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All Forum Posts by: Randall Alan

Randall Alan has started 1 posts and replied 1220 times.

Post: Need helf finding options for creative financing for home

Randall Alan
Pro Member
Posted
  • Investor
  • Lakeland, FL
  • Posts 1,241
  • Votes 1,551
Quote from @James Jefferson:

Hi, I have a family member that had a reverse mortgage on their property it's a 3b 1b 1 acre of land heats by oil no hvac and on well water. When I tried to get it when my side of the family found out and tried tp take over reverse mortgage payments to bank because she had died it was to late so they sold the house to Hud and then other reverse mortgage companies but a relative still lives there so they can't kick them out. So I want purchase it as my first rental property it's going to need rennovations for sure not terrible shape just older rancher home. County has assessed for 200k but is worth more due to the area they are building homes left and right on that road and they are selling 300k+ and up. Good quiet area. The reverse mortgage company wants buyout and I dont have over 200k to pay out. What would be my best approach, I assume find a private lender and work out some deal with them. Not sure where to start All questions and answers will help thank you.

@James Jefferson

Hi James,

To buy out the property you need to probably apply for a loan through any lender.  I wouldn't think it would take a private lender (which is much higher priced) than a typical mortgage broker's rates.

Is there a reason you think you need a private lender? You will need money to put down on the property. If you can qualify for an FHA mortgage that amount can be as little as 3.5% of the loan value.

In short, the previous owner made a deal and sold the house while they were still living for monthly cash payments until they died.  While I understand you want to buy the house, you are at the mercy of those that your relative sold the property to.  I don't know where you live, but it is likely that the reverse mortgage company (or whomever owns it) will file for eviction so that they can recoup the money they invested in the deal.  I would think their loan documents give them the right to control the property after the original owner dies - regardless of who is living there (although I have no direct knowledge of the laws where you live).

There are details we don't know here... like if you want the house for sentimental reasons, or because you see the value between what it's worth on the market today and what the reverse mortgage company wants for it?  It sounds like the reverse mortgage company is offering a path for you to buy it - which is more than they have to do.  Hopefully you can find a solution that works for you!

All the best!

Randy  

Post: Property Tax Increase - Fort Mill, SC (Lancaster County)

Randall Alan
Pro Member
Posted
  • Investor
  • Lakeland, FL
  • Posts 1,241
  • Votes 1,551
Quote from @Ryan Broschard:

Hey everyone,

Quick backstory. I purchased a townhome in Fort Mill, SC (Lancaster County) in July 2023. This is an investment property. The first year my property taxes were $1,619. I have just received an escrow analysis statement, and it indicates that's my property taxes for the year will now be $6,839. This is making my mortgage payment go from $2,293 to $3,308 per month. 

A few questions for those who have experience with this:

1. Does this kind of increase seem reasonable?

2. Have the property taxes increased because this is an investment property and not a primary residence?

3. Is there any way I can lower the property taxes to the original amount?

Any insights or advice would be greatly appreciated. Thanks in advance!

I have attached a photo of my original property taxes along with the new projected property taxes.

@Ryan Broschard

Hi Ryan,

You have hit a common issue many new investors fail to anticipate.  It comes down to how each county handles property tax valuation.

To put it in generic terms - a title company & lender will base your initial mortgage payment on the property taxes of the previous owner.  In short, you ride the 'coattails' of the previous owner's taxes for the first year.  Usually in the year following your purchase, the property appraiser will reevaluate the house based on the new sales price.  In addition, if this was originally an owner occupied house, there are often homestead exemptions where the first  $XX,XXX. of the value of the home aren't taxed.  In Florida where I live that amount is the first $50,000 for a married couple are exempt.

So to put all that into action, let's say the previous owner paid $100,000 for the property 20 years ago and lived in the property.  You came along last year and bought the property for $300,000 as an investment property.

So in year one, your taxes were based off the previous owner's purchase price of the $100,000 plus any annual tax increases since they owned it.  In addition, in Florida there is a cap on property tax increases each year of about 3.5% increase... but big caveat... UNTIL YOU SELL THE PROPERTY... then the cap goes away and you are taxed on the fair market value of the house which is usually the new sales price less maybe 15%.  I don't know if South Carolina has those or not... but the rest of this explanation should still be valid.  

