All Forum Posts by: Milton Chamberlain

Option 1: buy another “starter” home for around $375k and plan to live in it for around 5 years while renting out the current house. Hopefully by the end of that time frame, it will have appreciated enough that we can sell it and use the equity as a down payment on some acreage while still keeping the first house as a rental.

Looks like average home SOLD price increase 5% last year (in Boise)? If that is right? Not a bad plan if you are confident in that continuing IMO...time is your friend. We had around 3-6% appreciation in KC metro depending on the county (5 main counties make up the KC metro)

Option 2: stay where we are and use the heloc to invest in rental properties out of state like Kansas City, Cleveland, etc. Over the next few years continue to buy a few more properties to build up the monthly cash flow then use the increased income to buy our acreage property.

IMO, the only place you can immediately cash flow in KC is by buying a distressed property in a C market and putting money in to fix it up. Hard to come by, and difficult OOS. Also, due to KC mayor creating this ordinance, which to highlight and summarize includes:

bans discrimination against tenants based solely on:

"-Source of income from an occupation, including gig work or paying rent in cash
-Use of public programs like Section 8 Housing Choice Vouchers, disability checks, or social security
-Poor credit score
-Prior evictions and alleged damages older than 12 months (less than 12 months can be a basis for denial)
-Prior convictions or arrests (sexual and violent crimes are excepted, a landlord can still deny based on these convictions)

-The ordinance also requires the city to proactively scan for rental ads using discriminatory language like “no Section 8” or “no past evictions”.

-Landlords who are found to be in violation of the ordinance with respect to source of income can be fined up to $1,000 per incident. There is a prohibition against posting the landlord’s names if they are found to be in violation of the ordinance."

many investors are avoiding the actual city of Kansas City and instead investing in the surrounding townships and suburbs (which will not have to adhere to these new 'anti-discrimination' rules)

Our area is projected to continue to grow and appreciate fairly quickly so we are afraid of getting priced out of buying our little farm if we wait too long. What would you do in our situation? Any other ideas or food for thought? Thank you for your advice and taking the time to read this!

I agree, my market has continued to appreciate well (+7% 2022, +5-6% 2023), and will continue to do so as the KC metro has A TON of development and investment going on, particularly N of the river. I think your plan of buying a second home in your market and renting the first, and building equity over five years is a great idea.

If you want to see some 'case studies' of available investment properties (with financial analysis)  in the KC metro, as well as some additional info and stats, I am happy to discuss with you. reach out anytime.

Vinyl plank flooring or restoring the original hardwood?

Even with good tenants, your hardwood is going to get beat up again. And refinishing is typically pricy if done by pros...However if you are confident in your abilities to do it yourself, and looking to save right now, refinishing yourself might be an option. 

But waterproof LVP is always a great choice, and my most recommended route. Some of my buyers recently just put LVP over old hardwood. very common. I have LVP in all my rehabbed rentals, and wish I would have put in the bedrooms as well (instead of carpet)

Tile or Vinyl plank flooring in kitchen and bathrooms?

IMO LVP as well. I have LVP in all my bathrooms.

White, black or stainless-steel appliances?

I would look at rental or recently sold comps in your subdivision if available. Is it an A market? B? C? This can help guide your decision. If A, I would go with FANCY option. Typically, the Appliance-specific outlet stores have the best package prices. If your area permits top market rents, you might opt for the fancier appliances if directly competing with other landlords for the creme de la creme tenants

Laminate or granite countertops?

SAME as ^...Also, I have a buddy I just helped house hack a duplex in Raytown...he was going to try 'skim coating' over laminate with concrete, and then sealing it. Sounds like a fun and cheaper alternative. ewe_sneeze is his IG handle for his renovations...He is a real nice guy if you want to message him, im sure he would let you know his process or at least direct you to the YouTube page he learned it from :)

Good luck!

that's a great idea, and I would strongly urge you to continue this path and obtain a home to house hack, even if this one flakes.

In my market, having a buyer agent generally carries no further expense vs being unrepresented. Everything is negotiable, but typically buyer's agent commission is carved out of the listing agents commission (typically 6%...buyer agent gets 3%) 

my point in saying this is; GET AN AGENT! :) A good agent will meet up with you for a few hours, and along with educating you on the entire buying process (financing, contracts, inspections, what to expect in negotiations, etc) they will also be able to guide you by running comps and telling you if the home is priced well, as well as discovering any issues preventing the property from selling (liens, disputes)...Not sure about CA and AZ, But I have a buddy who renovated his dental office without pulling permits, and when the city found out, they made him literally gut it and redo it with permits.

