All Forum Posts by: Peter Mikhjian

I have an opportunity to purchase a 5 unit property (2 SFH's and a triplex). All of the units are currently rented out and it's right next to a small university. The area is growing, but these specific units are pretty run down and they could all use some work. Here are some of the numbers and my two general plans.

Under contract for $412k

20yr commercial loan @ 3.25% (need to put 25% down, $309k borrowed)

Property Tax @ $7850

Total Home Insurance @ $180/month

Rent roll totals $3775/month (estimating that we could increase to $4400/month with minor upgrades)

Strategy 1 (Do nothing)

My math shows cash on cash at about 10% (with property mgmt and no upgrades) and with the increases we can get up to 15% (assuming little to no upgrades).

Strategy 2 (Sell off one of the SFH)

We think we can sell one of the SFH's off and attain ~$170k after the sale (this one rents for $1200/month now). At that price/rent ratio it makes more sense to sell it and refinance the original loan.

A few questions - does the deal make sense, which strategy makes more sense?

Thanks BP

Pete M

 

I've got a strategy question for all of you creative RE guru's. I have an idea of what I want to do, but i'm looking for feedback from the best RE forum on the planet!

I'm under contract to purchase a property that has 2 parcels that are next to each other with 3 building total in South Carolina. One parcel has a single family home on it, the other parcel has a single family home and a triplex. The seller is currently just renting them all out. The total package is the in the $400k range and single family homes in good condition in the area are selling in the $180k range. If I purchased the package and just slightly raised the rent, it would be little work and a good return. However, a part of me is thinking to get a little creative.

The SFH home on the parcel with the triplex is in excellent shape and could probably sell for around $180k. I'm thinking to separate that from the triplex and sell it as a standalone to basically get my initial investment back. I'll let the rest of the rentals ride as is essentially. I think I could refi the remaining 2 buildings as well.

Is separating a house like this possible, could there be zoning issues, is it a relatively simple task? Who would I even start talking to, the city?

Has anyone done something like this before and been successful at it? Any suggestions?

Thanks in advance

I've got a strategy question for all of you creative RE guru's.  I have an idea of what I want to do, but i'm looking for feedback from the best RE forum on the planet!

I'm under contract to purchase a property that has 2 parcels that are next to each other with 3 building total in South Carolina.  One parcel has a single family home on it, the other parcel has a single family home and a triplex.  The seller is currently just renting them all out.  The total package is the in the $400k range and single family homes in good condition in the area are selling in the $180k range.  If I purchased the package and just slightly raised the rent, it would be little work and a good return.  However, a part of me is thinking to get a little creative.  

The SFH home on the parcel with the triplex is in excellent shape and could probably sell for around $180k. I'm thinking to separate that from the triplex and sell it as a standalone to basically get my initial investment back. I'll let the rest of the rentals ride as is essentially. I think I could refi the remaining 2 buildings as well.

Is separating a house like this possible, could there be zoning issues, is it a relatively simple task?  Who would I even start talking to, the city?

Has anyone done something like this before and been successful at it?  Any suggestions?

Thanks in advance

BP Family - Wanted to give one more update on this one.  It's been a while, but a lot has happened.  To make a long story short, we had both sides fully updated ($13k each side) and both rented out ($1850 each side).  Our cash flow was fantastic, but about 6 months ago we had an offer to buy it outright at $435k vs the roughly $300k we had into it.

We cash flowed really well from start to finish, but at the end of the day, we couldn't resist a +$100k appreciation gain before taxes.

Thanks again to everyone who helped out with advice along the way.        

It's a good problem to have for sure, nice on the 500!  

I looked at doing a 1031, but I couldn't find a property that made sense to me.  No need to buy something I wasn't sure on.  So, that door is closed already.

I'm not a CPA, but wouldn't I be able to 'buy a car' and then state that the car is for real estate use? If I had an LLC, I would assume that would be fine, but since it's a partnership, it gets a little muddled.

