All Forum Posts by: Account Closed

I'm confused about using the equity he gifts us as a downpayment to purchase this home. Would that mean we would refinance ourselves, taking $35k cash out of our home from HELOC or a Loan, then using the actual cash for the downpayment and have a separate loan for the full payment of the house? I see that our total loan would be 160k which could be considered refinance in a BRRRR, and I mean, the numbers work great with our plans. But how does someone use equity to buy a home???

I've been doing creative financing for over 25 years and I can't sort this one out. A lot of it doesn't make any sense as you've written it out. You may misunderstand how the transaction is designed. I never sign unless I know how everything works and I agree to the terms.

He appears to be putting $120k into the deal and taking serious risk to sell to you for $125k. Nobody who understands real estate will do that unless it is for their parents.

But, let's assume he actually means to do the following:

He will buy the house and rehab it, you will buy the house from him using a loan. He will get the difference between your loan amount and what you "buy" the house for. So, the numbers go like this:

He buys the property for $100k and puts $20k into rehab. He then sells to you for $160K and you get a loan for $1650. After the dust settle you "gift" him $35k. That's the $35 difference between your loan amount and what he has into the property. So, at closing he gets his $120k back that he used to buy and rehab the house plus after that you "gift" him $35k for his troubles. You have a house and a mortgage for $160k, he has made $35k. It's "as though" you bought it for $125K.

Several questions:

1. How does he know the home will take only $20k to renovate? Who covers the holding and closing costs?

2. How does he know you will qualify for the new loan?

3. If it is an FHA or VA loan it may not work unless done properly and legally. For FHA they will require you to put 3.5% down of the sale price. So on $160k it's about $5,600 that needs to be in your account for about 60 days prior to closing. You can receive the $5,600 as a gift from a family member but it has to be a gift not a loan.

4. How does he know the appraiser will appraise it for $160k? What happens if the appraisal comes in lower or higher?

5. Be very careful on the loan application, if done improperly it could be construed as loan fraud and wire fraud and tax fraud. Very serious issues. Never lie on the application. If it can't be done legally and ethically then it isn't worth doing.

6. It isn't at all clear why he would prefer this approach. The only thing I can see is an attempt to avoid capital gains on the $35k (by gifting instead of as profit) which is roughly about $4k tax depending on his tax bracket. But he may be over looking that and not know. There may be something else that he wants to accomplish that is perfectly legit, I just don't know.

7. Sometimes banks require "seasoning" of 6 months or longer before they will do a loan on a cash purchase. Check with your lender.

Just a few thoughts.

0 Votes

Originally posted by @Megan Dettenmaier:

New investor here - my contractor informed me yesterday that my house he's rehabbing was vandalized. They took many tools that totals approx. 10K. He's asking me to contact my insurance to make a claim, however this will obviously impact my rates in the long term. What would you do? He told me he was licensed and insured before I hired him.

If you stole his tools you are responsible to replace them. Obviously you didn't steal his tools, so the point is he is "blame shifting". He is trying to make you responsible for something he did. It's very common in today's society to blame others for something they had nothing to do with, so you have to watch out for it and Not assume the responsibility.

3 Votes

Originally posted by @Tyler White:

Thanks for your input Mason. Not quite sure what would cause it to turn around. From what I read the policies and the taxes are an issue as well as the crime.

If "policies, taxes and crime are are issues", those rarely "turn around". It is what it is.

If you are happy with the returns you can get there, just realize you are "buying a job" instead of "investing". There will be ongoing drama, phone calls and decisions, but, to each his own.

My properties require little to no interaction from me and I get great appreciation (in a very different market than Danville). Early on I learned the drama in places like you describe do not fit my criteria.

0 Votes

Originally posted by @Kumar Gaurav:

Hello,

There is a brand new construction for a duplex going on right next to my home. The new construction has very similar prototype as my house except that my home can be used as a triplex but the newer one is strictly a duplex.

