All Forum Posts by: Todd Willhoite

I am purchasing a rental property in my own name in order to get conventional financing. I have an LLC with rental property in it. It would be easier to keep track of expenses and in renting the property to tenants to use the systems, forms, and bank accounts of the LLC. If I in my individual capacity contract with the LLC to manage my rental house, are there adverse tax consequences? (I am thinking it might turn passive income into active income, etc.)

In Oklahoma you need to talk to the zoning authorities.  If inside a city, then talk to city zoning and check with city hall about city ordinances.  If outside city then talk to county zoning commission.

If it is in Oklahoma City, you might start with https://www.okc.gov/departments/development-services/subdivision-zoning

Thank you Brendan. 

I have a lead, but I am going through my options and I am not sure if there is a potential deal here. This will be my third deal, so I am not very experienced and would like to hear from you. Please let me know if my thinking is correct or if you can suggest other options.

Property: A- neighborhood, with good schools, approx 1500 sq ft, built 2012, 3 bed/2 bath/2 car garage. Last 5 houses that have sold in the last two months: 2 sold mid 160k, 3 sold mid to low 150k, lowest sale 150k, highest 166k, one is on the mls right now for 159k. This is a cookie cutter neighborhood where all the houses are very similar and all by same builder. Estimated repairs $5,000.00, mortgage on house $126,000. Neighborhood rent $1,300 to $1,500. Probably will rent $1,400 after repairs. Prop taxes last year $2,100, HOA $360 for last year.

Flip option:

If I sell for $150,000

-$9,000 (6% commission)

-$4,500 (estimated 3% closing costs)

-$5,000 repairs

$131,500                                   Holding costs

                                       5% interest on $126,000 = $6,300 /yr = $525/mo

                                       Property Tax 2100/12=$175/mo

HOA 360/12=$30/mo

                                        Insurance $1,000 estimated/12 = $83/mo

                                         Utilities $200/mo

                                         Total $1013/mo

-$4052 (4 months of holding costs)

$127,448 Net sales proceeds

If paid what is owed on Mortgage ($126,000) then not really any profit for me, and no margin of safety.

On the above numbers I don’t see positive cash flow on a buy and hold strategy after considering insurance, property management, vacancy, capital expenditures and repairs. So buying subject to the existing mortgage (approx $650/mo) I am not sure will work.

I would think any appraisal would come in at more than the amount owed on the property, so I don’t think a short sale is possible.

Are there any other options I haven’t thought of? Am I making mistakes in my evaluation? Thank you.

I have heard, but I don't have first hand knowledge, that some banks insist on language that the property cannot be resold within 90 days of closing for more than 120% of the sale price.

I arrived at the home of a potential seller to review their house and negotiate a deal. We had agreed over the phone to a specified time the day before, at which time I promptly arrived. Leaving my vehicle I set the alarm which slightly honks the horn, which I thought would alert the homeowner that I was there. A four foot high chain link fence blocked the way to the front door. Next to the gate on the fence hung a faded sign that said “Beware of Dog”. I noticed the front door, about ten feet away was open. Having read the sign, I was unsure about proceeding to the door, so I yelled “Hello!” toward the open door. No reply. I yelled “Hello!” again. Nothing. After the third time yelling I started to think. The dog sign had faded and was old enough that maybe the dog had passed away long ago. Maybe if there was a dog, it was small. Maybe the sign was there just to scare off thieves. Surely they put the dog up knowing I was coming over and they left the front door open anticipating my arrival. I decided to go up to the front door, so I opened the latch on the gate and pushed to open it. The gate didn’t move because a metal rod was pushed down through the gate into the ground. Now I started to think, should I pull up the rod and go in? A few moments later, three pit bull dogs rushed out of the house and hurled themselves against the fence. As I stood at the gate, a solid white pit bull with what appeared to be a smile on his face repeatedly tried to jump the gate and bite at my face. All the barking and growling got the attention of the homeowner who came out and arranged for me to see the property. I am so thankful I didn’t pull up the rod and walk into the yard. You never know what adventures you will find when investing in real estate.

I am rather tight, I mean frugal, but the $2,000 plus flight plus hotel to the Seattle boot camp last summer was well worth it.  They provided education beginning early morning, through meals, and into the evening if you wanted to participate.  I highly recommend it. 

A mentor is a great idea.  In addition you may want to read J Scott's book "The Book on Flipping Houses" which is sold on BP.  

A great resource for MHP due diligence is the book by Frank Rolfe and Dave Reynolds 30 Days of Successful Due Diligence on Mobile Home Parks

Welcome Tim. I wish I had started when I was your age. I bought my first SFR last year and I am closing on a SFR in Owasso. Listen to the podcasts they have a great amount of information and Brandon Turner's books are real helpful.