So back to the example... So if you paid 3x the price of the previous owner, and lost the homestead exemption due to using it as an investment property, it is entirely feasible for taxes to double or triple.  It's really not that they double o tripled them, it's just that you paid way more for the property, and so now you are paying the taxes on that higher amount - where the previous owner was paying taxes based on a much lower amount.  But if you aren't expecting that, it can be a shock when you first see it.  It's a beginner's oversight.  One that you will only make once.  lol!  If you go to the property appraiser's website, you can probably  look at the year over year change in the taxable value of the property.  Everything you describe though is just the normal process of how taxes are reassessed when a property is sold.  So you didn't do anything wrong, you just didn't know.

As for alternatives, most counties have an appeals process... but you will likely lose if you go that way.  Why?  Because counties usually set the fair market value of properties  about 15% below the actual sales value.  So for you to lower your taxes, you have to show where similarly valued houses that are selling at the same time you purchased your house sold for MORE than 15% below what you paid.  In other words, you have to argue that you over-paid for the house you bought by a significant amount.  So if you found examples of houses that sold for 20% below what you paid, they might lower your taxable value by 5% after taking that 15% cushion they give you into account.  You can likely see where a 5% reduction in your taxes isn't going to do much to reduce your bill.

 Hopefully it helps to understand what happened and why.

All the best!

Randy

Post: Looking for feedback on a deal analysis

Randall Alan
Pro Member
Posted
  • Investor
  • Lakeland, FL
  • Posts 1,241
  • Votes 1,551
Quote from @Brendan Connolly:

I’m new to deal analysis and would really appreciate it if some experienced users could take a look at this property to help determine if it’s a good deal. Based on my calculations, it seems promising, but I’m still building confidence in my analysis since this is a new process for me. I’m currently using a deal analysis spreadsheet from the BiggerPockets downloads section to run the numbers.

House: https://www.zillow.com/homedetails/2115-W-105th-St-Cleveland...
Rental Type: Long Term
Location: Cleveland
Location Grade: C

Below are the totals that I was calculating from the analysis: 

If some users that are more experienced in deal analysis would please take a look and let me know if my approach to this looks good that would be greatly appreciated!

@Brendan Connolly

Hi Brendan,

Well, for starters I don't where you accounted for yearly real estate taxes or property insurance.  Did I miss that somewhere?  You will also have a repairs and maintenance expense (for small things), as well as a capital expenditure expense (for big things like the roof and AC.  If you are going to have property management, that is usually 8-10% off your monthly rent on the property.  Many property managers charge the first month's rent when placing a new tenant.

Also, keep in mind that your property taxes that you can look up on the local property appraiser's website (usually), are the current property taxes where the current owner is often grandfathered in.  I don't know the Ohio rules... but in Florida where I'm at you can expect the property to be reevaluated the year following your purchase and your property taxes will typically increase based on your purchase price, versus what the previous owner paid.

We budget about $125/month for repairs/maintenance.  Roofs vary by geography... I just had a 2100sf house quoted and it was $23,000 for a new roof.  So you definitely want to pay attention to the age of those big items to see how far out it might be before you have to start replacing them.  On ACs I've had some last over 25 years... and others fail 10 days after their first anniversary... so ACs are more of a crap shoot.  

Hope it helps!

Randy

Post: Advice on investment type

Randall Alan
Pro Member
Posted
  • Investor
  • Lakeland, FL
  • Posts 1,241
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Quote from @Olga Daisel:

Folks,

I am a mother of 2 small kids, 3 and 5. My 5 year old started Elementary in our neighborhood. The school is very good, but middle is not so much.

I have some cash to invest, but can't decide what route to take. I singles out 3 routes, and due to funds limitations I can take only 1.

1. Get a house in a great neighborhood during the summer 2025 and sell my primary in spring 2026. My primary is not ready and needs more work before I pull the trigger. For those who are familiar with austin, I want a house in westlake hills, my primary is in northwest hills.

2. Buy a lot and build a house for sale in 2026. Potential income 600k-800k.

3. Buy a lot, build a rental propert, to be rented out 2026 for approximate annual income 150k.

I understand I can borrow for 1 and (2 or 3), but that would put me under risk i don't want to take.

