All Forum Posts by: Jordan Smith

Long Post Alert: Market Update followed by some Food for Thought.

Another Central WI guy here:). Seeing houses in the mid-upper price range and beyond ($500k+ for around here) hang around the market a bit longer and/or reduce listing price in $25k increments. Single family homes priced below that are generally moving quick still. Duplexes and small multifamily are moving quick, with rents increasing significantly across all asset quality classes (mostly B/C product).

We are very short on rental housing (and subsequently storage) as like previously mentioned about Stevens Point, GB/Fox Valley has a number of strong (and economically resilient) companies and industries that are hiring. We have a labor shortage due to folks moving south and west, so those of us here are experiencing strong wage gains for those workers with exceptional (coastal) talent.

The market can’t get any hotter, so what could make it worse (other than natural deceleration due to rising rates)?

1) I think the comment above about Wall Street building/buying neighborhoods of SFRs is a topic that we need to consider. Sure the supply/demand chart is out of whack now, but we saw Wall St fool us before, and this is how they could do it again. When the big guys exit, they RUN out of the building and pull the fire alarm on their way out.

For example, we all like to talk about how lending standards are different this time around, but we're not talking about institutional ownership entering the SFR market and how that has changed over the past few decades (would LOVE to see the data if someone has it).

What if the risk adjusted return profile changes such that Wall St is better off taking gains (selling houses), returning capital to shareholders, and moving to the new shiny fixed income product that is benefiting from rising rates?

Will Wall Street sell houses by the dozens/hundreds due to a change in their investment appetite? I don’t know, but would be good for us to keep an eye out for data on this as this asset class matures over the next few years.

2) I see a number of investors who have grown via 80-85% cash out refi leverage. Of course this is a good strategy to grow the portfolio, but I don’t see the liquidity I would expect for guys maxing leverage on every property.

Will excessive leverage from small investors bring down the market? Probably not, but this may be a moment to “pause for poise” and rebuild some liquidity if reserves are stretched. I’d rather have a tight market continue than see portfolio sales due to your lender remargining you at a 7.5% rate when your balloon comes due.

As for me, I’m new(ish) to my market, so finally starting to get some decent looks now that I’ve established some relationships.

Buy good dirt, have multiple strategies, and keep some liquidity.

Ok thank you Wayne, appreciate the help!

**Updated with correct math**

For example purposes (easy math here) - if "Net Cash to Seller" totals $150k, my down payment was $20k and renovation costs totaled $30k, my wire from the title company will be $125k ($20k down payment + $30k renovation + $75k profit), whereas his will be $75k.

Are we required to each report $75k on the 1099, and split the expenses on the tax return ($15k each)? Or are we able to report different amounts on the 1099 (ie I would report $105k with $30k expenses, and he would report $75k, $0 expenses).

My partner doesn't want to hassle with reporting the expenses so his goal is just to report the net number, whereas I would report all of the expenses. Just not sure if that is feasible.

Thanks all!

Hello all, 

I bought a house flip with one other partner, taking title as Joint Tenants. We agreed to split the profit 50/50, as he found the deal and worked with the seller, but didn't have the capital or expertise to complete the work. I came in to provide the capital and work/GC, and paid for the down payment on the house, all carry costs, and all renovation costs.

Now that we are set to close next week, we have a nice profit that we will realize, but given this is our first time flipping a house we are not sure how to have the proceeds reported on the 1099.

For example purposes (easy math here) - if "Net Cash to Seller" totals $150k, my down payment was $20k and renovation costs totaled $30k, my wire from the title company will be $100k ($20k down payment + $30k renovation + $50k profit), whereas his will be $50k.

Are we required to each report $75k on the 1099, and split the expenses on the tax return ($15k each)? Or are we able to report different amounts on the 1099, with only one person claiming the expenses as the step up in basis? 

My partner doesn't want to hassle with reporting the expenses so his goal is just to report the net number, whereas I would report all of the expenses. Just not sure if that is feasible.

Thanks all!

Hey all thank you for the advice. I found a local hard money lender that will fund this deal for me. 

@Michael Glist would love to connect with you for future opportunities as I find it easier to work with someone local.

Hey Doran yes it is.

Hello all - need some advice on the best way to finance this deal considering I will not be able to carry it with cash. Here are some fairly conservative details:

Purchase Price + Closing Costs: $370k

Renovation Costs: $25k (very conservative)

ARV: $515k

I have $55k cash on hand, with an undrawn line of credit of $100k.

The renovation will go very quickly, about 30 days.

Questions:

- Is there a short term bridge loan (interest only) option available in the market?

- What is the best way to minimize my transaction costs, given that I will need financing?

- How can I best position myself with a lender? I have a mortgage on my primary residence (same lender who holds my HELOC), but no other debt (personal or investment property). My AGI is $120k on my 2020 return, but that did not include by annual bonus paid in January 2021 of $40k (new job in 2020 so wasn't eligible to receive prior to Jan 2021).

@Adam Gollatz Hey Adam thanks for the advice. I'll send you a DM, would love to hear your story and about what you have going on.

Thanks @David Mo. I have a friend who lived in West Allis for the last few years, he seemed to enjoy it, though I can't recall exactly where he lived. Good idea to start connecting with some agents. I'll send you a connection, and of course let me know if there is anything I could help you with.

Hey Anthony - thanks for the response, as well as the suggestion for the Brew City REI Club. Any particular reason why you like duplex's over 4+ unit buildings? Something specific to the market or just personal preference? I've done a number of 4 units at my day job (as well other large projects), but open to all suggestions of course.

Also - any suggestions on where you might think to be a good place to look for a house hack duplex? We're both young, active, no kids, so somewhere near nightlife/entertainment would be desirable, understandably at a higher cost. It seems like a lot of the old neighborhoods I never had a reason to go to 10+ years ago are now becoming more popular (ie Walkers Point, Brewers Hill, Riverwest) for this type of strategy? That being said, we would be flexible on location.

Thanks!