All Forum Posts by: Stephen Polizzi

@Lynn McGeein The FEMA map shows it in well within zone AE, good tip though.

@Robert Rayford Agreed. Without some sort of water feature to off-set this monthly bill, I can't see the comps holding up on this deal.

Final quote came in at $2334/year for 155k house, 2k deductible, AE zone.

I'm waiting on the seller to provide a copy of the policy and elevation certificate.  If things are materially different I'll pursue further and update the post.   What zone are you in? This property is AE.

So first, I'm new; keep that in mind.

Started direct mail marketing 2 months ago and have sifted out a couple leads and saw a couple houses. As of yesterday, I was about to get my first contract signed. I have negotiated with the seller and we finally arrived at an agreeable price. The deal was ok - buy it for 79k, 4-6 week rehab of about 25-30k, and an ARV of about 150-155k. The house is in a good town, but it's on a private road. The neighborhood has some very nice houses on the ends of the road but drops in quality fast as you heads towards the middle, the subject house was right at the end of the nice house area. It was a 3/1 but the seller's midway through converting it to a 2/2 and there isn't a clear path back to 3/1 or up to 3/2. Even with 2 bedrooms though, I'm confident in my numbers on the ARV so I kept going.

In our last discussion, the seller mentioned a flood insurance policy which I immediately registered as a problem. Followup questions led to her telling me she was paying about $900/yr for coverage.  Not knowing a ton about flood insurance issues, I assumed this was a small issue and used it in part to negotiate her down from the 125k her realtor told her she could get as-is.  

Although later due diligence would have caught this, and although we had a verbally agreed-to deal, I decided to contact my insurance agent. She came back with a quote of $2260 based on a value of 100k. Now the problem is getting bigger. Once she adjusts the value to the ARV of 155k, I'll probably be closer to $3000 or worse.

The air immediately starts seeping out of my balloon.  Things were going so well.  I direct-mailed people, I followed up on calls, I negotiated a deal, I started planning my answers to the Famous Four...it was all coming together.

But now I'm cutting it off.  I'll wait till I have the final numbers from my agent to save some face with the seller and help her understand what she'll be up against if she continues with the property.   General consensus seems to be that flipping in a flood-zone can result in longer holding times after rehab.  Looking at the numbers, I think once you factor in the additional flood insurance, it effectively drives my comps down by $200/$300 in mortgage affordability. Lets face it, it's a 150k home on a poor-man's river...nobody's going to just eat that extra monthly cost.  Add to that that flood zone adjustments and resultant premiums seem to be on the upswing, so the new owner would be screwed in the long-term.  People will avoid my fresh flip sight-unseen.

I searched around the forums for awhile before making my decision. Hopefully my story will help somebody else as others helped me.  I've now added flood insurance to my initial vetting rather than leaving it as just a contingency on the PSA.

I don't believe in investing in the greater fool theory, and I think I'm too early in building my  business to risk being stuck with an albatross tying up my money, eating at me with stress and holding costs, and potentially sinking my ship. I'll wait for a better deal.  More time to come up with my Famous Four answers anyway.  

@Rodney Saucier Be careful in NH about transferring property to an LLC as it may be subject to transfer tax. There have been some recent changes in the law that seem to accommodate reorganization without taxation, but make sure you set up your transaction correctly from start to finish.

https://cre.nerej.com/important-changes-new-hampshires-transfer-tax-creates-opportunity/  

Hi Denise,

I've heard a lot of mixed reviews and innuendo about Franklin too.  I'm in the Tilton/Franklin area at least a couple times a week and it seems like there's plenty of jobs and activity.  I'm not an experienced landlord, so take this with a grain of salt. 

My guess is that you aren't going to get a lot of "young professional" type tenants there and rents will be in the low-mid range, a lot of D+ to C+ areas.  Don't have any insight into which areas to target or which to avoid, sorry. If you're comfortable with older units, lower rents, probably higher turnover etc you'd most likely do fine there, assuming the numbers all work on the particular property you're interested in of course. There are always exceptions both for and against you, but I think you'd have to really know the area to find them.

 Yes, exactly, and how to best structure everything to incur the least burden on those.

I'm looking for a CPA fluent in Xero to work with. Bonus points for either being in NH or working with NH clients, but will settle for a willingness to be able to figure NH laws out.  Looking to have a checkup done on our systems and processes, basic tax planning, question and answer throughout the year, and tax prep when the dreaded time comes.  Any recommendations?

@Matt Taylor Hi Matt, this is great information, thank you. Do you use this method for the purchase and rehab amount or the purchase only? Can you give an example of how the funds flow from the loan LLC using some round numbers? Thanks!

Thank you @Thomas Hickey and @Bradley Tetu.

@Troy Zsofka Thank you for the fantastic and detailed response.  Would most of the same hold true for multis in Claremont or are there other nuances there?