All Forum Posts by: Lauryn Meadows

My husband and I purchased our first flip house from the bank in January. We had a contractor in place that walked the property with us before we purchased. Once we were ready to start on rehab I asked the contractor to fill out a 1099 and a contract and they flipped out at the thought. Long story short, we didn't go with that contractor and my husband started doing some of the work himself. We've asked subcontractors to do the same thing (1099/ Contract) and many of them have also rejected the idea of filling out the 1099 to claim the money we paid them on taxes. For this project, we are going to finish out most of the work ourselves in order to stay in budget. However, we really need a GC in order to continue doing these projects. (My husband and I both work full time jobs plus we are expecting our second child- 2 under 2!) How have you all handled contractors wanting to work under the table? In my mind, I'm thinking that my purchase price is $3,500, and my sell price is close to  comps ($60,000)..(This is a total gut/ remodel on this property..all in budget of $40,000)  I have to show where all of my expenses are on this property in order to mitigate our own tax burden. Any advice on handling this situation is greatly appreciated! 

I'm going to look at the property this Friday and will know more in regards to cap ex repairs. I asked the listing agent and she did not answer. 

That leads to another question though. The property is pretty crummy on the outside. It could use a new porch and siding. Do you recommend spending the extra capital (if I can even get a hold of extra capital) on cosmetic repairs? I ask this because the units are rented to HUD renters and I don't think I'm able to increase rent. Would I be able to recapture my funds with a refi? Or would I just be eating into my cash flow by doing any cosmetic repairs?

This will be my first deal.

A 3 Plex listed at $59,900. I plan to ask for less but I'm basing my #s off of the $59,900.

(They came down $10k over a month ago.)

These are currently occupied to HUD renters.

Rents for each unit:

Unit 1) $513

Unit 2) $450

Unit 3) $400

Total monthly rent= $1363

Annual NOI= $16,356

27.3% CAP rate

I don't plan to use property management on 3 units but for the future I will..

$1363 x .10= $136.30

50% rule:

$1363/2= $681.50

Property management

$681.50- $136.30= $545.20

Estimating Taxes/ Ins/ Mortgage On $59,900

= $383

$545.20- $383= $162.20/ 3 units

= $54.06 cash flow/ units

Is this a good deal? I know the rule of thumb is $200/ unit or the 2% rule. This is only $54.06 cash flow/ unit but a 2.27% rent return on the asking price.

Am I missing something? Have I over analyzed/ under analyzed? What are your thoughts on this deal? 

QUESTION:

Okay guys, here is my financial plan. I'm currently selling my home residence. We have about $38k in equity. When we sale we plan to build a 40x60 pole barn garage with a living quarters on land that we acquired. The pole barn garage will have 2 beds/ 1 bath, 1200 sq ft living space, and another 1200 sq ft garage space. My husband is going to build it himself. We plan to put $35k-$40k in the structure itself. The plan is to use all cash and not have a mortgage. We will live in it until we have enough money to build our "dream home." (Side note: we plan to never sale this property or the building/ house we build.) I spoke to a local appraiser and she said she would not discount the building for being a metal structure. Once we have the building complete I want to refi and pull out the equity in a HELOC and use it as a down payment on a multi. I'm not exact on how much equity we will have but with the land and all I'm guessing $50k-$60k. What are your all's thoughts?

Hey all! My plan so far has been to purchase a 5+ unit value add property. I like idea of being able to create equity through better management. 

Today I spoke to a bank about a commercial loan (I don't have a deal I hand, but want to have my ducks in a row for when I do). The loan officer said they do not look heavily on the NOI of the property when determining equity. Rather, they look at the market ability in the area (what other like properties are selling for). With this, I'm not able to add the major equity in the property to refinance then use the equity as a DP on larger properties & repeate it over and over. I'm in a very rural area. She explained that most commercial lenders in my area (Ashland, KY/ Huntington, WV/ Ironton, OH) determine appraisals by comps rather than the cap rate.

Has anyone ran into this problem before? For other commercial value add investors, how did you finance? And, is it really doable to increase NOI by $6,000 and equating that to $75,000 in equity with an 8% cap rate?

Thanks for your help! 

Hey @Ryan Keeton! I have not had luck finding a local REIA. I've considered networking in the Lexington area. I'm interested in multi units. I have reached out to a few realators in the area that have been able to direct me to some local investors. Craigslist is another place to find investors.

Thank you all for the great information. There is certainly a lot to think about. Do guys suggest forming an LLC before purchasing first flip? Also I am in the process of getting preapproved for a HELOC.

Hey all! I'm wanting to get into multi families but I need some capital to do that. My thought is to do flips to fund multi families in the future.

Do you guys suggest an LLC or a S Corp for house flipping? Should I set this up before my first flip? Also, do you guys prefer LLC for buy and holds? Can I have an LLC for rental properties and a S Corp for flips or is that going to complicate my taxes? My husband and I will be going in as partners in whatever entity is appropriate.

Thanks Jim! Ill definitely be reaching out to commercial realators in the area. I've tried to contact a local REI but the closest one I have found is in Charleston, WV. If you are familiar with Ashland you'll know it's a very rural area.

Hello guys and gals! I'm new to real estate investing and I want to get in touch with local investors. I live in Ironton, OH. I'm looking for contacts in the Huntington, WV/ Southern OH/ Eastern KY areas. I've contacted several real estate agents to start building rapport with but I have not had any luck. My long term goal is to invest in large multi families. Currently I need to build up enough cash to invest in the larger multi families. My thought is to flip until I have enough cash for a down payment on a multi family, but I'm not sure if my local market is the best for flips? Any help is appreciated!