All Forum Posts by: Nick Ferguson

I'm currently in the middle of my first 1031 Exchange.  I've sold my relinquished property and am under contract for the replacement property.  The closing for the sale was remote so I was not there and the closing/title people needed LOTS of help to understand instructions for wiring funds and properly handling paperwork for the 1031.  

Anyway, sale proceeds are in escrow with exchange company and all is good.  I got a check in the mail though from my previous mortgager that is an overage/refund of about $1,000 buck for the unused escrow (taxes, insurance) on the house. 

I called the bank to ask them to wire to exchange company and they said they can't.  Exchange company says all sale proceeds should have gone directly to them and to call title/closing company.  Title/closing company has been generally incompetent and I don't think understands what a 1031 exchange even is (small, rural town...Not a lot of investment going on down there I'm sure). 

Is the escrow from the house that was sent to me even part of the exchange?  Like, since this money wasn't sale proceeds and wasn't part of the loan or anything, am I good to cash it or not?  My exchange company said not to cash it (but this sounded like general "never cash anything" advice as opposed to actually, "I heard what you said and this is my professional opinion") but they also said they couldn't take it directly so it's just sitting on my table.  

I'm curious here too.  I had a college rental that I converted to renting to a local business before last school year and I'm feeling very lucky right now. 

The business owner actually was saving up to buy the house from me so, while his business is greatly affected by this and this will likely delay or cancel the planned sale (that's fine by me honestly) he has enough saved to keep making rent payments for a long time. 

Hopefully everyone is weathering the storm. 

@Samantha Miller Don't "rent a room", just "get a roommate".  Don't charge "rent".  Just have them pay for "utilities, groceries, lawn care, etc." 

Also, I believe with most mortgages it's not about what you actually do with the property, it's about what you intend to do with the property as the time you close.  If circumstances change (like finding out that your plan is not allowed) you may be able to move out sooner.  I know I had a mortgage broker tell me when I was closing on a property that I intended to live in for 2 or 3 years (with roommates just like you) and then move out to rent the whole thing, he said as long as that was my plan now I could do owner occupant financing and if anything changed, I could move out without penalty (even in the first 6 months or year or whatever) as long as I didn't "plan" to do that all along.  How do they prove intent???  I have no idea. 

I have a property, my first that I ever purchased, that is about 4 and a half hours from where I live.  I manage it remotely and have two trusted people that handle maintenance/repairs/tenant issues etc.  I haven't seen the house in about 2 years so it's not like I'm running down there dealing with stuff myself but ultimately I don't have it under true "property management"

I owe about 29K on the mortgage and about 13K on a HELOC that I used to purchase another property a year and a half ago. It's a single family residence near a small college. Typical rent for a similar house in the area would be about $500 per month. I've focused on college kids and gotten outrageous rents (when compared to the area) ranging from $1000-$1250 over the years. This year, I'm only getting $800 as I just couldn't find tenants above that number for this school year.

The house will be paid off in June of 2026 and my plan was always to pay it off, use the increased cash flow from no mortgage to pay down other properties for a few years, and then sell it and 1031 into something closer to me in Cleveland. My neighbour, a fellow investor who runs a business from his home, wants to buy it from me.  He has offered $70K. $70K is a great offer for the area. If I put it on the market, I think I'd get somewhere between 60 and 70. 

So a few questions, Since I owe $42,000 on it (between both loans), how would the 1031 work and is now the right time? Should I wait until it's fully paid off before doing the 1031 or are there advantages to doing it sooner? If I'm able to execute a 1031, I know that the property purchased must be equal or higher value to what is sold. I assume that number would be the $70 that the "sale price" would be and not the roughly $20,000-25,000 that I would take home after paying off the loans and realtors? So I would therefore need to purchase a house worth more than $70,000 using the $20,000-25,000 as the down payment and reserves for the purchase. The other factor to consider is I would lose the HELOC on the house which I have used as my reserves should a large expense (like a roof or furnace) arise.

If anyone has done something similar, share your story. 

 Any idea who might do such a thing locally?  Im assuming it will be cost prohibitive as well but it's on a main street, then highways, and its such a small house I may get lucky. I at least want to explore further. 

Hey everybody, 

I'm looking at a potential value play that would involve moving a small house about 30 miles to a new lot.  The house is one story, very small. 

