All Forum Posts by: Kelvin J.

Hi all.

I purchased a property recently with an investment loan, rehabbed it and let it out under a 1-year contract while I live in rented accommodation. I'd like to sell it soon after the contract is up and want to avoid capital gains tax. Could I live in it as my primary residence to achieve this and if so, how long do I have to do this before I can sell?

Many thanks, K

Sounds like I'm out $500, but will have working A/C...if it indeed fixes the problem. I guess it's just part of it.

Thanks for the advice all, I appreciate it your time.

blocked up and end was buried. Blew it out and raised it now it works. The contractor installed it and it hasn't worked properly since. I'm concerned with him not the bank.

Thanks

I closed on my first house with a freshly installed A/C. It hasn't worked properly since install. It is under warranty but after several visits the contractor is blaming the existing pipework (the 'line set' and drain line) and wants to charge me to replace the line set ($500). Who is liable? The rehab has been done here in Florida in August in a hot box. The rehab contractor already walked off the job once. Is there a governing body I can contact? After last nights conversation I need to pay him today to get the work done.

Details:

The house A/C was ripped out and sold in this foreclosed house. A new AC was installed in May to make the house habiltable for sale as a REO. The contractor used the existing drain line and 'line set' and put in new air handler, thermostat and condenser. AC kept tripping off or blowing warm air continuously. After several visits the existing drain was found to be blocked and backing up tripping a float switch. After I blew it out and raised it to allow condensation to drip freely the problem remained.

So far the contractor has replaced a compressor (burned out) and the condenser (with a goodman rep involved, neither of which could figure out why as they are so reliable)

New line set to go in today for $500

who is liable for this and who can I talk to about it? 

Thanks in advance!

Kelvin

I ran the numbers and if I flipped at full ARV it would lose almost 5k after all buying, holding and selling costs. That's been out from the beginning. The spread is too thin.

I'm waiting on more exact numbers for the BRRRR approach, mainly loan origination fees for both loans. The double fees for the purchase and refi are a cost of doing business to me (plus quicken offers $1000 toward the second loan with them), and one of those elements that will be improved over time. The hidden value here, is in the experience I am gaining and the relationships being built. In 5 years I will have a much more efficient and profitable model, but if I don't get in the game at all, there is no model. I hear again and again that 50% of a deal is better than 100% of no deal. I'm thinking along those same lines.

I'm aware this isn't a slam dunk. I've been watching the market rise to the point I can't get in the game very easily, even with some working capital, so now seems the time to start. As long as it will pay for itself as a rental. The cash on cash is not great but better than the 1.6 % max in the bank

Here are the purchase numbers:

 2 month rehab to rent immediately after. 

Acquisition:

Refinance:

Holding costs for 2 months: $1630

Rental (I included managment fee $128, but I wil manage)

It has taken 8 years you build credit and capital as a new immigrant (I became a citizen last year). I'm reluctant to go all-in on my first deal but it is a way to get started. Thinking on it. I suspect marketing for absentee owners, finding a wholesaler or locating a partner or hard money are options but for right now this deal is staring me in the face. The problem with decisions is without experience, it's a bit of a minefield. I'll keep you posted.

Thanks @Joe Villeneuve and all for the responses 

I like the flip strategy but this flip has a very limited spread and a better rent-ability, and I'm reluctant to lose that as passive income appeals to me. MLS deals in the area are limited as the market is hotting up rapidly. Cash buyers are getting the fixer uppers that won't qualify for conventional finance and I have a way to go to build a network or team.

My main goals are to get in the game, build experience and contacts, and do it WITHOUT losing money. I'd consider that a win. My best case is to also obtain cash flow while doing it.

LOAN SITUATION UPDATE - I've worked with a great agent within Quicken to come up with a strategy. It's not ideal though. My service-industry job is in large part tip-based, which is unfortunate as Quicken (and other lenders) will not count them for Debt To Income (DTI) purposes for 2 years even if accounted for in my W2 paycheck. This now means my down payment needs to be 43% of the loan (62K) to meet criteria. With closing costs and rehab I'd have almost 81k in the deal. Then holding costs til rented (which would be low) which i can meet with my w2 earnings.

The good news is I can re-fi in 6 months at the new ARV of 180K according to reliable comps (135K with new 75% loan) and pull 50K back out. Cash flows at $150, I would have 34K tied up in it and $10k equity.

It's a lot of exposure, just about meets cashflow and reduces my working capital, but it does get me in the game and increases my on paper earnings for a future loan.

Is this too risky? All or bust? I kinda think so, but the numbers do stack up.

The alternative is to just buy as owner occupier and flip it in a year for a reasonable return. But then I wouldn't be able to start my investor career

Hi all.

I just sold my condo and am aiming to buy 4 rental properties in the next 12 months using the proceeds. My problem is my DTI as my pay is pretty horrible, and I'm struggling to see a way through. I don't have enough capital to buy something outright (and am missin out on the great deals on MLS) and need loans, but i do have enough cash for rehab and downpayment.

Today I have my first property all but under contract (REO bank addendums are slowing things down but I have accepted their counter offer. They are waiting for eanest money before signing...) Not a slam dunk but promising. 146k with about 13k rehab needed (its in good shape) ARV 180K and in a great neighborhood. Effective date is today so I have 7 days to source a loan. I had a couple options already lined up -

1. Owner occupied: 5% primary with Mortgage Insurance and then house hack with roommates. (PRO: lowest cash invested CON: high payments and no landlord track record being built)

2. Investment: 20% minimum down. PRO: keep payments low and gets me in the game. Also no mortgage insurance. Also 70% of rent collected counted immediately as income for DTI purposes when rented with a lease (*Quicken loans) BUT very High cash invested and locked up (49K)

I'm struggling to choose the best option based on future needs. It seems the investor option is best but it ties up so much capital. I'm going to struggle with a 2nd property.

How do I choose the best strategy to get in the game and still be able to tee up the next 3 purchases with crappy income?

I'd appreciate your thoughts.

Thanks Kelvin

Hi. i have my eye on a lot that is 100' by 140' in a great area, zoned for' village mixed use' (highest density so splitting is allowed) for 79k. Unfortunately, 30% of the back half is wetlands and with the 25' setback rule in Florida a real big chunk is lost. At first I thought I could split the lot into 2 x 50'x140' lots making it a great buy, but the wetlands would leave one of those with about 50'x20' buildable space, the other about 50'x 90'. It is in a flood zone so I would have to build up. My questions are: 

1. What kind of space would I lose for the septic tank(s) would i lose?

2. Could i even put septic tanks near wetlands? If so are there any restrictions?

3. Could I still split the lot in 2 and somehow use a 50'x20' buildable space with a septic tank?

4. Any creative ways to use this lot?

5. If i make an offer (cash OR loan) what kind of contingencies could I include to allow me to pull out if I discover problems in due dilligence?

Thanks, kelvin

Hi all. Couple of questions. 

Houses needing rehab (70K) in my area are being sold quickly to those with cash, people with loans tend to be losing out. I will have around 70k if I sell my primary residence (a condo) and wanted to take advantage of these high resale homes. My current income will only allow me to get a 15k line of credit on that equity due to low earnings last couple years so selling seems reasonable to get started.

Q1. Can I buy for cash and then later refinance as an owner/occupier to FHA or USDA to release capital (for investment property goals)?

Q2. Will I be less desirable as a buyer if i have most, but not all cash, and have to get a small conventional loan to cover a shortfall? (e.g. for a 90K property)

Thanks k