All Forum Posts by: Joshua Woolls

 Same deal...same numbers.  I don't do my own PM.  Why?  I also leverage them by refinancing my cash back out.  Why would I leave it in?  I'm losing money when I do.

 I can't speak of Michigan specific laws governing tax liens or tax sales, but you should consult a local expert on these matters because i do know it's not as simple as paying the back taxes and taking ownership. Generally, if Michigan is similar to Georgia,  the state or  local government will auction the tax lien competitively to the highest bidder (and those bids can approach the value of the property, not just the back taxes) and the previous owner will have a 1 to 2 year Redemption Period (states differ) to pay the back taxes and penalties and which time your attorney must make best efforts to contact the owner of record to ensure they have no intentions of paying the back taxes/penalties during the Redemption Period.  Then, if no one steps forward and the redemption period passes, your attorney then can start the judicial Quiet Title action, which could take another 6-9 months and $3,500-$6,000 in attorney fees and court costs.   Oh yeah, your relative/tenant may even have to vacate the premises during the 2 1/2 year Redemption/Quiet Title action since they may legally be trespassers until you gain title.  

Good luck in your endeavors.  

Hello All I am New to BP and Real Estate Investing. I am considering my first deal as a JV with a relative. Here is the situation:

My relative has been a tenant in this home for a year and a half with out any problems with the home such as plumbing, electrical, heating, etc. The thing is the property manager stop collecting rent about 5-6 months ago, and has disappeared off the face of the earth. In the mean time the current tenant (my relative), has been receiving letters, at the home, from the county stating that the home is going into foreclosure unless the back tax are paid/disputed by March 31, 2014. If the owner does not pay the taxes by the deadline we are considering paying the back taxes and taking ownership of the own.
the plan would be for my relative to stay in the home while we do some minor cosmetic updates and then flip the house or rent it out.

Oh yea one more thing the house is in Detroit.

Any comments/ suggestions would help? Thanks in advance!

@Joshua Woolls

  OK, I'll bite.  Where are you finding properties with $1000 cash flow with property manager in place and no cash left in in the property after you refinance?

This is all I care about, if you can charge $750/mo for a 75k house, i need to buy some houses where you are. If you could assume a 33% appreciation in 6 months on every property you buy, you should buy property in perpetuity with cash, credit, and when that runs our beg and borrow for more.

Even if you can get $750 for a $75k house, and the property value staying flat @ $75k, you would have a $287ish (60K cash out leaving 20% EQ @ 4.03% national average) mortgage on each, and you use the 50% rule its still only $88 positive cash flow per property. If you look at leaving 50% EQ in the property you end up with a $180 mortgage (37.5k down or cash out leaving 50% EQ @ 4.03%) use the 50% rule and positive cash flow $195 per property.

You would effectively be doing this 5 times over ($15k x 5 = $75k), where I would be doing it twice ($37.5k x 2 = $75k). You would have a positive cash flow of $440 monthly ($88 x 5), and I would have $390 monthly ($195 x 2). Granted that's not including any costs associated with purchasing the properties, where I would clearly have the advantage. This also leaves me with equity that can be tapped before hitting the 20% EQ line.

I guess to answer my own question, even if I could get $750 a month for a 75K house, I think I would rather have 2 houses cash flowing $390 and be $75K (2 loans for $37.5K each) in debt, than be $300K (5 loans for $60k each) in debt for an extra $50 a month. It doesn't make sense to me because in your scenario, I am effectively taking on $4,500 of debt for every $1 of additional cash flow over my scenario.

To put it another way you would incur an average of $681 in debt for every $1 of cash flow, my way incurs $193 of debt for every $1 of cash flow. 

Again I'm not a real estate pro, it just doesn't seem like the meager additional income is worth the considerable amount of debt liability, perhaps if the debt was non-recourse, I could see the benefit, but if you are personally liable for that debt, I don't think the numbers work for me.

Adam

 Not true.  Redford is a stable rental market.  It's the perfect storm.  You can get S Redford for the above including rehab, and even less in the north.  I pretty much have Redford locked in as far as the different micromarkets.  Call me if you want to discuss.

Thank you for the reply @George P. 

Ideally, I am looking for a place north of I-96. Fiancee works in Southfield and I work in Plymouth Township, so somewhere in between those locations as well.

@Joshua Woolls those are great returns. Do you have a zip code or two to suggest as I have been contemplating a few states in your region for cash flow. 

I would always keep a toe in my own front yard but always open to other yards. If I lived in Detroit I wouldn't hesitate to invest out of state, and it would only be days before I left to check out of state properties never to return. 

San Diego is a great town, loved it, even opened a real estate office there in a prime spot by the Shadow Ridge Country Club area in Vista ( It was ground floor time) and another in a little one room setup in La Mesa, and lived near Bird Rock. Wanted to try the area called the worlds most perfect weather. Quickly released the spaces and moved back to the S.F.Bay Area because my wife was very very homesick. Still did a few Commercial deals and upscale homes there just after we had left to clear the leads off my desk. 

I still think there are deals there but they aren't likely to fall into your lap so keeping your toe in the water is good. Boise, I have a ton of relatives there that I never see and it is sort of stable but if your looking try looking at the Salt Lake City area if your going the buy and hold route. I have lived here now for several years after moving here to get a heart transplant, the only real drawback for me is the snow, I'm a sun and surf guy. 

For those of you that say the opportunities are are limited in SoCal I can tell you there is 500 million to be made in L.A.County right now and if I could get my wife to move there and find the right doctors I would be there tomorrow but I can't do it long distance. No partner offers please. The only people I would partner with on this kind of action are all dead, It is the old story the gods take the good people and leave the garbage. Maybe some one will figure it out but it has been hanging like a carrot in front of me for over ten years now. But I know there are some LA investors saying there isn't any fruit on the trees here, lets try somewhere else.

 Thanks Scott.  Is that where you are?  I've heard Redford is one of the places to consider but then I'm sure the numbers would have to be adjusted.  Do you have any estimates as to what kind of cash, return, & time frame I'd be looking at?