All Forum Posts by: Tyson Taylor

I'd say that once you own an investment property you're a real estate investor.  I don't really think there's "average" or "advanced" categories, and it's not necessarily the number of deals.

I don't think it's helpful to compare yourself to other people.  Set your own goals and be satisfied when you reach them. There are many people who I'd consider wealthy that are still unhappily looking over at their neighbor.

Ok I'll play. One Million Dollars! I'm 40 and already have some irons in the fire, so this would put me over the hump.

Step 1. Quit day job

Step 2. Pay myself $100k for year 1 salary.

Step 3. Put $100k, $50k per kid, into a college fund.

Then the fun part.

I'd use $300k for a down payment on a property that will return 10% cash-on-cash. A nice little rental worth $700-$800k that I can count on.

The remaining $500k I'd keep liquid to buy land with cash and keep enough to pay for the entitlement/permitting process. Then go get construction loans and build. I figure I could live comfortably on 2 or 3 development projects a year.

I'm having trouble imagining how this will end well.  You say he's not doing it for tax reasons and the neighborhood is in decline, well in what other scenario does this work out well in the end?

He may be looking at it like @Alexander Felice mentioned. He's got some 10 year loans on ~$450k worth of property. He's put $122K down, borrowed the $328k and is paying $14k a year ($140k all in). So by his math, in 10 years he owns $450k worth of property for $262k out of pocket. That's nearly a 50% return and there's no property value inflation included! Maybe someone could talk themselves into it that way?  I can't do the math in my head but it's less than 5% annual return. I don't know, seems like a longshot.

Smarter to put your $122k down on a nice little 4-plex that returns at a 7-8% cap.  He'll have cash flow and equity for the next deal. 

Hi @Meli'sa May,

Unfortunately, I'm not aware of anything that'll help you out.  All the commercial deals I've seen take more cash (25%) and more collateral.  

I'm curious to hear from lenders though, as I'm interested in more commercial property myself...

I'm in a similar situation, I used to self-manage but got to the point where I just didn't have time. There are unfortunately only so many hours in the day and too many things to do. I've started to focus on what I'm best at and outsource what I'm not. 

Honestly, I also realized I don't want to be a property manager, I really don't enjoy that part of the business (though I did manage my own properties for 15 years).

If it still cash flows and you can find a manager that makes your life easier, I say go for it. 

Did you get a survey when you purchased the home? They will typically include a copy with the closing documents.  It would identify the location of any improvements, including the fence, as well as property lines.

It's hard to know if you don't have a survey. Many times you can find a pin or chiseled cross in the sidewalk that will identify a property corner, but it's hit or miss, and you can't be 100% unless it's verified by a surveyor. 

There may also be a height restriction on the fence regardless of whose property it's on. Are you able to confirm an 8' fence is allowed on the apartment property?

@Lenna Groudan

I think you're on the right track. I've done this same thing with my properties. 

Remember that by offering cash you should be getting a better deal than someone making an offer with financing (for the reasons you mentioned), so closing twice shouldn't really cost you more.  

I recommend looking for properties that need just a little work, something obvious that's hurting value (something you can fix, like an outdated bathroom, not something sitting on top of the freeway).  You can buy it quick with cash, do a little fix up and then get it appraised and then get even more equity out of it. 

I checked my last HUD-1, the only closing costs I paid were for title, about $2k. In theory, you don't even need to do that, but having a warranty deed in hand will make the refi simpler. I recommend closing only with a warranty deed, title problems are the one thing that can completely derail a deal and some are really expensive/nearly impossible to fix.

The closing will pretty much be just like a residential purchase loan, they'll require all the same information to underwrite it, the only nice thing is there's no hard closing date constraint that makes everyone panic at the last minute.

Good luck!

@Omid A.

First rule of zoning: Never assume anything about zoning.

A quick check of the Beaverton, OR zoning code reveals that it is permitted to build a SFD in most of the commercial zone districts: Zoning Code.  So it doesn't appear you'll need a variance. 

Call the planning and zoning department to ask specific questions, they'll help you out.  A survey or site plan of the property will help them be more specific with the answers.

Good luck.

@AJ Ard

A Phase 1 study won't look for things like asbestos or lead paint unless it's specifically requested, these studies are looking specifically for soil and water contamination, issues with the structure are outside the normal scope.  A Phase 2 is being recommended probably because they found underground tanks on the property.  I would highly encourage you to have that one done, worst case scenario is that the tanks have leaked and there will be a major clean-up required.  Removing tanks is one thing, remediating a serious amount of soil contamination is serious business.  

If a phase 2 is completed and there is no evidence of leaking (and the tanks are no longer being used/empty) the property would likely not require any further action.

As far as I know, if you buy contaminated property, the liability is yours. It's good to be thorough.  I think any lender that saw there were tanks would want a guarantee they're not buying a superfund site...