All Forum Posts by: Tom Squire

Hi All,

My real estate agent came to me with a pocket listing from another agent. The owner is asking 210 for a 3bed 1 bath SFH (about 890 sf) in a pretty good location. The seller is asking for an offer before they'll show the property as the tenants still have no idea that the house is for sale. Finding a house in this price range is very rare for my area (Bend, OR) as the low end of the market is very hot right now for first time home buyers.

It needs some cosmetic* work (new roof, floors, interior and exterior paint) and I'd estimate the ARV at about 250k on a good day. Some of the comps in that neighborhood were going for the high 230s last summer.

I am debating making the offer, with an option for wholesale built in (right to assign the contract, liberal due diligence period, 60 day escrow).  If I am able to find someone to buy the property and make 5-10k in profit, I would be totally happy.  

The other option would be to buy it, renovate it, and live in it as a somewhat short term (2ish years) situation before finding a new place and renting it out.  

Would love to hear y'all's thoughts on this potential deal particularly on the wholesale route.

@Dan Bryskin I agree that he thinks he can get more and that is probably his approach. I know he is using this property for a reverse 1031 exchange and the clock is ticking for him to close this deal. What points can I make in terms of convincing him the property is not financeable?

Bigger Pockets Community, 

I'm feeling a bit disheartened at the moment. I had a great duplex under contract with a 60 day escrow to allow for the 203k loan to have enough time to process. I was going to do the BRRR strategy and live in one half. Great location, great price (after it appraised for less than what we offered). We got the seller to agree to a purchase price (lower than the original offer due to the appraisal) and had an addendum signed. But we could not get the loan to come through in time from the original offer and escrow expired. The seller did not want to sign another addendum to extend the escrow by less than a week.

What can I do to salvage the deal?

Hey BP! I am currently in the process of buying a duplex to renovate (cosmetically) and live in one side.  Right now my GF and I are sharing a rental house with her cousin and his GF. We are planning to offer them to rent the other half of the duplex, but we know they wouldn't be able to afford it on their own. We're willing to let them rent out the other room in the house to a friend or someone from craigslist to offset the cost.  

If we go down this path, what is the best way to structure the lease arrangement for the that half of the duplex?  Should we have 2 leases, one for each room and have the shared common space?

What else should I be considering with this arrangement?

There are some psychological studies that show that if you do a small favor for someone initially (cant remember the specifics of the study if it was prompted or unprompted), they are more likely to do a larger favor when you ask a return favor. 

Tried this in real life once and it worked pretty well.  I knew I was going to have a pretty significant car repair bill to rebuild the front end (suspension and steering components). The mechanic spent time helping me figure out what I needed and he even let me buy the parts online to save some money.  When my jeep was done, I brought him a 12 pack of beer as a thank you for the guidance and support.  It came time to pay the bill and with a little negotiation, I was able to get the hourly rate down $10 an hour and he took an hour of labor off the bill.  Ended up saving me over $500. That 12 pack of beer was definitely a good investment. 

Great idea to take the bigger unit and convert it to a 3 BR! I had not thought of that.  The unit sizes are 1580 and 1200 respectively so its totally possible.  For now we are going to live in the bigger unit for a variety of reasons, but down the road, I could see it being pretty easy to turn the second living room into a 3rd bedroom and increase the cash flow. 

Good to know about the cast iron doing ok. Any thoughts on the galvanized steel water pipes @Matthew Ortins?

@Patti Robertson yes they are separately metered!

Hello BiggerPockets!

I've got a duplex under contract and will be using a streamline FHA 203k loan to bundle a renovation budget of around 29.2k (the limit for Streamline once fees & contingency buffer are included) in with loan. I'll be living in one side and renting out the other. One side is a 2bd/2bath the other is a 2bd 1 bath totaling just shy of 3000 sf.

Kind of a BRRR(without the refinance)/House Hacking combo.

Had the inspection earlier this week and a couple contractors come out for a walkthrough to place a bid.  Its easy to get excited about the counter tops, floors, fixtures, paint, appliances etc. 

One of the things that concerned me on the inspection report is that there is galvanized water pipes and cast iron drain pipes (replaced with PVC once above ground).  I've heard these are costly repairs and are a good thing to do. 

To my knowledge everything works fine, but I'm curious on the importance of replacing these and when it should happen? The house was built in 1959 so it seems like its about to start showing its age.  Luckly the roof was replaced last year (although there are some pretty nasty ice dams from recent storms).

Would love to hear your advice! Happy to share about the 203k process if anyone is interested as well. 

 Thanks for the reply, good to know Fidelity doesn't service real estate in IRAs.  

If I were to take the funds from the IRA and put them in the Roth IRA, I would have to pay the 10% early deduction, then I would have to pay income tax on the 'earnings' from the transfer. Does this make sense at my age to pay the double tax on the money or should I leave the money where it is?

Secondly, where is the best place to keep a future real estate investment? Sheltered in a IRA or Roth IRA, or just in my own name. I would eventually like to have the properties cash flow to sustain a passive income. (I think I may have answered my own question here, keeping it out of my retirement accounts to keep the income useable for reinvestment/passive income).

Hello BP!

Fairly new to real estate investing, just bought a condo this past year with my girlfriend (and not looking forward to doing my taxes) and am currently in the "save money for additional investment while I learn as much as I can" phase.

My question is this: I have 3 investment accounts with Fidelity: a standard investment account, a self directed IRA (from an old employer), a Roth IRA (all with roughly equal amounts). I haven't contributed anything to my Roth IRA or my self directed IRA for the 2015 tax year, aside from my employer IRA which I cannot access right now. I've heard its good to max out the Roth IRA contributions while I'm still young (26).

I have enough to max out the contribution for the year if i were to transfer from my regular IRA. I know I'll have to pay the income tax on it now, but is that a wise investment? I also have enough in savings to max out my roth IRA but that would be pretty limiting in terms of liquid capital.

Lastly, if I do make the contribution to my Fidelity Roth IRA, can I use that to invest in Real Estate?

Should I make a small contribution of cash to my Roth IRA before the end of the tax year? Should I continue to save my cash to eventually invest in additional property?

Thanks in advance for the advice!

I just bought a condo in california (that is my current residence) and this is the process we went through. I doubt it would be much different for a duplex (someone correct me if I'm wrong here). 

So from one novice investor to another here was our process (using an agent).

1. Pre-approval with lender
2. Made offer w/contract outlining terms of who pays what fees
3. Offer accepted
4. put down 1% deposit
5. Paid for home inspection
6. negotiated about what they were going to fix
7. Paid for appraisal (the lender is going to require this) also your offer is protected if the appraisal comes in lower.
8. Deposited rest of the funds in the escrow account
9. signed the papers
10. got the keys

There are a bunch of fees (title transfer, title insurance, clerk processing fees etc that can be negotiated as to who pays what in the initial offer) and the lender should be able to also give you a pretty close estimate on all the fees associated with the loan they will be giving you. 

Best of luck!