All Forum Posts by: Bruce Harding

Borrower is an LLC. Terms of loan are 8% for 1.5 years. It was the expiration of the note has passed 1.5 years and the money has not been paid back because she can't get enough rent right now.

It takes 6 months before she can refinance and get my money out.

She owns 3 other properties.   One I believe is recently un-rented and I have to find out more about that property.

I really could use some advice.  

I went in halves with a Real Estate Agent on a rental property single home that she was going to rent out for Assisted Living.

I lent money based on a lien contract.   Turns out it is a second lien  ( I don't know if there is a first one on the property).

The agent is working with REMAX who lent her the money where they make 3% interest spread and she does not have to pay them back for 5 years.   We are 1.5 years into the deal.   This is why I think I am on a second lien not a first.

She is making interest payments only on the property.

She has been unable to secure a professional tenant and is renting to a single individual at the interest only payment level so no money is being lost at the moment.

The downstairs bathroom is not finished and she does not have the money to finish it right now.

This year 2020 she switched to becoming a mortgage lender.   She has 10K coming and and two more loans in the pipeline that have not closed yet.  Her mother died so she took some time off of work and had to travel out of state to take care of her mother for a few months which hurt her income.

Her husband sells commercial insurance and has been in the industry for 30 years

She came to me asking me to take out an unsecured personal load on a Velocity Baking concept where she would put her future income going forward back into my revolving line of credit.    I have decided I am not going to do this.

Time is up on the lien and has been for 2 months.   She was paying interest on my money but does now not have enough coming in on the property to do so.

Her intention is to fix the bathroom, get another tenant and refinance the place in 6 months to pay me off.

I am wondering if I should get an attorney and sue under the lien at this point as I am not going to get a line of credit for her.

I worry putting pressure and hardship on her would inhibit positive solutions going forward and neither do I want to force her into bankruptcy.  

Purchased 2005 at 190K and only worth $210K now. Selling. Overall made little money on place with expenses. Renting now. Little worried about Phoenix market and tired of the hassle of dealing with the rent.

Total Equity is $71K based on $210 value.

$20 K of the 71K would be capital gains (correct)?   ($210 - $190)

We just put in about $8 K in repairs.  Deduct off of capital gains ?

And there will be tax on the $20K in the form of capital gains correct ?

Both State and Federal ?

Thanks for the excellent replies.  

1) I am meeting with the RMAX boys next week - investment realtors.

2) My wife has a friend whose son is a fix and flipper in the area.   I am going to spend some time helping him for free to see what I can learn.

I understand how to run numbers but I need to understand how to evaluate what repairs are going to be and how much they will cost ($27 per square foot I am being told on average by a GC the other night at the Pine Financial Meeting).

I spoke with the flipper today - he told me in the current market  you have to be your own GC and do a lot of the work yourself if you are going to make any serious money.

He flips 4 - 5 properties a year.

Not saying I want to flip - just that I think there has to be some invaluable knowledge I can learn.

3) I am thinking buy and hold would be the area for me.  I need to buy at a level where I can have a property manager as I don't want all the headaches when it comes to that part.

4) I am also working directly with a realtor who I am talking about flipping condos with.  She has done a couple before and has a team that does the rehab.  We would split the deal.  Not sure of the risk with condos though.   These would be lower end condos - say $100 - $110 where she would buy them (no commission) for $85 - $90 - put $10K - $15K rehab and list for $149K.

I am 59 now.   Wondering what the best way to invest in real estate at my age would be.

Stock Market returns from what I have read will average 6% going forward over the  long time horizon.  Plus if you invest in bonds it lowers that return.   And then there are fluctuations.  Plus you can only withdraw 4% if you want the money to last.

I work a full time job and can't give that up at this point.   Actually I will probably work until 70.

So I would be a part time investor.

I have studied Real Estate over the last year.   I have gone to some meetings - Pine Financial, Apartment Investors etc...    The various avenues and buy and hold seems to be the best path for the average RE investor from what I gather.

My inclinations are 2 - 4 units.    

