the foundation and plumbing(I’m a Electrician)
I don’t know how to estimate the cost of the build. After I have a set of plans(say a duplex). How do I go about estimating the cost of all the lumber needed, roof material, dry wall, siding, flooring etc.
any advice helps,
thanks Pat
Below are some online resources that might help. Just search the name of each and you will find a link to their calculators.
Remodeling Calculator offers a detailed guide and calculator to estimate the costs for various aspects of building a house, including roofing, siding, windows, HVAC, flooring, kitchen, and bathroom expenses.
BuildBook provides a free Construction Cost Calculator that helps you calculate total construction costs based on line items, rates, and quantities. It emphasizes the importance of accounting for every element of a project, including contingencies, financing costs, profit margin, variances, and unforeseen expenses. The site also offers a free collection of construction calculators for more specific estimating needs.
Building Journal offers an online construction cost calculator that quickly estimates the cost of residential and commercial projects in over 160 U.S. cities. This can be particularly useful for getting location-specific estimates, which are crucial as costs can vary significantly depending on the area.
Home-Cost features a cost-to-build calculator that allows you to vary zip code, actual home design, and quality assumptions for more accurate cost estimates. Their database covers over 40,000 zip codes and 4,000 design and material options, providing detailed and reliable results that take into account the specificities of your project location and design choices.
Omni Calculator offers a range of construction calculators for specific needs, such as concrete requirements for various parts of a construction project (slabs, blocks, columns, stairs, etc.), as well as calculators for other materials and project aspects. These tools can help you estimate the materials you'll need and their costs with a high degree of specificity.
Each of these resources has its unique strengths, from providing comprehensive project estimates to focusing on specific materials or aspects of construction. Utilizing a combination of these tools can give you a well-rounded view of the potential costs involved in building a house from scratch.
Good luck with your build,
KC
Post: Potential 1st Commercial Property - Need Creative Financing Ideas
- Investor
- Orange Park, FL
- Posts 169
- Votes 106
Quote from @Kyle Neff:
We recently received a quote for a commercial property buy. I am looking to gather a few more quotes from local lenders. There are two tricky areas with this building and the buy:
1) It is owned by the company operating out of it, so it is not leased nor has it been for decades. The owner is selling FSBO and told us an asking price of $500K. Unfortunately, a broker got wind of the sale and now moving forward is hinging on what value this broker holds in front of them. We have first right of refusal, and they don't want it on the market, but we'll likely be out of reach at anything over $500K. Anyone dealt with this and were you able to get the seller to commit to their original asking price?
2) The plan for the building is to house a new small business that my family and some friends/business partners are working through. We will have a business plan and legal pieces in hand soon, and are very confident that the location and the space of this building are perfect. However, we'd be taking on a commercial loan before any revenue comes in the door. We estimate at min 6 months before being open due to renovations and permitting. Has anyone seen an 'interest only' commercial loan? Does anyone have any creative ideas on how to structure the financing so that we aren't floating a huge monthly payment before the business even opens?
Thank you!
You have a lot going on with this deal, very interesting and I'd like to hear about the outcome because there are so many ways this can go!
Dealing with the Original Asking Price Amid Broker Involvement: When a broker becomes involved, and the deal's dynamics change, it's essential to maintain clear and direct communication with the seller. Since the property is being sold FSBO (For Sale By Owner), you have a unique advantage in that you can negotiate directly with the owner. Given your first right of refusal and the owner's preference not to list the property on the market, leverage these points in your negotiations. It's not uncommon for sellers to stick to their original asking price, especially if they see the value in a straightforward and faster sale process without the additional fees that come with broker involvement. You might also consider drafting a letter of intent (LOI) that outlines your offer and demonstrates your serious commitment to the property at the $500K price point. This approach can sometimes help in reinforcing the original verbal agreement and moving towards a formal purchase agreement.
Financing Options for Pre-Revenue Phase: Securing financing for a property intended to house a new business can be particularly tricky, especially when you anticipate a delay in generating revenue due to renovations and permitting. Here are a few suggestions:
Interest-Only Commercial Loans: Yes, interest-only commercial loans do exist and might be a suitable option for your situation. These loans allow borrowers to pay only the interest on the loan for a set period, usually the first few years, before transitioning to paying both principal and interest. This can significantly lower your initial payments, making it easier to manage cash flow before your business starts generating income.
SBA Loans: While typically requiring business revenue for eligibility, some Small Business Administration (SBA) loan programs are designed to help new businesses get off the ground. Specifically, the SBA 7(a) loan program can sometimes be used for purchasing commercial real estate. These loans often offer competitive terms, including lower down payments and longer repayment terms, which could be beneficial for your situation.
Creative Financing Structures: Consider exploring creative financing options such as seller financing, where the seller acts as the lender. This can sometimes offer more flexible terms and might be an attractive option for the seller to complete the sale without involving brokers. Another option could be to seek investors willing to contribute capital in exchange for equity in the business, thereby reducing the loan amount needed.
