All Forum Posts by: Matt Souza

Hi BP!

Hoping someone on here can help. My grandmother is selling her cottage that my grandpa built by hand over 30 years ago. How would you go about estimating the value of the house when built for tax purposes?

I know the tax elements can get pretty complicated when one owner on the title dies. But I was more curious how we would estimate value when built, when we clearly don't have receipts for construction costs. Should we be very concerned with something like that? I just want to make sure my grandma isn't audited and we randomly came up with a number for the property. Any insight would be greatly appreciated.

Thanks!

Hi Tereza Dyerova , I will echo everyone else, I would pass. The West part of Metro Detroit (Dearborn included) is a good area to invest. Low cost properties, high rents, and a strong blue collar tenant base. If you are looking to do turnkey, you should be able to find some properties that are around $60k and rent for $850-900. It appears to be me that you are on the high price side of that and low side of rent, not ideal. If you have boots on the ground, you can get those same properties for $40-50k. Hope this helps.

In Michigan, that is not an issue, but I cannot speak to VA. Here, we just Quit Claim Deed the title from our own name to the LLC. There is some paperwork and a small filing fee you need to pay the county, that's it.

Hi @Chris Ayers,

Are you refinancing your current properties into a commercial loan? You will not be able to get a conventional mortgage if the title is held by an LLC.

For future BRRRRs, you really have two options:

1. Purchase the property in your name, renovate, and refinance into a conventional mortgage. You can then transfer the title from you to your LLC. The only issue with this is the bank can potentially call the loan due at this time (or any time thereafter), since there is a Due on Sale clause in the contact which prevents transferring the title without paying the loan balanace.
2. Purchase the property in the LLC and roll it into a single commercial loan or a portfolio loan with your other properties. This will have worse terms than the conventional mortgage, but the bank will not have the ability to call the loan due. However, it is nice to have just one loan and one payment on all your properties.

Hope this helps!

Hi @John Kim,

My quick numbers show the park is selling around a 10% cap, which is appropriately priced for that area.

My only concern would be what value add opportunities are there? Water is already billed back to the tenant and most lots are full. Is there room to increase rents? Are there any expenses that could be cut? You should be thinking of ways to increase cash flow and therefore the value of the park.

Feel free to PM me if you want to chat more. I live 1 hour away from Ohio, could maybe be your boots on the ground for this if needed.

Best of luck!

Hi @Tijana Flowers-Harris,

I think it comes down to how much cash you have for a downpayment. If you can find a 2-4 unit within your budget (I assume 3-5% down if you're using FHA) and in a safe neighborhood, you should definitely do that. Just make sure you save some cash in reserves, as you may need it for managing the other units.

If purchasing a 2-4 unit spreads your finances too thin, then go with a smaller SFH in a safe neighborhood. I would encourage you to treat the SFH like a rental though, and try to purchase one that would cash flow if a tenant were in it. This will make the transition to house hacking your next property much easier.

Best of luck!

Hi @Kevin Mosier,

If setting up an LLC in Wisconsin is anything like Michigan (after glancing online, it looks like it is), you do not need a lawyer. I have created several LLCs in Michigan, it only takes a couple hours to fill out the proper paperwork. Since you are going in with partners, the greatest time spent will be on your Operating Agreement. The Operating Agreement is a legal document that will outline your partnership rules. There are a lot of great templates online for OAs. This guide should help for the whole process: https://www.nolo.com/legal-encyclopedia/wisconsin-...

If you are more comfortable having a lawyer put this all together, by all means do so. But I don't think it's necessary. Best of luck!

Hi @Keith Burton,

I agree with @Aaron K., you still need to save some more before diving in quite yet. Keep growing your client base, networking, learning, and saving.

I would recommend starting with a house hack or live-and-flip. There are a lot of great deals right now in Pontiac, you should be able to find something. Best of luck!

@Jornel Lugo,

I agree with @Bill R., this is one of the most common discussions on BP.

My take: If you are going to only be purchasing a few properties, you should be fine with a high personal liability policy with your insurance, umbrella is not really needed. I own a handful of SFHs and have a $1,000,000 liability policy on each, that should cover pretty much anything (*knock on wood*).

If you plan to own several properties and there are more than one owner involved, an LLC is probably your best bet. Just keep in mind it is trickier to get conventional financing with an LCC. Hope this helps!

Hi William Noetzel , Always good to see more people from AA on here. My brother and I formed a partnership on some deals last year, PM me your email and I can send you the word doc we used. What type of asset class is this deal you’re looking at? SFH, apartment, commercial? If it’s a SFH, a real estate lawyer is not really necessary. Best of luck!