All Forum Posts by: Bart Lucas

I have a house that I am looking to rent long term. The potential renter is asking about possibly renting to own. I have never done this or even looked into it. What problems could I face with this? I am looking at first and last to move in and when the renter sells their current house, they want to put money down towards an option to buy. Thanks for the input.

I currently own two SFR as long term rentals that were bought under mine and my wife's names. I am looking at starting a LLC both am confused with a member managed or a manager managed. My CPA says a single member LLC with my wife as a manager. This will keep my taxes on my personal tax return, which I think is the way I want to do it. My lawyer friend (not real estate law) says it should be a manager managed but I don't know if he is looking at the tax structure. What type should I be looking at?

Investment Info:

Single-family residence fix & flip investment.

Purchase price: $80,000
Cash invested: $55,000
Sale price: $179,000

Old Single Family Home went from a short term rental to flipping it.

How did you find this deal and how did you negotiate it?

The owner approached me to help him find a renter but he really just wanted out of the landlord business. The home was valued in Oct 2021 around $120,000 as it was in livable condition. The owner offered it to me for $80,000. I couldn't say yes fast enough. No negotiation needed.

How did you finance this deal?

Conventional loan with 20% down, which we had in savings. I took a HELOC against my personal house to fund the rehab.

How did you add value to the deal?

We were going to turn this into a STR so we gutted. The house was built in 1953 and had the original flooring (asbestos) and kitchen cabinets, int trim & doors were original knotty pine. The inside exterior walls were struck concrete block.
We replaced windows, int & ext doors, added drywall to ext walls, added beaded paneling to ceiling, new kit cabs & tops, new appliances, everything new in bathroom, and moved some doors to utilize space better. And add a new laundry room.

What was the outcome?

When we were ready to start renting as a short term rental, the original owner's daughter approached me about renting or selling to her. This house is located next door to her parents. So we agreed upon a price and we ended up flipping it.

Lessons learned? Challenges?

We got really emotional involved with this property when adding items to it. Spent more than we should have for a regular fix and flip. Had we kept as a short term rental, it would have made sense. Our contractor was expensive. He was very good but expensive. I probably would not use him on a regular flip.

And to tack onto this, what about the closing costs? Closing the deal with cash will have closing costs but then to refinance to repay the HELOC will have another round of closing costs. This sounds like getting hit twice and just adding to the amount of the deal. Or am I looking at this wrong or missing something?

@Stephanie P.

Thanks, Stephanie. We bought the property October 2021 and based on some comp sales I found, it is probably worth $200,000 now especially with all we did to it. We did just pay $20,000 car off and $19,000 of the $23,000 credit card. My score had dropped to about 650.

I will check out the credit report for a what if scenario. Thanks again.

We purchased our first investment property, a 2/1 house for $80,000. We put $20,000 of our money down and financed the rest for 30 years @ 4.75% with a payment of $450. Then took out a HELOC against our primary residence for $30,000 @ 3.95% with a payment of $300. Then a personal loan of $15,000 @ 3.95% with a payment of $450. Then last, we used $20,000 on a credit card to finish. (I know, not real smart)

My question is do I refinance to consolidate everything ($145,000) to get all my money from the down payment and credit card (which is almost paid off)? The rate is 6% and closing costs of about $7,500. My payment would be about $1,100 which is $100 less than my current payments. I am trying to get my savings money of $40,000 back to continue investing but my credit score and the number of credit inquiries tanked my score so the refinance option is not great. My lender recommends to wait a few months and try again when my score goes back up but I am afraid the interest rates will continue to go up and it won't matter.