Best of luck, Kyle!
R/KC
Post: Resources for off market properties
- Investor
- Orange Park, FL
- Posts 169
- Votes 106
Quote from @Kamia Liddell:
So I’m starting my real estate journey as a wholesaler first and my question is are there any other platforms I can use to find traces. I’m currently using Propwire but almost allll of the numbers I pay for are invalid. Someone please help!!
Wholesaling real estate can be a lucrative venture, but it requires access to reliable information and tools to find under-valued properties and willing sellers. Here are several strategies and platforms that might help you in your wholesaling journey:
Local Real Estate Investors Associations (REIAs): Joining a local REIA can be a great way to network with other real estate professionals, including wholesalers, rehabbers, and landlords. These associations often have meetings and events where you can learn about the market and find potential deals.
Public Records and MLS: Look into accessing public records in your area to find properties that might be in pre-foreclosure, foreclosure, or are tax delinquent. Some wholesalers also work with real estate agents to get access to the Multiple Listing Service (MLS) for leads on distressed properties that could be wholesaled.
Driving for Dollars: This is a grassroots approach where you physically drive around neighborhoods looking for distressed properties (e.g., overgrown lawns, and boarded-up windows). You then research the owners and reach out to them directly.
Direct Mail Campaigns: Sending out letters or postcards to homeowners in targeted areas or situations (e.g., absentee owners, older properties) can be effective. Tailor your message to offer solutions to their potential needs or situations.
Online Platforms: Besides Propwire, there are other platforms and tools designed for real estate investors, such as:
ListSource: A service for buying customized lists of potential leads based on various criteria (e.g., geography, property type, financial distress indicators).
BatchSkipTracing: Offers services to help you find accurate contact information for property owners.
PropStream: Provides comprehensive data for real estate investors, including leads on distressed properties, motivated sellers, and detailed property information.
Social Media and Real Estate Forums: Platforms like Facebook, LinkedIn, and specific real estate forums (e.g., BiggerPockets) can be valuable for networking, finding mentors, and discussing strategies with other wholesalers.
Bandit Signs: These are signs you see on the side of the road with messages like "We Buy Houses Cash." While effective in some markets, be sure to check local regulations regarding their use.
Real Estate Auctions: Attending auctions can be a way to find properties at a lower cost, though it requires upfront capital and a good understanding of the process and market values.
Remember, the key to successful wholesaling is not just finding deals but building relationships with both sellers and buyers (investors). Being consistent, ethical, and providing value will help you build a reputation in the industry that can lead to more opportunities.
All the best,
KC
Post: Hotel Condo Real Estate Investing
- Investor
- Orange Park, FL
- Posts 169
- Votes 106
Quote from @Pamela Gates:
Hello-
I am considering purchasing a resort condo to use as a rental real estate investment. I believe they are more common in typical vacation spots like Kissimmee, Orlando, etc. Does anyone have any insights or experiences to share? Very interested in real life cons to this approach to real estate investing.
Thanks.
Investing in a resort condo in vacation spots like Kissimmee or Orlando can be an appealing real estate venture due to the high tourist traffic and the potential for steady rental income. However, there can be several cons and considerations to keep in mind:
Seasonality: Rental income can be highly seasonal, with peaks during certain times of the year and potential lulls in others. This can affect your cash flow and requires careful financial planning.
Competition: Popular vacation areas often have high competition for rental properties, which can impact occupancy rates and rental prices. You'll need to ensure your property stands out and offers value to potential renters.
Management and Maintenance Costs: Managing a rental property, especially from a distance, can be challenging and costly. You may need to hire a property management company to handle day-to-day operations, which can eat into your profits. Maintenance costs in a resort area can also be higher than in non-resort areas.
Regulatory Environment: Local regulations regarding short-term rentals can change, impacting your ability to rent out the condo or imposing additional requirements or taxes. It's important to stay informed about local laws and regulations.
Market Volatility: The real estate market in vacation spots can be more volatile, with property values and rental demand potentially affected by factors like natural disasters, changes in tourist preferences, and economic downturns.
HOA Fees and Restrictions: Resort condos often come with high Homeowners Association (HOA) fees to cover amenities and maintenance of common areas. Additionally, HOAs may have restrictions on rental practices, which can limit your flexibility.
Initial Investment and Financing: The initial cost of purchasing a resort condo can be high, and financing options may differ from other types of real estate investments. It's important to consider your financing strategy and ensure you have a clear understanding of all costs involved.
While investing in a resort condo can offer lucrative opportunities, especially in high-demand vacation spots, it's crucial to conduct thorough research and consider all potential downsides. Speaking with real estate professionals, property managers, and other investors in your area of interest can provide valuable insights and help you make an informed decision.
Best of luck with your investment decision!
KC