All Forum Posts by: Tanner K.

@Joseph Hammel Thanks for the reply, what did your expenses cost roughly?

Hello BiggerPockets, I am currently taking the pre-licensing course in Minnesota, to obtain my real estate license. I want to start looking into what agency to work under (i.e. Edina Realty, RE/MAX Results etc..) and how commissions and pay differ and what to look for. Any current agents from Minnesota who could share who they work under and why would be a great help! I am in the St. Cloud area.

@Kyla Floyd I would look into seller financing, giving the current owner monthly cash flow that requires absolutely no work. If not I’d look into a business loan, sounds different but a lot of banks will give a business loan for rental property investing. In this case they look at the property and not your income although you can back the rental cash flow with your personal income if you need to show that you can afford the loan. When I looked into it, a business loan would be 5-6% not great but better than hard money

@Jason Lam absolutely, I'm very new myself and creative options are my best options. I approved for FHA with about 3.375% and even with that it's hard to make the numbers work. Mortgage insurance kicks you in the behind when working with banks, it adds a useless monthly expense depending on the loan size. Also, banks are slow, super slow. It took me over a month to get approved for an FHA loan and actually purchasing a property takes forever through a bank. So my solution has been to look for people willing to seller finance. Its a way where you can acquire a property very fast compared to banks, and sellers usually don't ask for a huge down payment. My numbers almost always work better using seller financing with a balloon payment after 5 or so years, then obtain a mortgage to pay them off at 5 years. The only issue is finding good deals with a seller willing to finance. Although I cant speak from experience, Im in the same spot as you right now but I can give you advice on what I know. Feel free to message me whenever with questions and I'll try to help!

@Jason Lam

Lower your cash put into the deal. It’s simple math, if you want the return to be higher, get the same cash flow at a Lower cost. Or look for properties that cost less and cash flow at the same rate. Basically you need to lower your initial investment or raise your return. There’s plenty of ways to do both of those things.

Thank you all for the input, I have re-read this thread a few times to grasp all your points but I fell I understand what your all saying. So, I wanna add some small details that I should have originally, it is a rental duplex, the seller is retirement age, trying to get out of the game and is in no rush to do so. Her husband is retired and they own 5 rental properties. seller is an active realtor and knowledgeable in real estate. I'm trying to fully understand both pros and cons of seller financing to make sure I'm not pitching what I think is a win-win, when in reality there's unknown risk similar to what @John Woodrich was saying about the unexpected tax from recapture income. I also want to make sure I'm aware of any benefits such as preventing the NIIT tax mentioned by @Ashish Acharya. If anyone has any other pros or cons related to seller financing, please mention them, tax related or not. Also, @Ashish Acharya can you explain what the NIIT tax is and how that works?

What are some of the benefits for the SELLER when using seller financing? I am in Minnesota and I’m trying to buy a rental property using contract for deed. I want to know all the benefits to the seller. How can the seller benefit from this on their taxes? How does it effect capital gains tax? How can they write off the payments or the interest? How can they lessen the tax burden of the sale by doing contract for deed?

First off I’d like to introduce myself.. My name is Tanner Kier, I’m new to bigger pockets and real estate investing. This is my first deal and it’s a quite complex one so I’d like to get some opinions on it. So here’s the scoop: I’m working with my long time friend as a business partner. We have the same love and drive for real estate and we get along great. We’ve both been study a lot and finally found an amazing deal through creative methods I learned in Brandon Turners book : the book on rental property investing. I started using Craig’s list’s “for rent” ads to find landlords that might want to sell. I got a response from a 62 Yr/old realtor, looking to slowly get out of the landlord game. She has 5 properties and is looking to sell two of them. All are within walking distance of the largest state university in the area. They have been in the area for 20yrs and have NEVER had vacancies due to their low rent. One is a side by side duplex, great condition, 4 beds and two baths on either side, asking $270,000, current income: $2600/m. Needs a new roof within 2 yrs and a furnace within about 2-4 years. No other issues. The other is a single family home used as a licensed rental, 4 beds 2 baths, 2 stall garage. current income: $1200/m. We just toured them today and after some talk on price we offered them $365,000 for both properties. Roughly 93.5 cents on the dollar. Is this a good idea? Is this too risky? We will be doing our own property management but still factor the cost because we will outsource in the future. Please reply with any comments/advice/questions. Any help is appreciated.

ALL COSTS/INCOME ARE ASSUMING $350/ROOM

Duplex: asking $270k, offering 250k

Income:

-current: $2600/m ($300/rm)

-Easily possible: $2800/m ($350/rm)

-expected: $3200/m ($400/rm)

Property tax: $2600 annually

No utilities

Vacancy 8%: $224

Repairs 8%: $224

Capex 8%: $224

Property Management 13%:

Insurance: $100/m

Mortgage:

- 4.5% for 30yrs $1,267/m

Total expenses: $2,619/m

Total income: $2,800/m

Cash flow after expenses: $180/m

SFH: asking $120k, offering $115k

Income:

-current: $1200/m ($300/rm)

-Easily possible: $1400/m ($350/rm)

-expected: $1600/m ($400/rm)

Property tax: $1400 annually

No utilities

Vacancy 8%: $112

Repairs 8%: $112

Capex 8%: $112

Property Management 13%: $182

Insurance: $100/m

Mortgage:

- 4.5% for 30yrs $583/m

Total expenses: $1,317/m

Total income: $1,400/m

Cash flow after expenses: $83/m

I'm looking to buy a single family home with great potential to become a Duplex. The only problem is that I know there are certain zoning restrictions on doing that. How can I find out if I am legally able to convert to a duplex without breaking and city ordinances or laws in my area?