All Forum Posts by: Bob Yon

Brian,

You may want to consider our REIA club www.CharlotteMetorREIA.com. We meet on Tuesday July 19 at 6 pm at the Sheraton near the airport. This month's topic is Top Investor Mistakes and How to Avoid them. Our club is an education based club. We help people like yourself get started as well as the seasoned investor. I hope to see you there.

Bob

Maybe I mis-stated my question originally.  I am trying to figure out if I am calculating Cap Rate and Cash on Cash Return properly.  Can someone please tell me if I am calculating them properly.   And, if I am are the resulting numbers of a cap rate of 12.14% and ConC Return of 19.29%; do these indicate a good deal or do you look for something higher?

I've got a deal that I think is a good one, but am a little uncertain about some of the numbers:

Here is the deal:

Duplex with $750/mo rent
Purchase Price $28000
Down Pmt $18000
Owner finance $10000 at 0% for 5 years
Closing Costs $2000

I normally use a 40% exp ratio which includes taxes, insurance, vacancies, prop mgmt, repairs and reserves. 
Property needs about $3k of clean up and repair before tenant moves in 2nd unit (1st unit rented)
Also will need a new roof ($5k) within a year or so

I've calculated NOI as: Gross rent - Expenses = NOI 9000-3600=5400

I've calculated Before Tax Cash Flow as NOI - Debt Svc 5400*2000 = 3400

I calculated the cap rate as NOI / Purchase Price 5400 / 28000 = 19.29%
  But, should I really be using Purch Price + Repairs instead of just price?

I've calculated Cash on Cash Return as Before Tax Cash Flow / (Purchase costs + Repairs)  3400 / (20000 + 8000) = 12.14%
   Is this the proper calculation?  Should it include the repairs?

Beyond all of that how do the numbers look to you; Deal or no deal?

I like the idea, but, what entity then would hold title to the rental properties. 

Thanks for the reply Ted.

I am doing deals monthly, and hope to be doing multiple deals per month very soon.

I'm leaning toward creating separate entities for each type of activity. I.e. keep my consulting LLC, create one for flips and another for holds. That makes sense. But, all of this about having a Ccorp to manage the others seems a little much.

Still not sure though whether they should be single member or not, and if not whether my wife should be 95% owner so she claims passive income and avoids some taxes.

Who knew making money could be so complicated?

I've searched the forums and have not found exactly what I am looking for though I don't think my situation is all that unique.

I have been investing for some time now and have acquired several rental properties.  I have also done some rehabs that I sold, some with owner financing and, I have done some wholesaling (just flipping to other investors properties that I have found through my marketing but did not want to add to my own portfolio at the time).  I plan to continue doing all of the above.

My overarching goal is to build a passive income so that eventually I can quit my corporate job which is as an independent computer consultant. This work is done though my Single member LLC, taxed as as S-corp.

My CPA says to just run my real estate transactions through my Consulting LLC.

However, I also had a local mentor/coach tell me that I needed an entity structure that is much more complex but that I need to separate my rental hold properties in an entity separate from my flipping and wholesaling properties. Basically anything I hold longer than 1 year should go in one entity and anything held for less than 1 year in a different entity. And, that these should be multiple members LLC, not Single member LLC so that therefore I have charging order protection.

They also recommended that I set up an LLC taxed as a C-corp that would provide marketing services to the other entities. Somehow this provides some special tax advantages including being able to deduct medical expenses, rent my home to the corp for business meetings tax free, etc. And that I could avoid the dreaded C-corp double taxation by keeping business profits at or near zero for the year in this entity. This mentor/coach group uses some very aggressive tax strategies.

When I mentioned this approach to my CPA he dismissed it almost immediately without much consideration at all saying it was too complex and expensive to maintain.

Like anybody else I want to pay as little tax as possible but if my CPA does not buy into (or understand) the strategy is it really any good to me?  Preferably I'd like to spend less time each year maintaining entities than it took to write this post.

Any and all informed suggestions and advice are welcomed.

never mind!

one quick google search of this guy's name " Kevin Lamont Williams" turns up several scam reports.

Good to know that my scam alert radar is still functioning properly. I knew something just did not smell right, though he has his story down pretty well. He knows how the game is played.

I've been investing in NC for several years and occasionally do some wholesale deals. My daughter just recently got her NC RE license. She was contacted by someone, Kevin, who claims to be working with a hedge fund (Hush Group Holdings) and the fund wants to buy several properties in this area.

This person wants daughter to provide a list of buyers who are currently unable to get a bank loan due to credit issues. (I have a pretty good size list of buyers who would like to buy rent-to-own or owner financed properties.) Kevin will then charge them $250 to begin a credit repair process which of course includes them providing all their financial information.

The buyer, with Daughter's help, is to find a home they want to live in. Kevin and the fund will buy the home and lease it to the buyer until their credit has been sufficiently repaired that they can then buy the house from the fund.

This almost seems to fall into the too good to be true pile.

How can we ensure that we are not getting involved in some scam that is just there to collects folks' $250 and financial information?

Does this sound legit or should we run screaming from the room?

Thanks,
Bob

@Jim Elston good to see a neighbor on BP.

It's not exactly you're backyard but it is close. I run the Rowan Real Estate Investors and Associates group over in Salisbury. You are more than welcome to join us any time. We meet on the 4th Tuesdays of each month (next week) at the China Buffet on Arlington st in Salisbury.

There is no charge to attend. We are a casual group of normally between 15 and 30 people at each meeting. Several of us meet early and have dinner before the meeting. Feel free to join us for that if you would like.

Thanks,

Bob