All Forum Posts by: Account Closed

I agree with one exception. Anyone using the above has to factor in all the closing costs, carry costs and other expenses. If you do a rehab project and it takes you 6 months and you have a hard money loan plus closing costs on both the buy and sell you really need to have a lower buy price than the equation above.

Ever wonder why the 70% is the magic number? Think about it for a second and then post why you think that is the number?

Final comment. The above shows the maximum you can pay. You need to start lower and you need to focus on the best deals. Short term projects tend to be better than large. Projects that have small repair budgets generally have less room for overruns and other surprises. Two deals that have the same numbers might not be the same if one is easy to resell and the other is rather unique with few possible buyers.

John Corey

AHP,

If you have any trouble let me know. I can find the discussion and send you the URL.

If you go to the site and then to the main forum you can do a local search for "John Corey" or "Terry Vaughan". Both names show up as people who have contributed to the discussion. One person has started a 2nd or 3rd thread to discuss ways to protect themselves. One thread discusses getting an appraisal to show the seller so they know what they are selling.

John Corey

The 1031 opportunity is a great way to roll gains forward.

That said the capital tax rate is pretty low. I would avoid buying into a marginal deal just to avoid the tax bill. It could be better to pay 15% now as opposed to a higher tax rate later.

So, find a rental deal that makes sense and works for you. If the 1031 structure makes the deal better, great. If the deals are not that attractive consider other options including just paying the tax.

Depending on your capital situation you can look at a multi-family property where the cash flow is likely to be better. Or you can partner up with someone else who has a deal ready to go and who will be handling the management.

My key message is focus on a good deal and the 1031 treatment is a bonus. 15% really is a relatively low tax rate.

John Corey

Would you mind stating what city the property is located in?

I was talking to a landlord who recently upgraded 29 units (all SFR or duplexes) with air conditioning. I was wondering if he will see some go missing. About half are window units and half are central air systems. Folks stealing for the copper or tenants leaving with an extra item in their stuff.

He has had problems before with copper being stripped in places he was buying (REOs). He is in Dayton OH.

John Corey

Ignore the debt service and figure 35% to 40% will cover everything. This assumes you pay for property management. Even if you do it yourself you still should budget something as you do not want to work for free.

John Corey

Nothing Down (I started with this book)
Weekend Millionaire (for those who have a day job so limited time to invest)
and almost anything else that catches your eye.

Go to a large bookstore and browse. Pick a few titles, grab a coffee and start reading. Figure out which authors seem to have some points worth the price of the book.

Go to the library and borrow all the books that they have. Read them all and find more by the authors you enjoyed.

Then get out and practice.

CDs and seminars are also a good idea when you have some money. Likely not the best idea when you have little cash and are getting started.

Figure that you need to spend a significant amount each year on your education. That could means new books, CDs, seminars, REIA memberships and annual conventions. After you have read or learned most of the basics you really need to focus on networking. You can stay on top of the latest ideas when you are in the market and talking to other investors who are active.

John Corey

PS. There is a lot of good information on the web so you do not need to spend much to get the latest info from the field.

The DOS clause is a civil/contract issue. Most lenders will not care about triggering it if you did a wrap.

More of a problem is how the laws changed in TX over a year ago. They wanted to eliminate the ability to provide seller financing using lease options if there is existing financing on the property. As I do not invest there I am not really on top of the fine details.

Consider contacting a RE attorney. They may be able to explain how you can legally set up what you want even with the TX laws. Or ask around at a local REIA meeting as the changes in the laws was a very hot topic for a period. Other investors will know what you can do.

John Corey

AHP,

Find your first post. I added a reply as to why I would immediately walk from the possible deal.

John Corey

Finding deals requires motivated sellers who own RE. It sounds like there are plenty of people in your area so likely someone is motivated.

If you have little competition then there is less pressure to do a deal before you know the facts.

I would not worry too much about what you have found so far. Focus on finding the deals and the motivated sellers.

Good luck.

John Corey

AHP,

My view...

Many savvy investors who have long histories as investors will avoid all such deals. There is a lot of legal liability risk when you do a rent back with an owner who is in foreclosure. They are under duress and can successfully argue in court that they were taken advantage of. When the seller is an older person the judge will be more incline to think that the investors was wrong. Even if the seller is happy relatives and others can raise a lawsuit.

Multiple court cases have gone against the investors. OH, MD, TX are states that have had past examples.

Be very careful and really make sure the couple know what they are going. Pay for them to get legal advice as a way to show that they knew what they were doing and were properly advised. Or just pass.

Granted if no one helps then they get wiped out. The problem is if someone does help and that person gets burned what can we say?

:nono:

John Corey

PS. There was a debate on another forum on this exact topic. A number of stories of deals gone bad (from the investor's point of view). One going back to the 1970's and others more recent). It is not a new problem but it has gotten worse with recent legal changes in FL, TX, MD, NC and other places.