All Forum Posts by: Sergey Sidelnikov

You missed several items in your calculation:

1. Closing cost will be on purchase and on sale the property. It can be total up to 12 - 14% (3 - 5% on purchase and 7 - 10 % on sale);

2. Mortgage originating fee;

3. Property tax for the holding period;

4. Insurance your lender will request to have;

5. Seller's RE agent commission unless you're going to sell it without RE agent;

6. Utility holding cost;

7. Rehab cost can be easy up to 10 - 15%, if not more, from the contractor's estimate;

8. You may not finish the rehab in 3 weeks;

9. Your estimate to sell the property in couple months after rehab is done is a bit not quite realistic. You need to add at least 30 days to close if you will get buyer right away as Andy Sabisch mentioned above;

10. You need to keep in mind you won't be able to sell the property to FHA buyers if you won't own the property at least 90 days after your purchase is closed.

I guess your calculation of the profit was based on the ARV of this property which you estimated as $310K. There is no guarantee you will be able to sell with this price. You may consider lowering the price if something happen with the market in your area. If you'll add all the numbers from my explanation above your potential profit from ARV $310K will be close to $3 - $4K or may be even less.

You can open an LLC in any state and buy the properties in any state under this LLC. You'll need to register LLC with the Secretary of State, in your example in each states of Connecticut, Ohio, Indiana, Wisconsin & Illinois before buying the properties. Talk to your CPA about tax return, almost definitely you will need to file Partnership return per each state where you'll purchase properties.

I purchased several properties on Auction.com and Hubzu.com with HML. The problem was neither from auction site nor from HML. I don't know if you can find HML who will finance just repairs, however it always good to ask HML.

Tomasz, I work with Finance of America Commercial for the last 3 years. All my deals they financed were closed in 30 days or less. Let me know if you're interested, and I'll share my contact with you.

Theresa, I work with attorney Joe Dey from Dey Smith Steele, LLC in CT. I don't know specifics of your transaction, however he may be able to help. Here is his information: office phone: 203-882-3351, email: [email protected]. Good luck.

1. LLC may or may not better protect your personal assets if something happen with your tenants and / or with your properties.
2. If you'll decide to open an LLC, your rental properties will need to be transferred from your name to LLC which will cost you money.
3. Per my knowledge insurance rates don't depend of the type of ownership, but of the coverage and deductible. Call your insurance company to verify this information.
4. If you reside in California, regardless where you'll originate your LLC, you'll need to register your LLC with California Secretary of State and pay $800.00 tax per year. Put all your properties under LLC's ownership to save some money. You will be responsible to have federal and state tax return on your future LLC, plus Schedule K-1 (Form 1065) Partner's Share of Income which you will use for your personal yearly tax return.
5. New contract between your LLC as the owner of the properties and Property Management company will be required.
6. There will be no difference to find contractors to work on your properties if the property will be owned by LLC. If you'll pay your contractors via signed contract or just invoices, you won't need to worry about 1099, to confirm, talk to your CPA.

Most of the HML lenders will require itemized budget for the project before they will finance purchasing of the property. Some of the HMLs will also add 10% Contingency as additional amount to your presented budget. Each draw you'll ask from the lender costs money, in average from $180.00 to $250.00, so you'll need to decide how often to request an inspection. Inspector's job is to confirm if one or another item from your budget list, you'll present to inspector, is done. Inspector, at least per my experience, will never ask about invoices. Regardless of how much you spent on one or another item from your budget list you'll be reimbursed exactly the same amount. You can use "Contingency" funds if you're over budget for some items, and if some funds are there still. Please keep in mind most likely lender won't reimburse you for the items that are not completed 100% on the moment of the inspection. For example, you purchased kitchen cabinets, but they are not installed yet when inspector will be at your property.

I did something like this in NJ, not in CT.

We purchased 3-plex, converted it into duplex, completed remodeling and sold each unit separately. You'll need to figure out if the split could be allowed in this area by contacting building / zoning department of Fairfield County or may be specific town if they have these departments. In NJ there was also requirement to get approval from the state. Again, you can ask building / zoning department if they will need this approval from CT state. You can't just sell units separately. It was created an LLC for the building where future owners would be members with appropriate rights and responsibilities especially how the members would split cost of property tax, insurance, utilities and so on. This part was done by our lawyer. I can provide contact information about this lawyer, however I don't know if he is familiar with respective CT laws.

Be careful if you're going to buy duplex with financing. You'll need to be absolutely sure your lender will allow you to sell just one unit if you won't have buyer for the second one due to one mortgage for your duplex. Most of the lenders do not allow split of the existing mortgage. We were lucky to have enough funds to cover reminder of the loan amount when we got the buyer for the first unit, so we just paid off the rest of the loan. The second unit was sold a little bit later after the first deal was completed. 

Good luck.

 

I work with Finance of America Commercial for the last 3 years financing my flips. They are licensed to finance deals in all states. Their programs are very competitive if not the best on the market. I would highly recommend to work with Finance of America (FACO). PM me if you'd like to know more.

James, please send me details about this deal.