Of course the newer home will have all the bells and whistles of a newer construction that my 15 year will not have.

I am thinking of selling but I am not in a rush and I 've been toying with the idea of timing my sale with the other property.

I personally think the listing price and/or sale price of the newer construction will positively impact the value of my property.

If I put my property on sale right away I feel I may not be able to reap the benefits of the neighboring new construction.

I personally I think if I put my property on sale exactly around the same time the newer construction goes on sale,it will help me sell my property at an optimal price.

I am interested to hear thoughts from other experienced members. I will appreciate your inputs.

Thanks

Are you positive prices will always go up? How long will it take for the other house to be completed and hit the market? If it is 8 months that means it will be about Feb 2022. What other houses will be competition in Feb 2022 ?

What about the time value of money? Can you invest that money to make more than you'd have by waiting?

Timing the market is a very tough thing to do.

Sell when it makes sense.

1 Vote

Originally posted by @Patrick Crehan:

Today, I started building a privacy fence at one of my properties. The properties in the subdivision are quite snug together and on the auditor site and deed it shows that the property line splits right up my neighbors driveway.

I had just finished digging the holes when the neighbor drives up and states, “did you get the property line surveyed for what you’re doing?”

I reply “well no, but the auditor site shows the line running up next to the driveway and so does the deed”

She replies “I am pretty sure you are about 1 foot into my property. Property lines typically run 2 feet off the driveway. When I go to sell the house, and your fence is 1-2 feet into my property, this could be an issue and I would have you take it up.”

I start thinking... what!?

Long story short, she states that I will have to hire a land surveyor to come by and mark the corners and boundaries to make sure I am not encroaching 1 foot onto her property. This will cost me about $750.

My question is, are there any other ways around hiring a land surveyor for a measly 1 foot of disputed property line? Do I even have to hire a land surveyor for this type of situation?

I live in cincinnati, Oh if this helps. Thanks guys

Pat

Yes, simply put the "1 measly foot" on your side of the property and she will be satisfied.

0 Votes

Originally posted by @Blaze Mutton:

Hey I invest in Saskatchewan Canada. Fairly new but I’m interested in multifamily in the states. Any do’s and dont’s recommendations?

Depends. What number of units are you interested in?

1 - 4 ?

5- 60 ?

61 - 100 ?

101 - 200 ?

0 Votes

Originally posted by @Carl Kallgren IV:

Hey BP fam!

Newby investor from the NC Triad area - Greensboro, North Carolina. I've got my first property under contract (with a partner), and am looking to talk to a lawyer and an accountant before I get too much further into the process, to make sure I set myself up for success from the very beginning.

Question is - who should I talk to first? I'm sure at the end of the day it's not a huge deal, but I'd like to cut down on the back-and-forth. Knowing myself, I'm sure I'll come up with more questions for the lawyer after I see the accountant, or vice versa.

I plan on discussing:

JVs and partnerships
Note investing (seller-financing)
LLCs and (Land) Trusts
Purchasing foreclosures

Thanks for your thoughts, even if it's "it doesn't really matter."

You need to join a REIA and talk to the guys doing what you want to do in the states you want to invest in. The list looks like you're in 1st year med and trying to decide between obstetrics, pulmonary and kinesiology or maybe doing all three simultaneously. They are very all different and require someone with experience (not an attorney or an accountant) so that first you can select a direction.

0 Votes

Originally posted by @Leonard Brown:

@Mike Hern You may want to take a deeper look at the market if “rough” is a concern. Philly is no different than any other major market when come to neighborhood classes except maybe where boundaries of the neighborhood class begins and ends. What’s your investment goal? That determines whether or not you’ll ever have to deal with the rough parts of Philly, which isn’t recommended for OOS investors. Development is everywhere in the city right now, so it’s very doable regardless of the area. What it comes down to is the investor.

