All Forum Posts by: Nathan Sharp

We currently live in the outskirts of SA. I grew up in DFW and will eventually want to live back in DFW to be around family. We are curious about the rental prospects in Collin County. Based on our research it is a very sought after area. 

Hi all! My wife and I are in Collin county TX today for a foreclosure auction tomorrow. We have been doing research on the foreclosure process but this is our first time going to auction and we are real need of more information if we are going to bid on anything tomorrow morning. If you have experience along these lines and are somewhere within the vicinity of Collin County we would love to meet up to learn from your experience. Dinner is on us!

My wife and I have lived in our primary residence for four years. In the next 8-12 months or so we plan to be moved into a different home and have this one rented out. We plan to sell it after 2-3 years of renting it out to take advantage of the zero capital gains tax on a primary residence. Currently we are doing a bunch of renovations to get the home ready for rent. 

My question is, how much of what I am spending on renovations in 2019 can be used against the taxes on the rental income I make in the coming years?

My wife and I have lived in our primary residence for four years. In the next 8-12 months or so we plan to be moved into a different home and have this one rented out. We plan to sell it after 2-3 years of renting it out to take advantage of the zero capital gains tax on a primary residence. Currently we are doing a bunch of renovations to get the home ready for rent. 

My question is, can the cost of improvements I am making now (flooring, paint, etc.) count as deductions against the passive income I will receive once the home is rented next year? As long as everything is documented, can I lessen my 2020 and 2021 taxes w/ what I am spending now?

Mostly I should have asked better questions. I should have gotten a better idea of what his normal operational style is. One of the things that irritated me the most was that they were typically only on site around 7-7.5 hours a day, mon-fri, even when they were weeks behind schedule! As someone who saved up the money to do a flip, by working 20-40 hours of overtime a week throughout my 20's, I found this unacceptable. I know a 40 hour work week is industry standard for contractors, but the next one I hire will have to make me confident they are willing to do what it takes to meet deadlines.

Some other things to lookout for: Advanced age (this guy was in his sixties) may equal experience - but lets face it - it also means less ambition and energy. Also the appearance of cataracts starting to form may be an hint that you'll be having to double check a lot of their work.

 I also would not hire a guy with a 10+ year old beat up truck. It hints at poor personal finance. Poor personal finance likely means they'll mismanage their business finance too. This guy guaranteed his crew of 2-3 of semi-skilled laborers around 20 bucks an hour, meaning he needed something like $1600 a week from me just to pay his crew. This became an issue as he fell behind on deadline and I let him know that I would need to slow down the payout of the $17500 we had agreed to. He could not miss out on a week of payment because he didn't have anything to pay his guys for that week otherwise. I WILL NOT agree to pay a GC on a weekly basis again. This arrangement gave him and his crew incentive to slow-screw me, whether they consciously chose to do so or not.  Instead I'll agree to pay draws at certain milestones towards completion. Although it may not sound like it, I don't harbor ill-will towards the man. That being said I am not optimistic about his future based on his business/money practices paired w/ his age.

Lastly, I won't hire a GC who speaks who speaks english as a second language again. This resulted in way too much miscommunication.

 Most of my missed savings stem from how long the flip took. The flip most definitely could have been completed in 90 days or less instead of 7 months. This would have saved me on utility payments, insurance and most importantly interest payments. Were I to have waited another six months I would have had much more cash to fund the project with. As it were, I maxed out two lines of credit w/ around 10% rates and three credit cards w/ around 15% rates. I think I came up with roughly 7k I could have saved along these lines.

The second biggest area I could have saved would be on contractor services. In addition to my GC I hired guys for AC, cabinets, and counter-tops, plus a few other miscellaneous services. Just from speaking to other professionals in the space since the project, I am confident I could have saved easily another four 4k here.

Also, I could have picked better materials. Prime example, I picked an unfinished pine siding to replace the old cedar siding. THIS STUFF SUCKED UP THE PAINT! I could have spent about 25% more on siding to get pre-primed and used half as much exterior paint plus probably 30 fewer man hours! 

Also, I learned you should always get the biggest roll off disposal container allowed. It would have been the same price as the smaller one I got and I would have saved 1-2 pickups @ $600 a pop. 

 More often than not Home Depot has promotions on their consumer credit card (through citi-retail) that allow you 0% apr for 6,12, or 24 months, depending how much you spend. Since I racked up almost $20 grand in charges there and the flip took 7 months, this really saved me some money. At times when they don’t have a current promotion I’ve just asked the cashier if they could honor it and they’ve never said no.

Don, I just review my closing disclosure. Our actual sale price was $146k. The cash due to seller was 137,793. The total I paid in closing was $8205. My wife was my listing agent so we didn't have a commission to pay on that end. Any advice for how to post in the future so as to be more clear?

Marcus, that is some great advice on limiting work scope. I honestly hadn't considered the ROI on things like old plumbing going into this but I will certainly keep that in mind when analyzing future deals. Thanks!