I've got a good/bad tax problem and I'm looking for some advice:

My wife and I bought a rental property in 2015 for $275k (no LLC, purchased directly in our name, so technically a partnership). We put about $25k into it to get it reparied and up to speed. It was a great property for us and it was CF positive from day one (even with the repairs). However, we just sold it about 2 months ago when another investor offered us $430k for it!

So, the good news is that after all of our expenses, we have ~$125k gain, the bad news is that we have a ~$125k gain.  

I've been working with a CPA for some time, but their recommendation was to just pay the tax on the gain, donate, or sell some stocks at a loss. I thought they'd recommend something like - create an LLC and reinvest it into another property and you can offset that gain with the amount you pay down, or go buy a car and write that off, or something of that sort.

Do you have a recommendation on how we can reduce our tax liability for this scenario?

Thanks for any advice

Pete

Yes, BP! BP has tons of resources on how to find off market properties. The few that I can remember are to (drive for dollars - look through streets you would consider that have been neglected, tell friends/family you are looking for property, send out yellow letters, go to your courthouse and see whats up for auction, tell your realtor you're looking for off market properties, find a wholesaler, etc.). I found this particular property through the MLS, but the future properties I've been looking have come from that original seller actually.

There's a lot of different ways to find non MLS properties. One thing to note is that people are always looking for the easiest method to accomplish a goal (ie. use MLS). I personally don't look at the MLS anymore, because I know that's where most people go and I'll find the most competition. Taking a different path can potentially yield more fruit.

Best of Luck

Wanted to give everyone one more update on this one -

Slowly raised the rent on both of the tenants to about $1200/month.  One of the tenants decided it was time for her to move on.  We renovated that one unit from top to bottom for about $13k all in.  We put it on the market at $1800 before we 100% finished and we had people literally lining up to see it!  I didn't realize how much demand there was for rentals like this.  Within one week we had a family move in (they were both doctors) and they've been perfect.

The other side is going to get the same treatment as soon as he moves out.  I sent him an increase notification letter for the end of Q1CY17.  Assuming everything goes to plan and we land a similar tenant, we'll be bringing in $3600/month.  Putting funds aside for cap ex (~$500/month) and $100/month for lawn maintenance and $1400/month for the mortgage - we'll take home $1600/month before taxes. 

$70k down + $26k (2 sides @ $13k each)  = $96k out

$1600/month * 11 = $17.6k in

18% CoC

This one turned out great for us, hoping we can replicate this a few more times and i'll retire!  If there's any bit of advice I'd give is to trust your instinct.  I'm grateful for the input recieved on this thread, but not everyone was telling me to go for it.  I trusted my gut and it turned out pretty good.

Good luck to the rest of you!

This question has become a little more challenging than I originally expected - CPA's & tax experts watch out!  

My fiance and I each lived and owned our own homes for more than 2 years.  My name was on my deed and her name on her deed.  She moved in with me, rented her home out (for less than 3 years) and then we got married.  We recently sold my home and according to IRS pub 523, we're ok to exclude any capital gains taxes (it's a primary residence I lived there for 2 years alone, less than $250k in gains).

Here's the catch

We want to sell her home now, but I'm not sure if we can avoid the capital gains on her home.  The only reason being that we refinanced her home and I was added to her deed. 

1) If we sold her home and filed taxes separately, can we exclude capital gains for both properties since they were both primary residences?

2) Can we file together and exclude capital gains for both properties?

Thanks for any insight you can provide

Pete

Hello,

I've got a question regarding a specific situation I'm in.  I've got a property I used to live in for +2 years and then I rented it out.  I rented it on 3.1.14 for a 1 year lease and I've resigned with him 3x ( we also did month to month for a short time).  It's nice to have the steady stream of income and no hassle of turning it around, but now I need the cash (buying a personal residence).  His current lease ends on 5.1.17.  This is just over the 3 year mark and I believe I'll have to pay full capital gains (appreciated over $80k from date of purchase).

I'm assuming my best bet is to give him the boot and make sure I sell the property before 3.1.17.  Any other suggestions?  The end goal for me is to get the cash (no 1031, etc.).  What do you think?

Thanks

Pete