All Forum Posts by: Keith Linne

@Adam Marley - I have a MN Real Estate license, and it is valid state-wide (meaning I can use it to represent myself or others in property transactions anywhere in MN). I'm guessing VA and WI would be similar state licenses. On a different note, MLS access/coverage is more localized. For example, I live in and have access to the Twin Cities MLS system (the MLS is what you can access, if licensed, to browse properties listed for sale, etc), so I have great coverage of active/pending/sold properties in the Twin Cities and surrounding areas. As you get further North (Duluth, for example), the data is less complete, as those listings are typically input on the respective regional MLS system. As such, I typically use an agent from that area when interested in local listings. Hope that helps!

@Account Closed - I flipped houses full time from 2011-2014, and have since transitioned to full-time General contracting for clients. I also have my real estate license.

In regards to the tax ramifications, I would check with a CPA to be entirely certain. In our case, gains were taxed at the short-term capital gains rate (personal income tax rate). There may be some ways to get creative with S-Corp structures/dividend payments, etc, but that isn't my area of expertise. Sorry I can't be of more help there!

I would highly recommend obtaining your contractor's license, from a profitability standpoint. I credit a lot of our success flipping to partnering with an excellent contractor who was just starting out. This gave us excellent quality, for below market pricing (he wanted to build a portfolio and prove himself). As his prices increased, and the market tightened up, our margins decreased significantly. Obtaining my builder's license allowed me to cut out his fees, push back on sub-contractor pricing (when needed), and also take on client work (since that was a goal of mine). Having a solid contractor is extremely important to your ongoing success with flipping.

If you ever want to bounce ideas off of someone, I'd be happy to grab lunch/coffee, or email/message back and forth. 

Hope that helps!

Welcome to BP, Daniel! Best of luck with your investing!

@Amy Ranae - My wife, son and I live in Minnetonka; however, I was in the same boat (regarding loans) a few years ago. We completely rehabbed our first home (in Richfield) and then lived in it for 2 years. At that point, we reached our capital gains tax exemption, and sold for a solid tax-free gain. 

I had a significant chunk of student loans. Roughly half of the loans had interest at 6%+, while the other half had interest at 4%-. I ultimately decided to pay off the loans in the previous category, as most investments (stocks, RE, etc) will out perform 4% if you place your capital correctly. Are there deals that could also out perform 6%? Absolutely; however, I deemed that the awesome feeling/overall relief of cutting my student debt in half was worth paying off that portion. Since then, my remaining loans have dropped in interest (for direct payment enrollment, etc). They currently average 3% interest, which to me is nearly free money. As such, I'll be paying on those until the end of their respective terms. 

I flipped houses full time for 3 years (roughly 30 total single family homes), and now work full-time as a general contractor specializing in interior residential remodels and whole house renovations (though I'm always keeping my eyes peeled for good rehab deals, buy and hold deals, and partners). The thing I find most often is that construction costs are significantly under-estimated (which obviously makes/breaks the viability of a flip). 

If you're interested, I'd love to meet with you for lunch/coffee sometime and brainstorm. I'd be more than happy to provide my thoughts on deals you're considering, and would also be interested in partnering, to help you get started. No pressure either way! Let me know what you think! 

@Anthony Angotti - Happy to help!

@Jim Adrian - I tend to agree that epoxy grout is overkill in many cases; however, in our main service area for residential contracting work, the water is extremely hard. Our clients tend to have bad experience with hard water/mineral stains in the bathrooms we renovate, so we've made it a practice to deal with the additional cost and minor headaches of epoxy grout for all client work, as it improves customer satisfaction, and helps reduce the number of service calls for return work. We've also found that it almost completely eliminates the need for sealing work, which is a fair trade-off. Great points on Mapei and the silicone products as well!

@Anthony Angotti 

It really depends on how bad the cracking is. Typically, you have a few options (most require knowing the color):

(1) If you know the grout color, you can purchase more grout and mix up some extra to "fill in" the cracks. Unfortunately, being that grout is a cement-like product, a cured layer and new layer will not usually adhere properly, causing the new grout to flake off over time. You then end up back where you started.

(2) Use a grout saw (a very coarse handheld tool) or razor blade to remove the grout in the trouble areas and then re-grout those spots. Having a full joint space allows the grout to properly adhere to the tile, etc. This can be a viable option if the cracking is concentrated to a specific area (removal of grout can be quite tedious), and you know the color (for an exact match). You don't have to know the color, but that can lead to a patchwork look.

(3) Use a tile caulking (home depot sells Polyblend grout that has matching caulking), that matches your grout color. The caulking will expand/contract with changes in temp and humidity, and as building materials shift over time.

(4) If you don't know the grout color, and it isn't a straightforward bright white, etc, tear-out and re-tile will give you the best overall finished product (and will likely allow you to determine the issues causing the cracking).

As a general rule of thumb, it's best to purchase grout and tile caulking for all tile jobs (when starting from scratch). Use grout wherever you have standard joints (between tiles). Use the matching caulking on inside corners and joints between materials (tub to tile, tile to ceiling, tile to window, etc). Make sure the caulking is an approved tile product and can be exposed to water.

