All Forum Posts by: Chris L.

Hey there! I’m new to investing in Durham and I am thinking of buying a neighbors 3 bedroom house near Duke. It’s not going to be a steal because it’s close to Duke and in a good neighborhood, but I think it might be easier to rent and or sell in the future. Wondering if you experienced folks could offer some advice to a newbie to purchasing an investment. 

1. The location is good but it’s not a cheap house-roughly 330k or so less any repairs. The owner is my neighbor and has offered to let me make first offer. His realtor is bringing in an appraiser to give me a fair starting value and they said I could deduct from there for repairs because they are selling as is. Prior to COVID folks were often asking for homes to purchase in the neighborhood and even rent because of the housing shortage. Not sure how things ae now with COVID. I do know I get calls all the time asking if I’m selling my house and I reside right next door. I won’t get a steal on the house but trying to figure out if its a good investment. How do you go about determining whether a property is a good investment?

2. Approx value of the house is 330k -it will probably be less as the owner is not doing any repairs or work and they said I could deduct. According to Wells Fargo I would have to put 66k down, closing cost around $8475 at apr of 2.729% and the monthly mortgage payment would be around $1427 per month. I’m not sure if that rate would be higher for a rental property, since I already have a residence,do you know?. The potential rent in the area for a 3 bedroom looks like about $1900 a month. That would leave me with about $473 per month for all other expenses. The taxes on the property taxes are $3300 per year, so after taxes I’m left with about $2376 for repairs etc. What are other typical landlord expenses would I have to consider? IWhat do you typically have the tenant pay vs landlord and how much do you set aside for property maintenance and emergency expenses. 

Does it seem like a good purchase to you? Just trying to figure out if it would be more beneficial to buy smaller properties as opposed to one large.

3. Do you typically get a loan or buy cash? I told my neighbor I would pay cash but thats before I realized how expensive it was. I thought of buying with cash to get a better deal and getting refinance later, but not sure if the rates would be higher that way. I also don’t know how long you have to wait before you could refinance, after paying chase. Anyone know?  I just thought perhaps I might get a lower price if I pay cash but not sure. 

4. I have a disability and am not working but my spouse works. I live off my existing investments so I’m really looking for something that will provide me income or go up in value over time. I don’t mind coming out even yearly but I would prefer not to have to go into my personal finances often to pay for rental expenses too often. What do you usually look for in a property? Do you typically want the rent to pay off all expenses yearly and come out with some income or do you hope to come out even? Do you avoid larger homes and purchase smaller less expensive properties? Just looking for some input as purchasing investment properties is new to me. Any and all advice is welcome. 

5. In regards to paying cash or loan. If I pay cash then all the income is mine-less expenses-however then my 300k+ is tied up. I might also be able to get the house slightly cheaper also if cash. I would be getting roughly $1900 a month income though-less any expenses. This would probably work out to 4-5% yearly income after expenses..I think... If I use a mortgage my funds are not tied up but I probably won’t make much income monthly either. Which way would you all go-cash, mortgage, or cash and then refinance later? Most have said mortgage but just curious. I suppose if I get a mortgage then I would have more cash to put into other investments so that is probably a better move. 

6. I noticed that the property is listed as a 2 bedroom on the property taxes but it’s a 3 bedroom and always has been. It was built as 3 bedroom. Some others with houses built by same builder have the same issue.Does that impact anything? 

Any input would be appreciated. THank you! 

@Arthur Schwartz @Chris Tarpey I noticed that the tax records show the house as a 2 bedroom but it is a 3 bedroom and was built as such. Does that pose a problem at all? My other neighbor has the same home, same builder, and has the same issue-listed as 2 bedroom but it’s a 3 bedroom. Odd..

@Chris Tarpey Just looked at zillow, gives an estimate of 333k for the house-it will probably be less as the owner is not doing any repairs or work and they said I could deduct. According to Wells Fargo I would have to put 66k down, closing cost around $8475 at apr of 2.729% and the monthly mortgage payment would be around $1427 per month. I’m not sure if that rate would be higher for a rental property, do you know?. The potential rent looks like about $1900 a month. That would leave me with about $473 per month for all other expenses. The taxes on the property taxes are $3300 per year, so after taxes I’m left with about $2376 yearly for repairs etc. Does it seem like a good purchase to you? 