 @Olga Daisel

I think we are lacking some key details of your plan. The numbers you mention in your post are confusing - like $150k annual income from a rental property.  The typical income from a free and clear rental would probably be $800-1500/month - and on a financed rental probably $300/month on a good day in today’s market.  Even at $1500/month that is $18,000/year… so I’m having trouble understanding $150,000/year unless you are building 10 free and clear rentals?

Likewise the $600-800k income by building a house.  Maybe that is gross profit when you sell it, but what about the cost to build it?  Flipping a brand new home likely wouldn’t bring much profit - especially after having to close twice when you first buy it, and later sell it.

Maybe you have millions to spend and I’m just missing the big picture… but when I think of “income” I’m usually thinking “net income” after you factor in expenses, like purchase price or building costs?  

As for holding a home and building another one - be sure to include carrying costs of the first home while building the second.  Also know that building a home seldom goes as expected - I have relatives that just built a nicer house… they thought it would take 9 months… it literally took 18-24 months between delays in permitting and the builder just not being able to get it done in a timely manner - often due to sub-contractor issues.  Custom building a home is a slow and painful process.  So if you started today you would probably be looking at 2026 before it was completed if I had to hazard a guess.

Can you clarify how much you plan to invest in real estate?  Lots of us are happy to offer suggestions but I think we need to understand your situation better.

All the best!

Randy

Post: should I sell NOW to avoid taxes or hold it for appreciation?

Randall Alan
Pro Member
Posted
  • Investor
  • Lakeland, FL
  • Posts 1,241
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Quote from @Edgar Duarte:

hi all

I would love to get some perspective from your expertise, we have a property that we would have to sell in 2025 to avoid paying taxes on the capital gains, we believe we rcan sell it for $700K and get an equity of almost $500K after paying the mortgage balance, if we invest all of it option in index funds at 7% rate (standard com growth calculator), or in more rental properties as we are all here for, I can get the equity of around $900K.

option B would be keep paying the house at 2.3% int rate while we have it in AirBnB and maybe sell it in 10 years for $900K, knowing that we would be paying taxes but it is not that bad still. or we can 1031 at that point?

What would you do? am I missing something? thanks everyone

 @Edgar Duarte

I would suggest you research “return on equity”.  I’m a long term rental guy, so make less than an Airbnb type operation on cash-flow .  But let’s say you selling it would net $500,000.  

For me, if I make $1500 net per month on a free and clear property I would make $18,000 / year.  But if I sell it and put that money in the stock market and earn let’s say 8% I would make $40,000 on the same money.  Even if I take the 15% tax hit I would make $32,000/ year on the remaining $400,000.    So return on equity would suggest it’s much more advantageous for me to sell it.  

You can run the same scenario accounting for the tax hit if you kept it past the 2 of 5 year time frame I presume you are referencing. 

The other option for you would be to borrow against the equity in the property.  You avoid the tax hit, and still get the use of 75% of the equity if you do a cash out refi - (but high interest rates sort of play against that to some degree presently… but you could alway refi again down the line if rates dropped.  

Randy 

Post: Has Anyone Imported Materials from China for a Rental Property Renovation?

Randall Alan
Pro Member
Posted
  • Investor
  • Lakeland, FL
  • Posts 1,241
  • Votes 1,551
Quote from @Adam M.:

I’m currently renovating a rental property and exploring ways to manage costs without compromising on quality. I recently watched a video where Troy Kearns mentioned he could source a high-quality quartz slab for $100 from China, which got me thinking about exploring similar options.

Has anyone here ever imported materials like hardwood floors, countertops, or tiles from China for a project? If so, I’d love to hear about your experience!

Specifically:

  • How did you find a reliable supplier?
  • What was the quality like compared to local options?
  • Were there any challenges with shipping, customs, or delivery?
  • Any tips or advice for getting started?

Thanks in advance for sharing your insights!

@Adam M.

Who has time to do that, much less the time to wait for a container to come in etc?  And you better do it before the anticipated tariffs kick in!  Lol!  

We are all about saving money on flips and renovation efforts.  I bought a brand new in the box $285 microwave off Facebook marketplace today for $35.  We will shop for used appliances where we can when we need one… or pick up used cabinets if we can, or search eBay for something smaller,  but going to the extreme of personally shipping something big in internationally for one-off renovation needs seems like a stretch of reasonable.

