All Forum Posts by: Sam Bates

Adam,

In my prior life I was a sales and use tax professional for multiple accounting firms and an energy company. Texas taxes and or exempts residential rehabs depending how the contract is structured.

If the contract is a lump sum contract it is exempt from sales tax to the end user which is you. The contractor is responsible for paying taxes on all materials they purchase and use in the job.

Citation:Tex. Tax Code Ann. sec. 151.0101 Tex. Tax Code Ann. sec. 151.051

If the contract is broken out to include labor and materials then the contractor is correct in charging you sales tax on materials, but cannot charge tax on the labor portion of the contract.

Citation:Tex. Tax Code Ann. sec. 151.0101 Tex. Tax Code Ann. sec. 151.051 Tex. Tax Code Ann. sec. 151.056 Tex. Admin. Code tit. 34, 3.291 Tex. Admin. Code tit. 34, 3.34

I’ve provided different statues and regulations that will provide greater detail of what I mentioned above. If the contract is time and materials and he did not include it in the initial bid I would fight with him and tell him that’s his mistake and for him to eat the tax. I would imagine he did that on purpose to win the bid then tell you later about the taxes due.

If you are concerned about him potentially pocketing the tax below is a link that you can look up the franchise tax status of a business in Texas. This will not provide evidence that the vendor has a sales tax account, but it will show if he is registered with the state and you can call the state and see if they have a sales/use tax account.

https://mycpa.cpa.state.tx.us/coa/

Rung, 

I'm an active and passive investor and the turnkey provider I use is Memphis Invest. My properties with Memphis Invest are in Memphis, but the company has branched out and invests in Dallas and Houston. 

I've worked with Memphis Invest since 2014 and they provide exceptional customer service. Their model is to purchase a property, renovate all the big ticket items, and then put a tenant in the property on a 2 year lease term.  They are are the best company in the turnkey marketplace from a property management standpoint. They have over 3,000 properties so their system is a well oiled machine. I decided to invest with them to diversify my portfolio and treat these houses like a bond because the monthly cash flow is constant without any headaches.

Now saying that, if you are fine "hitting singles and doubles" I'd go with them. However, if you are looking for properties that give you plus 15% ROI they might not be the company for you. All the properties I've purchased in Dallas have significantly higher returns than my Memphis properties but I've put in all the sweat equity in my Dallas portfolio.

Andrew is correct. Most houses in Dallas have foundation issues, but this should not scare anyone from investing in Dallas. With Memphis invest they will fix your foundation and I would think the foundation company they use will provide a lifetime warranty. If you are concerned about foundation issues you can always keep a reserve to give you a piece of mind. 

If Memphis Invest does not suit your needs you could consider investing in multifamily passively. My company develops apartment complexes and other types of real estate. We syndicate each real estate deal which means we create a private placement memorandum (PPM) with the SEC and then raise money for each deal. All our deals have provided superior returns to our investors. If you would like to learn more I would be glad to speak with you in greater detail.

Arthur,

Since your long term goal is to create a buy and hold portfolio I would start with that strategy and stick to it. From your commit about option 1 it seems like you have adequate capital now to purchase a multifamily property so I don't think it makes sense to move away from this strategy. If you purchased a home with a 203K loan there are many variable that could that could change in the next 6 months to a year and if it has an adverse effect you might not be able to purchase a multifamily property then. 

If you can purchase a 5 unit property or larger I would recommend this route instead of a 3 to 4 unit property. I say this for two reasons. First, 5 unit properties and above are considered commercial units. The value of commercial units are based on NOI (net operating income) instead of how single family homes are valued. This allows you to create value (increase income and/or decrease expenses) when the market remains the same. The second reason is it is usually easier to get a loan for a commercial property than a SFH.

Diana,

I would find an insurance broker in the Denver area. If they are worth their salt they should find out your goals and needs then they can shop around and find you the best deal that meets your requirements. I'm in Texas so I do not know of any specific companies to speak with, but I would recommend going to a local reia and asking around.

@Rich Chan can you provide more information on your portfolio loans? Do you lend in TX? do you offer LTV above 70%?

@Garry C. It sounds like you do a great job with your vacation rentals. I'm in the early stages of investigating a vacation rental in Colorado. What percent of the year would you expect a rental to be  occupied using VRBO or Airbnb?  

Steven,

Welcome to the world of real estate and Bigger Pockets. There are many strategies you can implement in achieving your goal of replacing either your wife’s or your incomes within five years. Below are three of the most common investment strategies.

• Single family homes – self managed or property manager
• Small multifamily – self managed or property manager
• Apartment complex syndication – passive investment

There are multiple avenues to finding SFR's. You can use an agent like you mentioned, wholesalers, networking, auctions websites, or direct mail. You mentioned you have minimal time so the last few options might not be the best decision. The draw back to using realtors is many realtors only look on the MLS for houses and many times this is not where an investor wants to find a house. Self-managing properties can take substantial time especially during the rehab process or when you are locating a tenant to place in your property. A management company will reduce the number of hours you spend on your investments, but they also reduce your ROI and they do not care as much about your property as you do so things can fall through the cracks. There are many management companies in the DFW area so screening and selecting the right one that fits your needs is paramount.

Small multifamily investments are similar to the SFR's as I mentioned above except the financing can be different and multifamily investments are valued differently than SFR's. They are based off cap rates and net operating income not comps.

Apartment syndication is the least hands-on of any of the investment options. A syndication is a pool of investors that combine their money together to purchase an apartment complex. You can buy a yield or value add deal based on the partnerships goals. The partnership will usually have one lead or could have a couple of lead investors who have experience and manage the deal. If the deal is large enough the apartment will be able to support a professional property management company to manage the daily operations of the apartment. The partnership's goal is to achieve a specified ROI then either refi and cash out or sale the property.

I’m an investor in the DFW market and have invested in all the strategies listed above. I’ve also flipped multiple houses the past few years. They can all help you accomplish your goal, you just need to decide which strategy is the best for you and your family. I have a business partner and we’ve created a partnership to purchase value add C class apartments in the DFW area. Our goal is to renovate and retenant the apartment. Please let me know if you would like to meet to further discuss.

Thanks,
Sam