@Arthur Schwartz Thank you for taking the time to reply. You mentioned buying with cash and later re-financing in and taking 80% out, are re-finance rates typically higher? How long after the purchase can you refinance. Would it be better, given the mortgage rates now, to just purchase with a loan. Others chimed in and seem to think so. Was just trying to get the best deal on the sale but also don’t want to tie up my cash and wind up paying a higher rate on re-finance than if I got a 30 year loan or other. If it were your purchase, what would you do?

This home is probably around 300k - a 3 bedroom house in a desirable community. Prior to COVID Family’s were asking if there were homes to rent in the area because there were a shortage of homes to buy. I’m not sure how the market has been impacted by COVID. Has it impacted the market in Raleigh? This property is right next to mine and I folks call me all the time to see if I want to sell my property-I’m assuming wholesalers but I’m also getting folks out of state calling me to buy. Not sure if this is relevant or not.

If looking to invest in a property, how do you go about choosing? Curious on others methods. I have a disability so most of my income from my other investments. My spouse works full time. Although this house is in a desirable community, I won’t be getting a steal on it but steals are not easy to come by here in general. Like I mentioned it’s in a great neighborhood, I’m just wondering if I should be investing in smaller properties like a townhome or less expensive home and if they would offer me better returns. I’m okay with not making money initially, if it will provide us greater returns later but I don’t want to wind up pouring all my personal savings into repairs over time either. I would like for the rent to pay the bills. Yah know what I mean. Im not bidding against others so I do have an advantage but does that make this the right property, I don’t know. I probably won’t make money until down the road. 

When you are determining whether to buy a rental house or not, do you typically want the rent to cover the mortgage, taxes and all potential expenses or early on, or is it pretty normal to expect to pay funds out of your own pocket for some expenses for some time? It would be ideal if the rent could cover all expenses, at a minimum, and even nicer if I wind up with some cash in my pocket too. Just trying to figure out if I’m chewing off too much because it’s good location and a convenient purchase. Also concerned about renters struggling to pay rent right now. I would always support a renter in challenging times but I don’t now how long I would be able to do that if I have to pay a mortgage etc. myself. Are there provisions for landlords to help them get by?

The owners realtor is getting an appraiser to come in to provide a starting number to work with and said i could deduct for any repairs expenses. I initially said i would pay cash but that may change. Still trying to figure that out. Do appraisers have a legal responsibility to provide an accurate appraisal? Not sure why the realtor doesnt just look at comps and come up with a number. Either way it will give me a starting point. 

Just looked at zillow, gives an estimate of 333k for the house-it will probably be less as the owner is  not doing any repairs or work and they said I could deduct. According to Wells Fargo I would have to put 66k down, closing cost around $8475 at apr of 2.729% and the monthly mortgage payment would be around $1427 per month. I’m not sure if that rate would be higher for a rental property, do you know?. The potential rent looks like about $1900 a month. That would leave me with about $473 per month for all other expenses. The taxes on the property taxes are $3300 per year, so after taxes  that I’m left with about $2376 for repairs etc. Does it seem like a good purchase to you?

Thanks for listening. I’m just trying to think through this and determine how to proceed. Everyone’s help is appreciated. 

@Chris Tarpey thank you for your input Chris. I think it sounds wise to get a loan.  My neighbors agent contacted me and said that they are going to get an appraisal and will provide it to me, then I can lower the price from there for any repairs that need to be done. They are selling as is and would not give me a price but told me they would get an appraisal. Are appraisers required to give legit appraisals? One concern I have is the appraiser making the price higher than what it is worth. 

I am going to do a walk through this week. Which professionals do you think I should bring with me to give me an idea of cost of repairs and any potential issues-underground gas tank, mold etc? Would that be an inspector or contractor?

I’m wondering about the investment choice of a more expensive home (say 300k) like the one I’m looking at vs a small townhome. This is not a property I will get a steal on but it’s been hard-pre-Covid-to even get a house in this community.  When you purchase a property and are going to rent it , how do you determine if it’s a good investment purchase? Is it better to start with a smaller property? How much higher do you typically want the rent to be over your mortgage payment,taxes etc or is it typical for the rent not to cover taxes, ongoing repairs and maintenance early out? This is a 3 bedroom house. I think this is a good opportunity for us because we know the owner but also wonder if we should start smaller. The home is not too far from Duke and we get a lot of professionals here and before the pandemic folks were constantly asking if there were any homes available or places to rent-because there were no homes available to buy. I also get calls all the time from, probably a wholesaler, asking if I want to sell my house-which is in the same community. This is our first investment/rental purchase so with that I’m having doubts. I have a disability, but my spouse works. Most of my personal income comes from my existing investments I have. I just want to choose wisely and choose a property that isn’t going to drain me financially and that will eventually provide me an income over time. It’s one thing to not make income for some time knowing the house is being paid down and I will eventually makes some money in rent, but its another to be pulling from my personal savings all the time. I want to avoid that. 

