All Forum Posts by: Pete Harper

Quote from @Rakesh Balavanthapu:

I am a new to REI and trying to find my first deal. Have been listening to BP podcast episodes from 2020 and earlier and the numbers were no where near what they are today.

I have analyzed about 30 deals in Atlanta, Dallas and Columbus markets. Couldn't find a single property where it is meeting the 1% rule. Agreed that I looked at only MLS listings, but still.

Am I looking in the wrong place ? Or am I making any mistakes in my analysis? Not sure where to go from here.

Also, is there a place on BP where we can find market analysis? I am a pro member. 
Please let me know how you guys are dealing with this

1% rule is not dead, you are looking in the wrong place.  I just purchased a 2% rule property in Central Texas in March.  My portfolio average on 38 units is 1.6%.  I still screen at 1%.

1) You need to dig much deeper. All the easy stuff on MLS has been snapped up.
2) Look for small multifamily; duplex and foorplex. Much easier to cashflow with multiple units.
3) Look for off-market deals. I send out "yellow letters" using the county tax website.  I also target tax auction properties. 
4) Look in the secondary and tertiary markets outside the large metroplexes.  
5) Be prepared to do renovations.

Jon and Carlos, Thank you for your detailed replies. I was missing the step of UPREIT DST. I'll read up more on tax code 721. I'm also looking at investment options using REIT.

I'm not ready to kick the bucket just yet. ;-) I'm doing some advanced tax planning and wanted to plan out the life cycle for the 1031s. When the time comes a REIT might be a good option. Meanwhile I'll keep building my real estate portfolio.

I'm doing some estate planning. My kids are in horror of inheriting and managing our real estate portfolio that includes multiple 1031 exchanges. These exchanges have almost no cost basis so they face substantial state and federal taxes if sold. Speaking with an advisor he mentioned doing a 1031 exchange into a upREIT. The advisor said I could sell the property and do a 1031 exchange through an intermediary into a qualifying REIT. When we die the REIT would get a step up in cost basis so our kids would not be liable for the original taxes. They then have the option of collecting dividends from the REIT or selling shares at the step up cost basis. Since my kids are all live tin Texas they avoid state taxes associates with original 1031.

Is my understanding correct?

A lot depends on the initial condition of the property.  We recently completed a major reno on a duplex with a carport in between the two units.  The previous owners had done an unpermitted addition.  We were going to have to take it down to bare studs anyway so we knocked down the walls between the kitchen and carport.  We were able to add two bedrooms and bath/laundry to the floorpan.  The previous 2BR/1BA units became 4BR/2BA almost doubling rent.

Our current project is a 2BR/1BA duplex.  The kitchen needed to be redone so we tore down the wall between the kitchen and living.  The tiny galley kitchen is now open concept with a peninsula bar.  The delta for tearing out the wall was $2000.  On the other side of the duplex there is a large covered porch that will make a nice little 3rd bedroom.

From my experience it is alway better to add bedrooms first.  Usually a inexpensive upgrade that returns the most in rent.  Next would be adding a bath and/or laundry.

Quote from @Michael S.:

@Dallas James

Sorry, the Biggerpockets app is no longer supported and we had removed it from the App/Play Store. We'll bring it back again after all the improvements are rolled out.

Please go to the mobile site of biggerpockets.com for access.

 Do you know if BP plans on supporting the IOS version again.  I had the original version that I lost when upgrading phones.  This was over a year ago and still not available. 

Quote from @Nick Belsky:

@Pete Harper

As noted by others, you are describing delayed financing.  There are seasoning requirements as delayed financing has a different set of rules compared to other types of financing.  There used to be lenders who would waive seasoning with rehab completed, but they are offline right now.  Hopefully, they will be back soon.

Many private money sources are killing conventional right now.  To be fixated on rate, in this market, will make you miss out on a lot of good deals.  Rate is not a primary concern to seasoned investors as other factors of the loan are far more important and impactful.  Rate is too easy to offset.

Good luck.

I don't follow your comment on seasoning period for LOC. Assuming I use a LOC to purchase a $100k property for cash. I use an additional $20k LOC funds to renovate. After 3 months I have completed renovations and have a tenant in place. ARV of the new property is now $180k. I take out a new loan on the ARV for $135k, pay back the $120k in LOC funds and have $15k cash to reinvest. In this scenario how would seasoning be applied? This is the first loan against this particular property. Seasoning wouldn't apply to the LOC loan since it is secured by a second property. What am I missing?

As others have said don't jump the gun.  If you are using the standard Texas lease they have until the 5th to pay rent.  If they don't pay by the 5th you now have grounds to start with the eviction process.  Give them a 3-day notice to pay or quit.  The TX form is down loadable from the web. To serve notice you need to either hand it to them in person or send via certified mail.  I like to post a copy on their door too.  That usually gets their attention.  If they don't respond in 3-days your next step is eviction.

Assuming they start paying rent you really don't want to keep them as a tenant.  Pay attention to the end date in their lease.  You can give them a 30 day notice of non-renewal.  I usually like to wait until after they have paid the final months rent before serving notice.  That way they can screw you on the final month's rent.  What ever you do, do not give a reason for non-renewal.  Just state their lease has expired and you do not with to renew.  Saves a battle over "why".  Get them out and move on.

Quote from @Reese Nichols:

I'm new into real estate currently seeking my first real estate property where I live over in east Texas. Im interested in house hacking and I'm trying to pull together as many leads/ways to find on-market/off-market deals. I came across HUD properties and am wanting some advice on them. Are they good? Pros/cons? Financing? Any advice possible would be great!

 Additionally you may want to consider your county tax auction.  Go to your county web site and they should have a link to the monthly tax auction on the courthouse steps.  These are properties usually with over three years back taxes owed.  In many cases the original owner is deceased.  Many of the properties are in very rough condition having sat vacant.  Bidding starts at the amount owed on taxes.  Be prepared to pay cash on the day of the sale.   

I don't follow you. Assume I use $100k from LOC to purchase a duplex. I put another $20k LOC funds into renovations. Three months later the ARV is $180k rented with long term tenants paying $900 each. If I do cash out refi I can pull 75% of appraised value or $135k. Payback the $120k LOC and still have $15k cash. No seasoning period on the duplex.

Quote from @Erik Estrada:

Quote from @Pete Harper:

I wanted to see what line of credit loan products that are available for commercial. I own several properties 100% that are held within an LLC that I would like to be able to tap the equity without taking out a conventional loan. I know that HELOC loans are not available to commercial investors but looking for something similar. I had planned on doing a BRRRR but with interest rates so high I can't see taking out a 30 year fixed interest loan. It would be nice to have a line of credit that I could quickly tap should a good deal come along.

Property #1 is a duplex that I own outright. It was purchased and renovated as the second property in a BRRRR chain. Funding for purchase and renovations came from cash-out refi on another 4-plex (not property #3) Gross rents $2400.

Property #2 is a 12 unit apartment complex that we paid cash for.  We've owned it two years now and have it stabilized, fully rented and with higher rents.  Gross Rents $8400

Property #3 is a 4-plex that we paid cash for and renovated.  We've owned it three years now having it stabilized and fully rented. Gross Rents $3200

For any 1-4 unit, You can do a second mortgage on non owner occupied properties. Max CLTV is 85% and the max cash out is $475,000 per property.

Maybe I wasn't clear, none of the three properties have first mortgages.  Properties are held by LLC so I need to go commercial.  I'm not looking to do conventional mortgage with interest rates so high.  With LOC I only need to tap what I need.  I don't have capital sitting around paying high interest.  LOC would be ideal. I just need to find a lender.