Grout comes in sanded and non-sanded varieties. Sanded is used in larger joints (1/8" or larger), non-sanded is used in smaller joints (1/8" or less - think subway tile). At exactly 1/8" you can technically use either. I like to use TEC Power Grout, which is an epoxy-based grout. It is a bit more difficult to work with, but it is also more durable once fully cured, and it is less porous (typically eliminating the need to seal the grout).

I live in MN, and we have huge humidity and temperature swings throughout the year. Some cracking is always expected; however, the above steps will help minimize the issues in the long run. Hope that helps! 

Always fun digging into plumbing repairs! Here are my thoughts, from a construction background:

Make sure you install the tile on proper backing. DensShield is easy to work with, and approved for moisture. Durock is also a good product, but extremely difficult to cut.

Also, double and triple check your measurements for coverage, to be certain you have enough material (especially when buying closet-out tile). The general rule of thumb is total square footage coverage, plus 10% (to account for breakage, cutting, waste, etc). That figures adjusts a bit depending on tile pattern, shape, and overall tile setting experience (more cutting with staggered designs/fancy mosaics, etc). There's nothing worse than realizing you're 5 sq ft short on material, and you aren't able to acquire additional materials of the same style/dye lot!

Big box stores (home depot, lowes, etc) have fantastic return policies. My motto when it comes to materials? "It's better to have it and not need it, than to need it and not have it!"

Good luck with the project!

@Kyle Myers Thanks for the response! My apologies - the "cash to close" figure is a type-o. Should say $24,250 ($16,250 DP + $4,000 CC + $4,000 reno). Sorry for the oversight!

I like your thoughts on maintenance vs CAPEX as well. I'll definitely work on figuring those separately before pulling the trigger.

Thanks for the advice, and for taking the time to reply!

Hi Everyone!

I have been lurking on the BP blogs/forums for about 2 years, and decided it's about time I jump in and introduce myself.

I am from the Minneapolis, MN area, and I started in Real Estate as a traditional Realtor (spring 2011). After a few months, I moved into full-time property rehabbing (flipped roughly 20 single family homes from 2011-2014).

As the market shifted a bit, I earned my MN Residential Builder's License, and I now work full-time as a General Contractor (almost 100% interior residential remodeling).

I'm in the process of analyzing deals, and my goal is to purchase my first buy and hold rental in 2016, and continue onward from there.

I look forward to joining in the discussion, and continuing to learn. See you around BP!

Hi Everyone!

I've been lurking on Bigger Pockets for a year or so, and cannot praise the site, and everyone's input/discussion, enough. It has been an incredible learning tool, and has really helped expand my overall knowledge base of REI.

I am from the Minneapolis, MN area, and I started in RE as a traditional Realtor (spring 2011), and then moved into full-time property rehabbing (flipped roughly 20 single family homes from 2011-2014). 

Toward the end of that rehabbing phase, I earned my MN Residential Builder's License, and I now work full-time as a General Contractor (almost 100% interior residential remodeling).

After tons of reading, property analysis, saving, etc, I'm ready to pull the trigger on my first investment property.

I recently came across a duplex that seems intriguing (analysis below). Monthly averages for utilities/taxes have been verified with the appropriate parties, and I'm running 10% allowances for management (verified), vacancy, and CAPEX. Overall, I've tried to be quite conservative, so I don't run into financial nightmares on my first property.

I'm planning to buy and hold the property in an LLC. As such, I'm assuming 5% interest and a 25% DP (awaiting verification from a local bank I have a good working relationship with). One concern (also in the works) - will a bank typically finance a mortgage with a balance below $50,000?

Up/Down Duplex (2 units, 2br/1ba each) - neighborhood is B-, but close to where I grew up, so I am comfortable with it.

$65,000 purchase price 

$16,250 down payment (25%)

$4,000 estimated repairs (both units are in great shape, but I like to be conservative)

$4,000 estimated closing costs

Cash to Close: $14,250

Monthly Rent

Rent $650/unit (based on research, the market supports $700 - $725/unit)

Gross Monthly Income: $1,300

Monthly Expenses

Taxes - $135

Insurance - $100 (estimated - awaiting confirmation)

PM - $130 (10% of gross rent - may manage myself, but would still need to account for my time)

Vacancy - $130 (10%; however, the market is currently very high demand <2% vacancy overall)

CAPEX - $130 (10%)

Rental License - $15/month

Gas - $80/mth 

Water/Sewer - $70/mth

Garbage - $25/mth

Electric - $0 (tenants pay)

Monthly Expenses: $815

Monthly NOI: $485

Mortgage - $265

Total Monthly Cash Flow: $220

DSCR: 1.83

CoCR:  10.89%

After purchase, I think there are a few value-add opportunities:

(1) Have water/gas metered separately, and pass all utility costs along to the tenants. This would reduce overall variability of monthly expenses, but would also cause my CoCR to take a hit if the work was completed up front.

(2) Aim to achieve $725/unit in monthly rent (the current leases expire in June 2016)

(3) Appeal the current property tax valuation (currently assessed at roughly $90,000). 

If you have I moment, I would greatly appreciate your thoughts on the above property, the things I have missed in my initial run-through, and any additional metrics it would be smart to consider when analyzing deals moving forward. 

I'm excited to purchase my first buy and hold property and begin building a portfolio, but I want to be certain I'm adequately matching the up-side of each investment property with its associated risk.

Thanks in advance - I look forward to hearing from everyone!