I have considered out of state turnkeys because I can get good prices in places like Cleveland and Alabama.  HOWEVER I have always read you make money in real estate when you BUY.   And turnkey you buy retail.   The turnkey companies make the money up front and it would take 10 years I think to make money with the turnkey model.  And then the 10 year Capital Expenditure tsunami hits - roofs, heaters, etc....

Question 1 - Is it too late given my age ?   

 I will be using 401K Trust money so I have to go the commercial loan route putting 40% down.  This will limit my ability to purchase - which is why I was looking at cheaper markets.

Question 2 - Minnesota markets are not cheap and it is a sellers market right now.  Are there still deals out there or should a person wait for the market to drop ?

Question 3 - Given that I do invest in this market how does one go about finding deals ?

I don't have the time to direct market and knock on doors etc....   So find an investment agent ?   I am meeting with the Remax folks soon to see what they have to offer.

I don't think I have the time to poor through 50 properties a day and make offers like a full time person could.

Question 4 - If I invested here it would not be MPLS or St. Paul - Prices high, Taxes always being raised, etc...

People seem to be moving farther out - St. Cloud, Owatonna, Cambridge, Mahtomedi etc...

Question 5 - I am a numbers guy. I understand NOI, how to run the numbers on a property etc... But I don't understand how to evaluate a property or a neighborhood. I can't do a walk through and determine what needs to be repaired.

To recap - Is it too late to invest in real estate ?  Should I use an agent or broker to find me deals ?  Should I look outside the cities ?  Should I wait until prices go down ?  

Would someone in my situation perhaps be better with turnkey ? Should I perhaps try the BRRRR strategy ?

After a year of figuring out where I want to invest and what area of real estate I want to invest in I am ready to move forward.   But I still feel lost as how to best get started.  I feel if I just jump in I am going to make big mistakes.

Thanks everyone !

Any recommendations would be most appreciated.

Thank you.

This is a townhome in Phoenix.  I bought this in conjunction with my stepson.

The property is in my name.    There is 50K equity in the property - half mine and half his.

He would like to buy this property from me.  The appraisal will come in about $210,000

I am assuming the bank will want him to come up with $40K or 20% down which he will not have - he will have only the $25K of current equity which is sitting there now.

Is there a way to finance this transaction so 1) he can buy this property and 2) where I can get my equity out ?

Also if you have not done so yet I recommend looking up the snowball affect when it comes to paying off the mortgages.

Should be able to pay off 10 properties in 10-12 years from what I have read.   You need to run it like a business.   

And to reduce risk you need to scale up to as many properties as you can as fast as you can.   If you have 10 properties and get a vacancy or need repairs you can weather the storm from the income of the other properties.

Unfortunately MN is not landlord friendly so no way am I investing in the MN market.   MN is terrible for business which is why so many small businesses have left.  Taxes are high.   One of these days MN is going to experience the pension problems now starting in CA and IL.  4 of the 5 top employers in the state are State or Federal government.  When that happens taxes will go up because politicians know nothing else.

One of the things I do when assessing a market is to download the CAFR of the city I want to invest in.  Then I look at the level of increase in taxes and pensions.  For example in Cleveland the pensions liability for the city increased 22.5% in one year.   No way to sustain that so I will not be investing in Cleveland.  You have to look at population growth, diversity of employers in the area etc...

Other things to consider ... harsh weather is harder on properties.   Old basements can cause trouble.  Some suggest to get the roof inspected by your insurance company which I think is a good suggestion.

Take 6 or 8 months and study TK investing.  I think it is a great retirement model with less risk than the stock market if you do it right.

Start with your own goals.   Do you want appreciation or is cash flow most important ?

Appreciation markets - They can be more volatile.   May say we are coming into a recession in 2020 or 2021.  Who knows what that will bring.   TX, FL are the hot markets for appreciation.   But your cash flow suffers and there is the potential for negative cash flow because rents don't hit the 1% of purchase price mark.

Cash Flow Markets - the midwest.  These tend to be more stable but don't appreciate much.

Study study study the turnkey investing.  I am doing the same thing as you.

I have figured out the markets I want to be in and why.

You have to not only look at States but individual neighborhoods.  Price of houses you want to buy ?   Do you want to buy in states with cold winter weather ?

What age homes ?  The older the more maintenance.  

Do you want houses with basements ?

I could go on and on.