All Forum Posts by: Drew Castleberry

@Mark Nolan thanks for the info...as I'm digging into more it looks like that's the way to go. 

@Jaime Raskulinecz good to know! I know there are so many rules and regulations, thanks for that wonderful long tax code we have! I'll definitely have to keep that in mind when I do more research on what the limitations are. Thanks!

@Brian Eastman - that's great info and definitely helps me out. Looks like I'll have to figure a strategy, looks like I could at least do 1 property.

I'll dig further, thanks again for pointing me in the right direction!

So I've scoured BP and the web on self-directed IRAs and have gotten a bunch of useful information. Unfortunately the information I was able to find was mostly on setting one up and general guidelines on how to operate one, mostly within the rules of the IRS.

Here's my situation - In January I'm moving to a different group within my company, and unfortunately I won't be able to keep my current 401k, the new group offers a different one. So I have the option of rolling it into my new one (which isn't very good), or doing something else with it. What I want to do is roll it into a self directed IRA so I can purchase real estate with it.

But here's the kicker, I don't have enough in to 401k to purchase cash for any properties. I currently have about $35k in it, which would be more than enough to purchase a couple town homes by the local college that will produce good returns, and that's my plan for using the money.

However, what I don't know is can you obtain a mortgage through a SD IRA? And how would the logistics of making all the mortgage payments, maintenance fees and other costs work? I certainly wouldn't want to have to pay fees to a company handling the IRA to make those transactions.

Can anyone clarify any of this for me?

I was helping my parents do a flip in late 2006. 5 beds, 3.5 baths 3 car garage, great house in a great neighborhood. Bought at auction. Had to have the sheriff evict them. They had one minivan, jam packed it full with as much stuff as they could with their 2 kids and get this, 22 dogs! I don't know how they fit not only their kids in the van but also all those dogs (20 of them were about 6 month old puppies, all golden retrievers).

Needless to say the house was absolutely disgusting, but the garage and side patio were unreal. In the 3 car garage, they built kennels out for all the dogs. On the side of the house, there was a paved patio that was fenced in, think of a large RV parking spot.

Well in the garage you can tell the dogs peed all over in it, but on the patio, oh geez the patio. There was so much dog crap that you literally could NOT take a step anywhere without stepping in dog poop. I don't know how the neighbors couldn't smell it, it was literally the worst thing I've ever seen or smelled. 

It was the nastiest flip I've seen to date, but probably one of the most profitable. It would have been even more profitable if the stupid appraiser didn't low ball the value by about $20k because she wanted to buy the house! That's an entirely different story!

Great job and self discipline to leave your reserves in tact! What I've read a lot of people analyzing properties on here and others that I talk with, they don't project enough for their reserve account. Yes 10% is fine up front, but that isn't going to handle any capex issues that pop up. 

On my properties I hold 10% for my maintenance/cash reserves, but hold all monthly profits in the reserve account until I have $5k built up per property (SFH). It's a bit different than how others do it, since I can't touch my profits until year 2, but it eliminates from having to tap into my account that I purchase properties with, or my personal savings.

It always seems that it comes in bunches, good job for planning for it and weathering the storm!

 There's a lot of others that are great tools, but they're good for starting out and giving you a decent idea of what you're looking at, without having to pay for anything.

 Buying something sight unseen isn't uncommon, I've done it several times, but I wouldn't recommend it on property with any type of significant damage, such as fire. The big thing is that you need to protect yourself in the offer. Always make it contigent upon an inspection. Being that you've now been able to walk the property you can see the extent of the damage.

One thing you need to find out is if you are buying it as is, or if they are going to finish the rehab (assuming its through the insurance company). If you have do the rehab, from a cash flow perspective you can probably cash flow well as long as you have low HOA and taxes. But if you have to rehab it and it sounds like you'll have to purchase it for at least $18-20k, you can easily blow through a budget of $40k.

Several things you should do before you settle on a specific company.

1. Identify the markets you want to invest in.

2. Develop rules on the type of property you want to buy, i.e. rent ratio, taxes, capex, etc. You need a system, that way you can easily identify or eliminate properties quickly.

3. Validate rent for the area using Zillow, and calling at least 3 property managers in the area

4. Any specific property you are looking at, good tools to evaluate the area are crimereports.com and trulia.com

The good ol' Tri Cities, my home town! Is the market still crazy out there? 

I worked on a rehab probably about 10 years ago where we had a tub that was PURPLE! We had it reglazed and it only cost just about $100. Obviously the price will have gone up some since then, but I'm sure there are still contractors in the area that can do it at a reasonable cost. Needless to say, for me it was worth spending the extra money than having to deal with all the chemicals and prep work and it probably turned out better than I would have done it, and fast too.

Just curious, what's your niche? Do you specialize in purchasing MH at foreclosure/discount and moving them to property you currently own? Good luck!

I bought a REO forclosure in 2011 that was a previous drug house and was only 4 years old. It was 2,600 sq ft with a 1,600 sqt basement. The entire basement and the master were used to grow marijuana. They tapped into the power illegally at the street, full blown operation. Drug went bad in the kitchen, guy took a machete to the neck/shoulder, ran out bleeding. Rumor is he died on the neighbors front porch but who knows.

Anyways, original purchase price was $270k, bought $10k over asking for $180k, Put $50k in to finish the basement, cosmetic stuff upstairs and the yard. Sold 2 years later for $300k. After all fees and everything netted just over $50k.

Everyone told me I was crazy for buying a drug house, but it was a diamond in the rough! So glad I did cuz it started my REI with my first house hack!