All Forum Posts by: Paul Shannon

I own a fair number of older homes.  Actually my first buy was a 1920 duplex that was occupied.  Its the only real estate i've owned that I've sold.  Total head-ache.  I had maintenance issues come up almost monthly.    

The other other early 1900's properties I had I bought vacant.  It's a lot easier to replace a sewer line, do foundation bracing, and replace floor joists, when nobody lives there.  These types of repairs can add up quickly and even with estimates, unforeseen problems can arise.  Be conservative in your rehab numbers.  My properties I've rehabbed are turnkey and don't have outside of the norm maintenance issues, cause most things are new.  

Its nice if it comes with a paying tenant and is cash flowing, but consider how long you'll have to manage the property before you can get it rehabbed to your standards.  

Are you able to qualify any of these leads as legitimate?  You said that there were red flags you didn't mention in your post....if your gut tells you its a scam, it probably is.  

You can go to listsource.com, run your own criteria of what you are looking for to really narrow your scope, and pay a lot less than .95c per lead.  

As for the $13/$14 for a cash buyers list, that sounds crazy.  Find out who the wholesalers are in your market.  The good ones know the cash buyers and you don't have to pay anything unless you sell through them.  

If there is a lot fee, that means you own the home, but not the land.  In this case, you are correct....you would be buying a depreciating asset and I recommend against it.  If you are investing in mobile home parks, you want to be the guy who owns the land, not the trailers.    

Alternatively, sometimes you can find manufactured homes that are erected in stick build neighborhoods.  The home, while manufactured, should be tied to a permanent foundation (as opposed to on wheels with a skirt around it).  In this case, the owner owns the home and the land.  Generally the manufactured home will appraise and comp out more closely to the single family stick-builds around it.  

The second scenario is a potentially viable investment.  The first is not.  

If the newly renovated property cash flows as a single family rental, perhaps you take that route for a couple of years until you can see where travel patterns are when the lease is up.  If Covid hasn’t damaged long-term trends, convert it to an Airbnb at that time.  You’ll probably see more appreciation and have a larger buyer pool if you want to sell the property some day, than from a duplex in the burbs.

I wish I had house-hacked.  Hind sight is always 20/20, but it would have been great. I was living in Boston at the time.....If I'd have bought a duplex back in 2008 instead of a condo, I could have simultaneously learned about real estate investment, got my hands dirty rehabbing and understanding the work that goes into keeping up with a property, managed tenants next door, had those same tenants help me pay down my mortgage, and made a fortune in appreciation. Instead I bought a condo, sold it  in 2012 for slightly more than I paid for it and moved out of state.  If I had held onto that condo and rented it out, I could have sold it in 2018 for double what I paid for it.   Yikes!  

Its still burns!  But house hacking is such a great starting point that I wish I would have taken advantage of.  I think I would have started down the path I'm on now much sooner if I had that initial experience.  

If you really are going for asset protection by forming the LLC in the first place, does it make sense to quit claim the deed form your personal name to the LLC? The mortgage is still in the name of the individual even though the deed now says the LLC.

There is really very little precedence to whether the LLC protects the owner in the event of a lawsuit anyways versus just having increased insurance/umbrella limits in the individuals name. However, if you are trying to keep the "corporate veil" from being "pierced", I would think a lawyer would tear you apart in court with the quit claim strategy.

My personal choice has been to buy properties in cash in the name of my LLC, BRRRR, then refinance them in the name of my LLC, albeit at a higher rate, through a lender like Visio, Lima One, Corevest who will loan to an LLC. Bank accounts, commercial insurance policy, commercial umbrella policy....all in the name of the LLC.

I think having a bank account and LLC for each property is overkill. Its a lot of paperwork. Have a dollar amount that you are willing to defend against if litigation arises.....example 5 properties in 1 LLC worth $1M. If you get sued, those 5 properties are exposed, but not your entire portfolio. Personal risk management preference here.

Hey Keith, 

Sounds like a good opportunity with a few complexities, but worth exploring.  

Have to make a few assumptions here without all the details, but first thing that comes to mind....if you're buying it from your dad, could you work out a seller financing deal?  Your dad becomes the bank.  You pay no money (or a small amount) down and pay him, say, 8% to finance the 50 grand.  Basically a bridge loan for you until you can secure longer-term financing after rehab is complete.  Now you have a lot more money to rehab and pay contractors.  With COVID and the uncertainty with lenders, that gives you a lot more flexibility if you can't secure long-term financing in the medium-term, and it gives your dad a decent return.  Talk to a lawyer to draw up a contract. Refinance to a bank loan eventually and pay your dad in full. 

Secondly, if your dad is willing to help out, that's huge to oversee the project.  I'd get a few bids to make sure your $75K number is real, and then meet with the contractors.  If you didn't have boots on the ground, it would be tough, because you'd end up with some cash leaks.  But with your dad there to check-in and give first hand perspective on any surprises that come-up during the rehab, you've got a built in partner you can trust.  If the contractor does a good job, you may have a long distance investing opportunity beyond this project.  

Good luck. 

I'm seeing that buyer and seller expectations are not entirely aligned right now.  We went from a sellers market to now somewhere in the middle almost overnight.  

Now is the perfect time to be patient.  Focusing on building relationships here on BP and connecting with people virtually.  Learn about different strategies that you haven't explored in the past.  The strategy you had been using will take on a different shape and opportunities will arise as markets change.  You'll be ready when they do. 

It really depends on what your main goal is with the software.  For simple income/expense tracking, Quickbooks is adequate.  

For tracking net worth, income, expenses, cash flow, spending, etc.,  I really like Personal Capital.  You can link all your accounts, credit cards, mortgages, and really track your assets and liabilities.  It shows your asset allocation and holdings and has a retirement planner that you can adjust based on your goals.  Its free to use, but you may get some phone calls to sign up for them to manage your money.  I've used it for 3 or 4 years and talked to a personal capital advisor once and otherwise haven't been bothered.  

I've also heard good things about Mint.  Good luck. 

There's something to never selling real estate correlating to generational wealth building.  Unless you really need the cash.