All Forum Posts by: Cole Melcher

Retail

Class B or C

around the 1M mark

Thanks in advance!

Anyone here doing any commercial investing in Nashville, TN? Trying to get an idea of what cap rates buyers are buying at right now. Thanks in advance.

Thanks for the response @Clayton Mobley.

The return I am talking about is only on the cash flow that the equity is generating. Once you add in amortization, 3% appreciation, & tax savings, we are averaging about 22% ROI. The maintenance estimates I use is 8% on SFR & 4% on condos. Our actuals are less than that, however, we have not had to do a whole lot of maintenance since our turnover has been low the last few years. I am trying to be a little more conservative than what our actuals are running right now to give me a good idea of what our returns would look like with a more normal maintenance schedule.

After re-reading Rich Dad's Cashflow Quadrant, I have a renewed focus of increasing our passive income from our investments. Up to this point, my main focus has been on increasing our net worth. 

Right now we are generating a cashflow of 3.4% on the equity we have in our rentals. That is after subtracting a 10% vacancy rate and a generous estimate of maintenance expenses. 3.4% seems very low to me, however, I have searched the internet and cannot find any discussions on passive income returns on equity. What are other people seeing on their rentals?

I have an idea that my tax professional says won't work. I have read through the complete IRS guide to rental properties and can't find anything that specifically prohibits this plan from working. Anyone know for a fact that the IRS won't allow this, and if so, where I can find that information.

Plan:

1.) Buy a SFR as a rental property

2.) Rent the property out over the course of five years using the cash flow to make improvements. (I'll also be putting personal funds for improvements and general maintenance into the property as well. Some will be deducted for that year and some will be capitalized)

3.) Depreciate the property over the course of these five years

4.) Move into the property as a primary residence after year five.

5.) After living there for two years, sale and take the capital gains allowance for a primary residence.

I second everyone else so far that Trulia and Zillow are a complete waste of time for running comps. Completely inaccurate data in regards to market value. Partner with a trustworthy real estate agent. One bad deal can cost you a lot more than paying a real estate agent's commission. They can run comps and pull pictures from previous closed transactions. 

Did you have the repair cost agreement on an official amendment form or was it just a verbal agreement? If you reached an agreement on the repairs and have it in writing you have the right to take legal action and force the seller to honor the contract. A simple letter from your attorney is usually enough to push the seller to honor their agreement. If the deal is good enough I would pursue it. If it is just a mediocre deal and nothing fabulous I would just walk. Get your EM back and try to get your inspection costs refunded. There is always another deal around the corner.

I would consult an attorney, but I would be highly surprised if the HOA could legally enforce the requirement of labor from the owners. I could see a discount in dues if you did work, but can't see them requiring you to work.

Brandon,

Have you thought about just starting your search now and when you find that "perfect" home, make the offer contingent on you selling your current home? That way you don't have to try and do anything creative. With Nashville's market as hot as it is right now you should have no problems selling it fast. I'm a Realtor in Nashville so if you have any questions regarding any of this don't hesitate to ask.

Welcome to BP!