I would urge you having some conversations with agents in your area. interview a couple, and they should guide you in the right direction. Dont sign an agency agreement until you know you want to work with them

Im reading Hyperion right now...it is sick :) BUT finance books? I read a good chunk of the BP books when I was about to buy my first property 5 sum odd years ago. They contain great info.

The ones I remember and found the most valuable was the land lording one, and the one about how to create an accurate SOW.

Then of course, RDPD is a great mind shift book, which has already been mentioned

*NOT a tax expert/CPA! BUT, my understanding is that the formation of an LLC does not necessarily lend you any benefits by simply having the property titled under that LLC. It may lend you a little privacy, but folks who want to find you will just look up who created the LLC and then find you.

That being said, in MO, they are incredibly easy to set up, and are not that expensive to establish (~$50 last I checked, although that may have gone up) and doesn't require any input from an attorney or tax professional (in my state)

Personally, I have an LLC bc I pay myself through an S-Corporation as a realtor...the savings come out in the wash, but it allows me to pay taxes quarterly and avoid end of the year surprises.

Another reason you may need an LLC is if you are investing with partners, and/or seeking certain loan types ( I know hard money lenders often require an LLC)

Once again, this isn't my wheelhouse, so at the end of the day, I would reach out to a tax professional to learn more

Long answer short: in my opinion, you do not need an LLC if your plan only involves renting out your inherited home

I have helped owner occupants use down payment assistance programs to cover the 5% down payment (in MO), and then negotiated seller paying all the closing costs. This was an $80k property...I think she had to bring $700 to close.

Not sure if Indiana has DPAP, and I am pretty sure it does not apply to multifamily properties, so you would have to live in the property for a year (plus then navigating the 10 year commitment on the DPAP) before renting...it would be tough to leverage 1k into an investment property

While the class systems are arbitrary and can be biased based on the person classifying the areas, you are correct that
usually classes A/B make more on appreciation, but barely cash flow (especially with the current interest rates), and that in C classes, you can generate some cash flow. but appreciation rates may be slightly slower

if your main focus would be to build equity with some nice monthly income from rent ($50-$100 cash flow after accounting for expenses) It would be in a C class neighborhood with higher crime rates in my market of the KC metro. But that doesn’t necessarily mean there will be drive buys and open air drug markets. More so, maybe account for the expense of internet and security cameras and pass that down in rent, and make sure the property has covered or off street parking to avoid petty theft. Maybe put in flood lights. Maybe allow and look for a tenant with a dog.

In my market, appreciation rates are closely tied to school districts, I.e. you will see lower market values  and appreciation rates for similar homes depending if they are .5 miles east and in a more ‘desirable’ school district or high school zone, or .5 miles west and in a less desirable district/high school zone.

to give you an example; my buyer just bought a 2bed/2bath duplex in a lower market value (LMV) area of Raytown. However, the HMV area of Lee’s summit is 5 min south where they bought in Raytown. 
so, while the property was cheaper by $50k vs if it was in Lee’s summit, that buyer will now get to tap into the higher renter demand of folks working in lees summit, but wanting the lower rent of Raytown. These ‘green zones’ between less desirable and more desirable sub-markets are IMO great places to look to avoid the pitfalls of higher crime areas. Very case by case though, and at the end of the day, you need ‘boots on the ground’ eyes you can trust that can go walk the areas for you.

Everyone else echoes my opinion…the day to day mgmt should just be 8%

The biggest issue for me (if was giving family a discount) would be figuring out ‘placing tenants’ fee. Keep in mind placing tenants can be VERY time consuming, so if he is not going to be verifying employment, ordering backround check and receiving application fees himself, I would think charging him by the hour would be fair (I mostly see 1 month rent fee for placing tenants)

maybe if he is willing to do all that work himself, and you just have to show, you could show for free since he’s family? Or just charge a small showing fee to cover your gas and a bit of your time, just like when you help out fellow agents and show for them when they are unavailable.

Sounds like it will not evolve into a bigger issue, however if it does and you need some assistance, Travis Wymore is a great real estate attorney

Jackie Ahumada with Prosperity home mortgage has helped my last three house hackers. She can give you all the info you would need.