Hi there. Interested in buying my neighbors home as my first investment property. It’s a highly desirable area and homes sold relatively quickly -pre pandemic. I have not bought an investment property before and am looking for some input on the following:

1. The owner has a friend that is a realtor that will be handling the sale of the property and I have been communicating with them but they are not providing a price and they are not doing an appraisal. They are selling as is but letting me bid first. Just wondering what steps I should be taking for this purchase. I am thinking I should bring in my own appraiser, inspector and contractor to give me some insight into issues, pricing and cost of repairs. Anything else or what do you recommend?  Is there an online service that would give me a ball park figure on what the house is worth, before I go into getting an appraiser etc? How do i determine how much I should put into the home before renting or selling and how the rental market is doing for homes?

2. I am wondering if this is a bad time to be purchasing a property or if COVID hasn’t really impacted this area. I have folks calling me all the time trying to see if I will sell my house so I assume it’s pretty good here. Houses tend to sell pretty quickly but I have noticed in the past years that it’s the houses under 300k that sold quickly and those above sit a little longer but prices have gone up so much here that I’m assuming that has changed.The house is probably around 300k. 

3. Is the price range too high for a rental-probably 300k? My hope is to eventually sell in the future but for now I thought of renting. 

4. I’m wondering about the rental market for a 3bedroom home and if COVID has impacted landlords here. A concern is that the tenant will not be able to pay their rent in this COVID climate. What is happening right now with regards to rentals in the area and what happens if the tenant does not pay because of COVID?

5. Would you pay cash or get a mortgage on the home? What approach is better. Can you pay cash and then get a mortgage at a later time? Thought while I was having repairs done that it would be better to not be paying mortgage interest but also don’t want all my funds tied up in a home. 

6. Please share any input or suggestions for a first time investment property buyer. I have a disability and am looking for a way to use existing funds to make further income and I thought investing in property would be a good option. 

Christopher Smith, Yes the business would be transferred to me and my brothers. Parent presently owns 100% and will be transferring to us. 

Hi there..Thank you for your reply. It’s not a house, it’s a business. I understand that the portion that is gifted is at parents basis but I thought that, perhaps, the sold part would be at the basis prior to discount.  It sounds like you are saying that is not the case.  As far as leaving the business for full step up later, it has already gone down in value since our father passed and it could go down further because of changes in store front businesses. Also, the tax law will sunrise in 2024 or so and may revert back to 5 or 6 million which could possibly cause issues. Thinking maybe the business should be gifted in full instead of sold, then would get parent step that they received in years prior. Any thoughts?

If you did a partial sale/partial gift purchase of a business from your parent and the purchased and gifted portions were discounted( lack of marketability and lack or control discounts)..... If you paid 350k for 51% of the business and this amount was based on the “discounted value” how would you determine cost basis? Would the portion you purchased have a cost basis of 350k OR would the 51% purchased have a cost basis based on the value prior to discounts?   For the portion you were gifted, would the cost basis be your parents original cost basis?

Any input would be appreciated. Thank you

When my father died I inherited 25% of my fathers portion of my parents property at step up (mom disclaimed this portion) and my other brother inherited 25% at step ups as well (mom disclaimed this portion as well). The property is in an LLC and owned 50%mom and 25% me and 25% my brother. Mom resides in the house on the property, me and my brother do not reside there. We do not charge mom rent to reside there. We don't plan on selling the property until mom passes because her house is on the property. My question is this, Im assuming that moms portion of the property will be increased to full step up when she passes and that part of the property will be inherited by all of Moms 5 children; however, what will happen with my and my brothers portion of the property and will we be able to take 250k deduction each for capital gains? Are there any strategies to reduce capital gains taxes on my and my brothers lots?

Thank you