This is in the Cleveland / Akron / Northeast Ohio area and through Google searching I was only able to find two companies that are semi-local and move houses.  Neither has answered/returned phone calls or emails.  I'd hate to let a potential deal slip by simply because I can't find someone to do the work. 

Has anyone in Northeast Ohio ever physically moved a house to a different lot? If so, who did it for you?  Does anyone have the slightest idea what something like this would cost?

A lot depends on your management strategy as well as a little luck.  At this point, I am self-managing my units.  I've had one property for 6 years and a second property (duplex) for about 2.  The longest vacancy I've ever had was 2 weeks.  I plan and plan and plan and when a vacancy occurs, I have people in there (or I am in there) as the tenants are moving out and we get it turned over.  I always post my rentals while they are still occupied and try to build good relationships with my tenants so that they don't mind if I'm showing the unit before they've moved out.   

My last turnover was literally 12 hours.  I had one tenant who was falling behind on finances and wanted to break her lease early.  I let her out of her lease at the end of the month (3 months early) and in exchange asked that she keep the house clean and allow me access whenever needed for showings, beginning immediately.  Two weeks later I had a tenant ready to accept the unit on the first of the following month.  Her lease ended on the 30th and her current landlord would charge her a full month even if she was there one day longer.  I asked my current tenant if she was willing to be out by the 29th and because I was helping her out, she helped me out.  She moved out on the 29th, I had the unit cleaned as she was still moving her stuff out, made notes of repairs and did the quick ones myself that day.  I had my handyman in over the course of the next week fixing other things and the new tenant was in the morning after the old one left. 

My single family unit is near a college and I rent to college kids.  I always do leases that begin and end in June (they end the day of graduation and start the following Monday).  My team knows for months exactly what day and time the unit will be empty and having the summer be at the beginning of the lease guarantees that my students won't graduate and leave me empty-handed for the summer months.  If they want to live there in the fall, they will be paying for summer whether they plan to stay there or not.

I have also been very lucky.  I have avoided the "nightmare" tenants (although I've had quite a few "kind of bad dream" tenants) and I haven't had to deal with an eviction.  But If you're dealing with property management company or you have a lot of properties, you obviously won't be able to put that amount of work into having quick turnovers and I'd say 5% would be the most realistic and 10% would be the most cautious numbers to use for projections.  It sounds like you'll be using a PM but I wanted to illustrate some of my experiences for some of the drivers of vacancy rates. 

Hey @Federico Gutierrez thanks for the input.  I agree completely with the exterior stuff.  Those were the actuals provided by the seller, unfortunately.  Obviously, I would do what I could to make them lower but I don't want to bid based on the future improvements I will make.  Do you think I'm off in my thinking there?

Thanks for the feedback @Omar Khan and @George Hoover . 

I definitely agree about passing on expenses when possible @Michael Hayes .  This property currently has gas/electric in owner's name and I like to get 2 pictures, what is it and what could it be.  I think a purchase has to be based on what it is, at least from a purchase price standpoint.  In evaluating quick glance numbers, I don't want to assume that I can easily pass expenses to tenants and then find out I'm wrong once I get further into a deal.  On this deal, passing on the expense would mean submetering the gas, or installing electric baseboard heaters in each unit. 

In regards to lawn and snow, pest removal, etc.  Lawn/snow should just say snow removal.  Landscaping/lawn care is mowing.  Both of those numbers were 2017 actuals for this property.  I would not consider either optional, unfortunately. 

Thanks for the good feedback guys.  Do any of you or anyone else local have some long term figures on how much you've spent on maintenance/repairs (and even capex) for multifamily in the area?

So I have a few units and I'm looking to expand into small multi-families.  I've explored financing options and have that secured.  I am hoping to use a mixture of my own money and passive investors but want to evaluate every deal like it is 100% someone else's money.  That way if I cannot pay a preferred return and have a strategy to return capital in a reasonable amount of time (and repeat the process), I will not do the deal. 

The problem is that every deal I analyze, I end up with negative cash flow after accounting for debt service.  Looking at my spreadsheet below, what do you guys think of my evaluation?  This is a "quick eval" spreadsheet so some values are assumed.  Am I obviously overstating some expense or is it just coincidence so far that every deal I've analyzed somehow ends up in negative cash flow?  Using the 50% rule as a ballpark should put my total operating expenses around 19,000 annually whereas I get closer to 30,000 annually with my analyses.  This deal, and others I've looked at, are in Cleveland, Ohio and surrounding areas. 

Any thoughts?