Just like you mention, the number of unknowns would not seem to be worth it to me.

Just my 2 cents.

Randy 

Post: Keep or Sell?

Randall Alan
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  • Lakeland, FL
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@Huong Luu

In my opinion, presuming you need the money - it is better to cash-out refi the property.  It avoids having to pay the capital gains and lets the property keep appreciating while you still own it and reap those future rewards and more cash-flow from the property in the meantime.  Bonus - the interest on the loan is tax deductible!

You would not want to over-leverage the property though.  The bank will make you leave 25% equity in the property - but you also still want the property to at least cash flow some - so be careful how much equity you pull out / new debt you take on.

I would do a cost benefit analysis of what your actual gain is in cash-flow on buying a new property with a (currently) higher interest rate (if financing), versus just holding on to the current appreciated property and enjoying that cash flow.

All the best!

Randy

Post: Help Needed: Stop Work Notice in Covington, GA for Fix-and-Flip Property

Randall Alan
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  • Lakeland, FL
  • Posts 1,241
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Quote from @Aldo Valeriani:

Hello everyone,

I’m relatively new to real estate investing, and this is my second fix-and-flip property. Unfortunately, I’ve run into a major issue: I received a Stop Work Notice on my property in Covington, GA, because I didn’t have the proper permits for the renovations.

I want to resolve this as quickly and smoothly as possible without jeopardizing the project.

Can anyone offer advice or share their experience with:

1. How to address the Stop Work Notice with the local authorities?

2. The best way to obtain the necessary permits and ensure compliance moving forward?

3. Any recommendations for contractors or permit expediters in Covington who can assist with this process?

4. Tips to avoid similar issues in the future?

Any guidance or referrals to professionals you trust would be greatly appreciated!

Thank you in advance for your help.

@Aldo Valeriani

You address the issue with the permitting entity by asking them what they need from you?

The answer will form around what work you are doing that requires permits.  Let's say you were replacing windows.  Where I'm at if you change the size of the window by 5% or more you have to have engineered drawings showing the changes.  So this involves hiring an architect draw up plans ($1,000 - 3,000 if I had to guess).  Then it likely takes hiring a GC to manage the project.  The GC is likely at least a couple of more thousand dollars.  Then he is going to hire subcontractors to do the job and you are going to pay them for that work as well.  In short - if you aren't licensed to do the work -  your services aren't going to satisfy the permitting agency.  Hopefully the permitting people are nice and will offer some guidance.  In a busier place, you might just be told to find a GC to "un-cluster' what you did.

For me, when this happened, I had to go and hire a certified plumber, and electrician, and framer to come in and certify that all the work my handyman did was correct - and to fix the issues that weren't correct.  Some of those included those previously mentioned windows.  We had to bring the 1925 house to 2023 code which involved un-installing 26 windows that were already nicely installed (in appearance) in the house, reframing them to 2023 standards (at the time) which also involved strapping the bottom of the wood framing with metal straps (mind you this all after we had already completed the inside renovation).  It cost $38,000 for the framer to take on the risk and do the work - and that does not include the cost of the GC, or architect, or plumber that was also required!)  I'm sure it was highway robbery - it certainly was based on the man-hours it took - but when you are in a desperate situation, you do what you have to do to get yourself out of it.  I will tell you he did a great job because very little interior re-work was required - but it was a substantial hit to the Reno budget!

Your GC will know how to apply for the correct permits.

Avoiding the issues in the future is a function of respecting the permitting process in the first place.  The whole reason they are there is to make sure work is done right.  They are literally on your side (as long as you are doing it right).  They are definitely not on your side if you are trying to work around them.  We found that by more or less falling on our sword and saying, "Hey, we want you guys happy... tell us what you need from us" they were more than helpful and once we had contractors they liked on board the process went perfectly smoothly.

I don't live near you so can't help with your locale... but hopefully some of it helps!