The Part of Philly I visited is where the Cheese Steaks Sandwhiches are ( S 9th street?) and it was a little intimidating. Then I saw this video

https: //www.youtube.com/watch?v=o1wBG1...

Driving Tour Philadelphia’s Most Disturbing Hoods In 4K UHD | Kensington to Badlands (Narrated)

0 Votes

Originally posted by @Steve Keisling:

I’m in Wilmington, NC. I just had a family friend offer to partner with me to buy a air bnb. I only have one rental and I funded that myself. I’ve never partnered before. We haven’t talked specifics yet, but I think he wants to be the bank on this. Does anyone have tips structuring a partnership with a private lender for air bnb? What is fair? Pay him back with interest commensurate with bank rates? Hard money rates? Do all profits go to him until the debt is paid, or do I keep some? Any help is appreciated. Thanks!

A partnership means you are taking on your partner's potential liabilities (and he yours). Court cases have evolved from one partner getting included in a lawsuit because the other partner's daughter got into a car accident in the other partner's car, and other seemingly unrelated issues. It's like being married. I would stay away from a partnership unless your local attorney will defend you in court based on the partnership papers he draws up. I wouldn't do a partnership. There isn't any advantage but there is a lot of risk.

It's much better for each of you to have an LLC that forms a Joint Venture Agreement. LLC's are treated as separate persons and your JV Agreement will be written up like Bob, LLC does these tasks and John, LLC does these task and any profit will be split 55% for Bob, LLC with 45% going to John LLC. By being separate, It protects each of you from outside influences and from each other much better. You do have to run them like a business to receive the benefit of protection.

Then you can put umbrella insurance on top if you choose to.

When someone is collecting properties on their own, (no partners) sometimes they simply have umbrella insurance and no LLC since the umbrella insurance is easier to manage, is cheaper and provides better protection than an LLC. (for technical reasons such as if you don't properly maintain an LLC they can sometimes pierce the veil)

0 Votes

Originally posted by @Jared Bartlett:

This particular rental is a 4-plex in Spokane WA. The tenant is on section 8, is a 42ish year old female. She is "not really" living at the apartment, and is staying at her new boyfriends place. She lets her son live at her place (he's 22ish, meth addict, real loser). Right before the pandemic hit, I was about to evict her (was going to no cause) but then evictions stopped (and WA state got rid of no cause now). She stopped paying her portion of the rent (about half the rent, which is $300ish) and hasn't paid rent in over a year. She won't even fill out the papers to have the city/state pay her back rent. The charities/organizations won't let us fill out the request for rent on her behalf.

Problem: She called yesterday and said her stackable washer/dryer was stolen (they left the big screen tv, left EVERYTHING else, just stole the washer/dryer) and now she wants me to replace it. Obviously her meth addicted son pawned the washer/dryer as there was no sign of break in at the apartment, and nothing else was taken.

How to proceed?

Option 1.) Replace the washer/dryer, just eat it like I have a million times before. Even though the next one will probably get stolen during the evitable upcoming eviction (maybe put a super ****** one in just to tide it over?).

Option 2.) Can I say, hey, why didn't they steal your tv, or dvds, or ANYTHING else and ONLY my 2 year old $1,400 stackable washer/dryer? And say "prove it" when it comes to her asking me to replace it. Or is that just going to be viewed as retaliation and them only stealing the washer/dryer isn't enough evidence on my side?
Thanks in advance!

Evict and file charges.

1 Vote

All Forum Posts by: Account Closed

Account Closed has started 141 posts and replied 4068 times.

Post: Using home equity as down payment

Post: Contractor has tools stolen...my job to replace?

Post: Buying a Turnkey Property in a Declining Town

Post: Neighboring property impact on sale price

Post: Property line issues

Post: Canadian looking to break into American multifamily.

Post: Lawyer vs. Accountant - who first?

Post: Philly - Yay or Nay?

Post: How to structure a partnership

Post: Tenant's son pawned stackable washer/dryer, now they want another