All Forum Posts by: Kevin Siedlecki

@Kat Wyninger - Just eyeballing it, I agree with others that this is not a good deal. $350 is nothing... even $500 is nothing. You can't make money on a structure renting for so little no matter what your regular expenses. A roof, furnace, driveway eat up almost all of your gross income for a year, nevermind paying for taxes, insurance, debt, maintenance, etc..

I wrote a blog post that might help you understand the numbers.... in fact, that's part of the title.  Here's the link: https://www.biggerpockets.com/blogs/6815/45137-my-...

Hope it helps!

@Bernard Chouinard - The most important thing you said is that you don't know what you don't know. This is a very complicated project to take on for your first deal. I would never have taken something like this on as a beginner, so kudos on your ambition. Definitely get a lawyer involved every step of the way. The extra expense will be well worth the peace of mind.

How much do you think the property worth? If they haven't paid or touched it in 6-7 years, you could be dealing with some serious rehab costs. You'll also have to deal with removing the squatters, which, depending on how clever they are with the law, could be more complicated that you think. I know in some municipalities, if they have utilities in their name for a certain period of time, they can claim legal residency, which means you go through a long and expensive process to remove them.

Bottom line, because of all the unknowns, I would either pass on the deal, or find a parter with experience to help you through it. 

New kitchen, bathroom, and flooring for $15k? No closing costs, holding costs, or selling costs included in the estimates? No thanks.

@Jim Kennedy- sorry I was unclear. I meant my personal AGI before real estate. I do contract 1099 work and have a w-2 job, so I always owe taxes on my personal return before the LLC is considered. Last year I had to carry a loss over, but still owed the IRS several thousand from my 1099 stuff. It's a very irritating window to be in! I'm just wondering if there are deductions I can apply to my AGI so I can take more of that carried loss on real estate for this year's taxes. AGI is before itemized deductions, right?

@Account Closed's thought-experiment?

Good post in that link. It sounds like he went bankrupt just from marketing. He never even got a chance to assign a deal! I don;t think it's relevant for our conversation here. It doesn't matter what your exit strategy is if you run out of money before you ever make a deal.

@Account Closed - I don't think that makes a difference. If the seller is going to change his mind, it doesn't matter if you are buying or assigning the contract. He's not going to be any more likely to change his mind on the assigned contract than he is on sale to you. To the seller its the same thing. 

@Edward Westbrook - My advice would be to create the business right now, and run your current rental through it, so you can show positive income for the business when you apply for a loan. I'm not aware of a bank that will give a real estate loan to a business with no income or credit history. 

You'll need to call some banks and speak to their commercial lending departments. Warning, most commercial lenders are not going to be interested in deals under $500k or so. They'll all have different floors, but if you're looking to just add a cheap duplex, you might have some trouble finding someone. I'm sure there's someone out there who will do it for you, but it probably won't be the first one you call. Good luck!

@Jessica D'Amour - I had a very similar situation on a house that had great cash-flow and location, and I walked on the deal because of it. First of all, do not trust a word the seller says about current tenants. I assume they are lying about pretty much everything until I see it on paper - and it's amazing how often they "misspoke" or "misunderstood." 

It can be tempting to think the current tenant can live there and keep paying, then you can fix it up when he moves out. It's much more likely, however, that the tenant has complained about the unit and the seller doesn't want to deal with it. Even if the seller is telling the truth, if the tenant moves out sooner than expected or complains about the living conditions, you're on the hook for a gut job. If it's actually dangerous, yes, he could sue.

You can make the tenant leave when you buy, because you are legitimately doing improvements, but if he refuses, you've bought yourself a huge headache, and there is really no way of knowing how that's going to play out until you bring it up. Remember, you never have to buy a house. There is always another deal. 

@Account Closed - I love hearing people think outside the box. Keep thinking like that and you'll come up with an innovative idea that will make you serious money. I don't think this is the one, though.

Two things- wholesalers either don't have or don't want to put up the money to close. The whole point is finding a deal for someone else. The assumption that there will be a bidding war is a very dangerous one. 99+% of people on the MLS are not interested in anything that wholesalers are dealing with, so the benefit of listing is really low. You know the saying: "If everyone is your target audience, no one is your audience."

I also think you have the timelines to close exactly opposite. What are you basing your 1-2 week closing on? Right now 30-45 days is standard, and when you open it up to MLS buyers, you're really only adding retail buyers who will want the whole time to do their due diligence and think about whether to go through with it. If you're working from any kind of decent buyers list and you have any kind of decent deal, you're bringing that deal right to your target audience: people who have the capital and experience to identify and fix problems, and are interested in closing quickly, putting their capital to work. That's the only way to get a deal closed in 2 weeks.

If you close yourself and then list, not only are you putting up your own cash (including closing costs and due diligence costs), you are then listing, showing, waiting for offers, and waiting for the buyer's due diligence period as well. Even if you somehow attract a cash buyer bidding war (which is extremely unlikely), you're going tie up your money and wait a month or two for the deal to happen. Not to mention you will be giving up 3% to a buyer's agent - that's part of the agreement when you list on the MLS.

The bottom line is that you would need the MLS to raise your price significantly just to make the same profit you'd make on a traditional wholesale, and you'd be putting up your own capital, and making the process take a lot longer.

I hope that all made sense. Keep thinking, though!