All Forum Posts by: Kevin S.

@Vlad Gurovich not super familiar with solo 401k's but I always thought the rule was that you have to earn income from that self-employed company in order to be able to contribute, so if you aren't earning any income from her sole proprietorship, then I don't think you can. Here's an old thread where it's discussed:

https://www.biggerpockets.com/forums/51/topics/351473-spouse-contributions-to-solo-401k

@Jordon Milford without even changing any numbers it would be a hard pass for me if I were looking at this deal, your current calculation shows you would make $11/month as it stands, so basically no cash flow. Additionally, looking at the expenses you budgeted for, you left off CapX, which is typically something that you want to set at about 10% of monthly rent (depending on the age/condition of the property). You're Vacancy is probably a little high, though I don't know what area you're in, most often you see it set at 8% as this gives you approximately 1 month of rent saved up each year (1/12 = 8.33%). 

Even if you increased the rent to the max amount you stated, $725, you still wouldn't really be cashflowing. With Vacancy of 8%, Repairs of 8%, CapX of 10%, insurance of 11%, and property taxes of 11% you have 48% in non-mortgage related expenses, which would be $348/month (725 * 48%) PLUS mortgage/taxes/PMI of $384 as stated in your calc, that brings your total costs to $732, putting you at a negative $7/month in cash flow.

Good luck with your property search!

@Cody F. having stiff late fees (being sure to follow what your state allows as far as late fees) can help you to combat late payments. Other than that, just continue evicting as necessary, and screen new tenants harder so that you find people who aren't as likely to pay late all the time. Good luck!

@Jarel Terry No, FHA loans allows you to purchase multi-family properties of up to 4 units. You must occupy one unit yourself as an owner-occupant, but the other unit(s) you are free to rent out immediately.

@Jon Wimmer Welcome back to BP, I hope you have good luck in your small MFP search. I bought a duplex in Tulsa back at the end of August, but had been looking and keeping an eye out for properties in the Tulsa area (including Owasso) for about 8 months at that point, and I don't believe I ever saw any MFP's in Owasso go up for sale (pretty sure that's because there are very few).

Also, not trying to be a downer or anything but I haven't seen a ton of MFP's come on the market under $100k and those that I have seen are either way outside the Tulsa/Owasso area or are in rougher areas like 61st and Peoria.

If you haven't already, reach out to @Deren Huang and get on his MFP email, that'll help you see what's coming on the market now.

The areas I focused my search on for MFP's were all in Tulsa so I don't know if that'll help you or not, but here they are:

- S 78th E Ave (just west of 71st and Memorial)

- S Hudson Ave (also called E 77th Pl I think, it's a street east of 51st and Yale)

- S Harvard Ct (between 51st and 61st on Harvard)

- S 75th E Ave (just west of 51st and Memorial)

- S Canton Ave and S Darlington Ave (on the SE corner of 71st and Yale)

-  S Indianapolis Ave (North and South of 71st Street just off of Harvard)

I will warn you, all of those areas go for more than $100k, but they are also all areas I'd feel safe living in and have fairly good rent prices. Hope that helps.

@Account Closed Since you didn't provide any information on the age of the property, your reason for choosing certain expense percentages, etc. I'm just going to use the normal assumptions for cost that I use when assessing a property. Overall I'd say you've definitely understated your expenses, you'll want your Vacancy to be around 8% as that gives you 1 month of rent saved each year (1/12 = 8.33%), CapX should be 10% (not 2%), typically management companies charge about 10% (not 5%), and repairs should be at 5%. Overall that's an increase of 19% or $2,155.55 which makes your property negatively cashflow. Now there may be some mitigating factors that could push some of those percentages I listed down a bit (or maybe there's a chance to increase the gross revenue by increasing rents), but overall this deal looks marginal at best to me. 

@Israel MarQuez Looking at your numbers, I'd up the vacancy to 8% as that gets you closer to putting away 1 month's rent per year (1/12 = 8.33%). Additionally, even though you've got a newer roof, hot water heater, etc. you'll still need to get a lump of cash saved up fairly quickly cause you never know what can happen, so I'd up your CapX to 10%. Also I haven't seen in management companies (at least in my area) that only charge 5% for their services, t ypically it's more like 10%. Overall you'd be looking at a 11% increase in your costs if you went with my changes which puts you at a negative cash-flow per month. As @Dennis M. said, this is a marginal deal at best, I'd pass.

@Mao Pmn Looks like you only budgeted 3% for vacancy, if it were me I'd up that to 8% which would give you about 1 month's rent saved up every 12 months (1/12 = 8.33%). Also unless everything is brand new, 5% is low for CapX, typically I budget 10% for CapX since they are inherently expensive items.

@Stephen Aki Pretty sure you can't roll a Roth to a Traditional. The issue is taxes, a Roth is a retirement account that has already had taxes taken out of the money deposited, so when you withdraw it you don't owe any additional taxes (unless you make an early withdrawal and owe a tax penalty). A Traditional is a retirement account that is pre-tax, and you owe taxes on the money at the time you withdraw it. I double checked the IRS website and it clearly states a Roth can only be rolled into a Roth IRA:

https://www.irs.gov/retirement-plans/retirement-plans-faqs-regarding-iras-rollovers-and-roth-conversions

I'd say you're basically out of luck here unfortunately.

@Alex Kouvatsos I know what you're going through, I did a duplex through FHA a few months back. The issue with FHA is that it can place a larger burden on the seller as the property has to be in move-in, livable condition in order for FHA to approve the loan, and there can't be any woodrot (there are a few other requirements for condition, but those are the major ones I'm aware of). These hardline requirements are often enough to make a seller go with a slightly lower offer or even a comparable offer that is non-FHA.

Additionally, your numbers are not looking good. I punched in some approximations into a calculator I use (similar to the one on BP) using a purchase price of $305k, downpayment of 3.5% for FHA, $8,900 in taxes (which will probably go up assuming you're purchasing it for more than it's currently assessed at), 8% Vacancy, 5% Repairs, 10% CapX, $200/month for insurance (have no clue what it runs in NY so just guessed) and $208/month in PMI and that puts you at a negative ($49.30)/month in cashflow. And that's with all 4 units rented out and not including 10% management fees (if you include those you're at negative ($409.30)/month).

You're also probably going to need at a minimum $20k to cover downpayment, closing costs, PMI funding, etc. and another $10k at least budgeted for repairs.

The only thing that could save this property IMO is if rents are significantly under-market. Otherwise, the numbers are telling me you should probably walk away.