All Forum Posts by: Ty Moore

 Thanks for your post Ben. Would you please elaborate?

 Thanks for your input AJ. It's good to know the limitations on refinancing. It sounds like what you're saying is that I might not be able to get an appraisal and refinance for 6 months after purchase, is that correct? And then after we do that refinance, you can't do that again for another couple of years?

The reason that I'm looking at negative cashflow is just because of the mortgage amount to get our full amount out of it. If we buy it for $161,000 cash, put $20k into it and then refinance at a valuation of around, say $250k, we could pull out 75% of the ARV and get $187,000, which would put us just slightly over what we put into it. But with a 30 year mortgage of $187,000 at 7.5%, plus insurance and Cap Ex, that will put us above our $1,700/month rent. Does that make sense?

 I'm so grateful for guys like you that are way smarter than me with this information! I didn't know that was an option. But really, the timing isn't as much the issue as it is the negative cashflow if we were to refinance and pull out the amount that we have in the house. But it's really helpful to know that on deals in the future! 

If I understand correctly, what you're saying is that if I buy a house cash, I can take the purchase price plus expenses on renovation and use that to get financing more quickly? I also didn't realize that you typically have to wait 6 months after purchasing a BRRRR before you can get a new appraisal/refinance!

Thanks again!

This is definitely worth considering. Thank you for taking the time to answer this. I just don't know what I don't know. Even penciling out the numbers is risky for me because I don't know what all I should be accounting for. I have been using software (deal check) that fills in a lot of the unknown/common information for me and that's where I get the negative cashflow. I want to make sure I'm pricing things conservatively enough that I don't get hosed. But It's good to keep in mind that I might be able to find a way to make it work as a BRRRR and still have capital to start another rental.

Thanks again!

 Great point! I also hadn't considered the fact that if I were to flip the house and get the $ back, I would most likely do that again this year which would definitely put me up into a different bracket. Thanks for your advice!

 I'll have to look back into the tax bracket information but my understanding was that in 2024 as long as my income is below ~$89,000, I would pay $0 in long term Capital Gains. Maybe I'm incorrect about that. My wife and I might bring in close to $60k but the flip will be split with another buyer so if we make $40k it'll be split. That said, I may do a couple more flips this year anyway which would definitely put me over!

 Thanks a lot for your thoughts! It's good to remember all the hassles that come with big decisions like these. 

As for the 1031 exchange, I think you have to own the property for 2 years before you can do that. Am I correct in that or no?

Thomas, it sounds to me like you own one rental in Indiana that has no mortgage and you own another that you're hoping to flip to appraise around the same $175k as the other one that you own free and clear. Is that correct?

If so, couldn't you refinance the house you own outright in Indiana to pull that $ out and use that on your flip? Is the first house already rented? You would lose a lot of cashflow but it would give you capital to get the second rental fixed up. Then you could refinance the second house and have capital to purchase another house and continue growing. It's called the BRRRR method. Buy, Renovate, Rent, Refinance, Repeat.

Sorry if I misunderstood the question. 

I am planning to purchase a foreclosure this week for $161,000 and put $20,000 into it with the hopes of it appraising around $250,000. My original plan was to flip the property and sell it for a quick $40,000 or so. The main reason for this is because the BRRRR strategy will put me in the red on Cash flow by about $200/month with the mortgage to pull all my $ out.

Looking into the taxes on a fix/flip it looks like (based on my tax bracket) that I will pay 12% ($4,800) in short term capital gains tax if I sell it before one year of ownership. However, if I were to keep it for a year (and rent it out), I would actually pay $0 in long-term capital gains tax. 

If I'm correct about all of that, by holding the house for a year, it would save me $400 per month. So even if I'm in the red on cashflow by $200/month, it still makes more sense to hold it with the negative cashflow to save the $ on short term capital gains tax. 

AM I LOOKING AT THIS CORRECTLY?!?!

 I'm not exactly sure what you mean by "no title seasoning". 

My hope was that we could renovate and then get it refinanced after getting a new appraisal on it with everything looking better. Honestly, being a foreclosure it would probably appraise for more than we're buying it for without the updates but want to get our money's worth. 

But then after new paint, floors, some drywall repairs, etc., we would refinance and hope to pull our money back out to do it again. But the mortgage payment will probably put us in the red on the cash flow.