Randy

Post: 711 Rescue - does it help LP in case of imminent foreclosure

Randall Alan
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  • Lakeland, FL
  • Posts 1,241
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@Marina Wong

I will post this as a cautionary tale... up front - I know nothing about the company you mention.  So I am not speaking about them whatsoever.  But it sounds like they are just positioning themselves in the middle of your 'deal gone bad' to make some money for themselves.  A lot would have to go right for them to be able to help.  Notice how they presume they are going to buy the asset at a substantial discount from the lender.  Maybe that happens... but what if it doesn't?  Again, knowing nothing about this particular company, my bet is that type of company will require money up front just to consider whether they can help you out.  Maybe it's a processing fee, an application fee, etc?  So now you are throwing good money after bad probably without a guarantee of any actual performance of the company until much later down the line.  If you have to front money to them before they perform, I would be very careful.  I have personally seen that scenario take place and what ultimately happened was that the company just came back to the debtor and said, "You have to come up with $XXX,XXX for us to be able to qualify you for help.  In short, it was an unrealistic ask on the part of the company, and they knew it, but didn't care because they had already made their money off of the up-front fees they charged the debtor and ultimately didn't care whether the debtor got help or not.  My buyer was charged $4,000 by a company to try and get them a loan when it was pretty obvious they weren't normally qualified.  They ended up with no help, and less money in their bank account.  

So I would definitely do some independent research on any company that is actively offering life-lines to real estate companies in trouble.

All the best!

Randy

Post: Checklist for Rehab?

Randall Alan
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  • Lakeland, FL
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@Charlie Green

I'm sure a checklist is out there... but I would suggest that any functionally usable checklist isn't going accurately to serve the objective you have laid out... mainly because there isn't a checklist that can anticipate everything you are going to run into during a rehab.  Many rehab issues are hidden... it might be termite damage, or damage to the subfloor, or mold behind concealed panels,  etc that will not make itself known until you are long closed on the property and deep into the renovation.  

The other variable you are going to run into is the assumption that you can accurately price a renovation based on 'just the problem you see'.  It's one thing to find all the issues... it is another for you to be able to know what that is going to cost to fix it from a contractor that may not be walking the property with you when you are doing your inspection.  That variable alone could be huge.  As an example, my in-laws called a company to replace a tub with a walk-in shower.  The people they hired quoted $18,000 for a job that I could have gotten done for $6,000 through my network of vendors if I had been asked.  The way I see it, there are 'retail contractors' (wear the fancy shirts, drive the wrapped vans, advertise on TV, etc)... and there are more 'wholesale contractors' who maybe do their day job on their off time and charge a lot less and show up in their personal vehicle.  But the factor of 3 difference in the price above sort of shows you the issue you are going to run into.  

Beyond that, there are always change orders that come up where your contractor comes back to you and says, "We've got a problem, and it's going to cost $X,XXX to fix.  Permitting can open up a whole other can of worms where they insist you bring something up to 2025 code, and not the 1925 version it was built under.

It also depends on who is sourcing the materials, and what their objectives are.  You can buy crappy cabinets from the box store made of particle wood, or nicer plywood cabinets with soft close hinges, etc, or you can have custom cabinets made to your exact specification.  Those are three entirely different price points.  So you have to know going in what level you are rehabbing to, and which path you are going to take for any given issue - to which there are always multiple at different price points.  If you watch the rehab tv shows, their GCs are usually aiming at the high end of what they could expect, with the hope that it costs less than that once they get all the way into the job.  You could call those accurate quotes for the rehab service in question... but you could also call them "well padded' quotes to make sure the contractor isn't going to lose money on the job.

There are also some house systems that are difficult to judge.  Like a septic system and how well it is functioning.  Are you going to pay the $500 to pump the septic to see how well the drainfield is working? Probably not... but that is a $7,000 - $10,000 unknown variable you just factored into your checklist in the blink of an eye in the event you eventually have to replace it!  

Experience is the best teacher.  We can guesstimate a small bathroom to cost us $3,000, and a larger bathroom to cost of $6-7,000 with b-c grade consumer finishes and such... but my suggestion at the end of the day is to add 20% to your best guess rehab budget because very rarely does the price ever go down.

Can you see how it's relatively impossible to get within $1,000? And I guarantee you if you speak with a contractor that does, they already did the math and factored in the 20+ % to make sure they can meet your objective and deliver the service at the agreed upon price!

Hope it helps!

Randy