All Forum Posts by: Nader Hachem

I’m finally in the position to actually take action and purchase my first rental property after I close on my primary later this week. I’ve got the process down of running my numbers, finding an agent and finding a deal that Would work. 

With that being said, I haven’t looked into much of the accounting side. I’ll be speaking to a professional accountant to get their thoughts of course, but what actions are needed for that first rental on the business side?

Are there certain tax implications I should be paying attention to? Is opening an LLC preferred? (What I've been hearing Is no because financing will be difficult - rather get an umbrella policy)

Aside from accounting and tax things, what systems do you have in place that would be greatly beneficial. For some context I’ll be investing in LTR SFHs to begin with

Thoughts?

Quote from @Russell Brazil:

Most real estate photographers offer this service, as well as video services.

Yeah of course i'd be aware of the competition. My idea would  start of as a MVP (minimal viable product) with the 3D scans - maybe using those scans to develop pictures as well. Eventually i'd expand to different things like 2D Key plans, drone shots, etc. 

As an agent yourself. Do you use this service? What more would you like to see from other services you have used if it is something you use?

Hey all,

Not directly investing in Real Estate related, but i had an idea to start a 3D photography business which would allow you to virtually walk through the house and have a virtual tour. One camera that comes to mind is the Matterport camera.

A few questions:

- As a Real Estate agent, would you invest $100-$200 for this service? Have you done in previously?

- Does anyone have experience working with this type of business or idea?

Would love to hear thoughts about it.

Quote from @Bill B.:

When you say you’re offering $40k over asking but only $10k over appraisal< you’re really only offering $10k over asking, assuming the appraisal comes in at/near selling price as it should. You could just s easily offer a million over asking, and $10k over appraisal, it’s the same as $40k over asking with $10k appraisal in most cases. 

Your 5% on $250k is probably scaring them. That’s $12k and your saying you would go up to $10k over. so that’s doubling your down payment.  Most sellers would assume you’re maxed out at that price. If I come in with 20% down and $10k over I’m only going from $50k to $60k, 20% more. But I’d probably just go for the win and offer $30k over asking and $20k over appraisal. I’ve beaten your offer of $10k over appraisal and WORST case I switch to 10% down ($25k) plus $20k over and I’m only putting $45k down instead of my original $50k if it appraises I just go back to 20% down on $280k ($56k) and it only costs me $6k. 

Would 5% still scare them off if I’m showing proof of funds? In my last offer I’ve attached bank statements showing proof of funds. 

reason why I’m putting 5% down is I’d rather have cash to put on another property for a few hundred a month rather than putting 20% on my primary residence and not having cash to invest - 5% on primary just lines up better with my goals 

Quote from @Dave Skow:

@Nader Hachem- what down payment are you working with ? if you are maximing out the loan to value on a FHA loan (96.5% ) or on a conv loan ( 97% ) - and the apprisal comes in low - this does creat an issue .....if you are putting a larger amount down - a low appraisal may not be an issue ( depending on the amount between price and appraisal .

 I'm putting 5% down on a ~250K property through a conventional loan

Quote from @Bruce Woodruff:

Do NOT do the inspection yourself - unless you are a seasoned inspector or builder. That's just asking for trouble.

And you can still have the inspection, you just agree to not ask the seller for any repairs. Perhaps taking it 'as-is' and a shorter escrow....?

So if I understand this, it’s stating something along the lines of ‘I will conduct an inspection, if anything is found - seller won’t be responsible for repairs but buyer will be able to back out’ isn’t that just a normal inspection contingency situation? 

Quote from @Michael J.:

You can do an "as-is" contract but still retain the right to have the property professionally inspected.  It should look something like,
"Buyer retains the right to inspect the Property by 6 P.M. on (date) for informational purposes only." on the contract.  If you are working with a REALTOR they should be able to walk you through this.

Does this give me the option to back out if a major issue arises like it would if I had a contingency? I assume that would be done after the offer is accepted just because how fast these houses are selling, in a day or two  

I've been shopping for my first primary residence, have been offering 40K over asking and waiving inspection. We're looking at starter homes (1200-1300 sqft, 3 bed, 2bath - both work from home so we need extra rooms for home offices). This has been falling within the 220-260K range.  The last offer we put in, we went 37K over listing, waived inspection and had a 10K appraisal gap coverage.

The reason we lost this one was because we had an appraisal contingency. On top of the 30-35K worth of work it needed (house was OUTDATTEDDDD), eliminating an appraisal contingency would have made us cough up another 20-30K to cover that gap. Realtor said it would have appraised for 230ish

I've spoken to a few people about this, but that appraisal gap seems to turn off many realtors, even if we come in higher. Is there anything else we can do? I don't see how my offers can get stronger without having to cough up more money - and we're already way overpaying. Should i increase the appraisal gap coverage? I'm looking to lower my earnest money - right now we've been doing 10K but will lower it to 5K which will make me more comfortable risking an appraisal gap. 

On another note, for the inspection waive - does anyone have a list or a checklist of things to look for when walking through the house? Since i won't have a professional inspector out there, I'll make sure i want to hit every single point i could possible when walking through it. I'm creating a list myself. 

A few things i captured are - major items like roof, furnace, AC unit, do the lights work, faucet running, water heater, the grade around the house, any water leaks in the roof, insulation in the attic? 

All input would help at this point

Quote from @Marty Boardman:

I'm sure there are a lot of spreadsheets and/or calculators to be found here on BP for evaluating and estimating repairs. As a general rule of thumb I repair/replace anything that has less than 5 years of life.

You seem to have a grip on the basic stuff. Here's what I also budget for:

BIG TICKET ITEMS:

Windows

Rough/Finish Carpentry

Plumbing/Electrical Upgrades

Foundation Repair

Concrete Repair (driveways and/or patios/decks)

Plumbing/Light Fixtures

SMALL TICKET ITEMS:

Window coverings

Lock changes

House cleaning

 Thanks for that. If you find anything on BP or have something that already exists, please pass it on!

Quote from @Jaron Walling:

This is a case by case situation and really an open ended question. Every rental property starts out in ____ condition. If the countertops are nice, undamaged, and don't have 10 layers of paint replacing them is a WASTE OF CASH. Same goes for the cabinets, flooring, bathroom vanities, and tub. On the flip side if you don't have a kitchen or bath (most expensive rooms) I'd review your analysis and calculate a budget to remodel it effectively. 

If you plan to buy and hold for 10+ years some of it will get damaged, destroyed, or worn out in that time. Unless comparable rentals in the neighborhood justify high end finishes usually it's a bad idea to install them. I really focus on breakable issues like sink drains, doors locks, HVAC maintenance/replacement, outlets, water heaters, and the roof. Fixing what breaks BEFORE it breaks is peace of mind. It's not always possible but that's what reserves are for. 

Your opinion of LVP is spot on. In my opinion carpet sucks. It the cheapest flooring possible but you'll replace every 4-5 years. We clean units for unit turn overs and the investors I work with usually pull the carpets and replace with something more durable and trendy. 

 Yeah definitely agree that this will be on a case-to-case basis but i was asking so i could basically fill what's needed after the walkthrough. I.e. if i see i need to replace 500sqft of LVP, cabinets, etc, i'd plug it back into this spreadsheet (that has a database of all things replaceable) and get a number for that specific property. 

Are bathrooms really that expensive? I've seen a few times where people have retiled, painted, replace vanity, all for under $1,000. Expensive is a relative term so that may be expensive, i'm just not sure haha! Thanks for the info too.