All Forum Posts by: Eric Tait

There is also another way to look at this depending upon how skilled you are in using real estate to achieve your investment goals.

In a 401k plan you are locking away your money until you are at least 59 1/2.  You are going to be at the mercy of the stock market and it's vagaries. 

If you know what you are doing in real estate, you can create your own "match".  It is very easy to do in single family home buy and hold.  When you purchase and/or renovate a property below it's market price, you have created equity or "matched" your contribution. 

( If you put 10K down and gain 5K in equity you have a 50% equity "match")

It is a capital gain, just like it would be in the 401K, but you can later access that money through lines of credit, second mortgages, or an outright sale (making it a long term capital gain at worst, or a 1031 exchange at best). 

If you are renovating the property, the deductible costs of renovation will give you a tax deduction (just like your pre-tax contribution).  

What people often seem to not take into account with 401K plans is that the money that you have in there is not really your money.  The easiest way to prove this is to have you try and go and get it all and spend it.  The average person will lose close to 40% of the value right off the bat with ordinary income taxes and penalties.  Also, you may have a vesting schedule with your employer so that the "matched" funds take time to actually be "yours".  So yes, it works as a forced savings vehicle but it does not materially improve your current life situation.  

No one retires early "investing" in a 401K.  

I would call your insurance agent and have them run the property to tell you.

Hey @Jimmy H.

At minimum, you have to be put on title with a contract that spells out that a sale will occur after the rehab. Or create a new entity that you both own that he transfers ownership of the property to; then have the operating agreement state that a sale will be executed upon completion of the rehab.

Good luck!

All of our properties are full except one that we turned 2 weeks ago. It is on the SW side 3/2/2 and I have gotten over 150 inquiries in that 2 weeks for rental. 

So in the rental game I am not seeing a slow down. 

You can also negotiate the rate the companies who protest for you will charge you.

As you can see Jeff got 25% while others are saying 50% of the saved amount.  

O'Connor used to give that 25% to investors, so I would call them and ask.  There are many companies out there that do this, so you can shop around. 

@Ian Briggs

- Be careful with that Ashford Meadows deal. I am pretty sure that is a condo development. You need to really check the % of owner occupied units and the HOA fees and any special assessments that they have or have had recently. Check the financials of the HOA very closely.
These things could definitely hurt your resale value. 

One thing I put in my sale contracts for multi-family is that the due diligence time period does not BEGIN until I have all the documentation that I have requested. 

@Corey Smith

 Houston is very competitive for apartments right now, C class highly performing property is selling between $25-$35K a door.  So that is the upper range of value. 

A good operator who knows that they can bring in management efficiencies will salivate at a property such as this.  So while it is tempting to look at it as strictly a value based on the income, you are right to say that 100K is too low a price. (but if you did decide to list it at that, I would gladly take it off of your hands, today in fact!)

So on the low end you have a value of 500K running well, all rehabbed.  Minus the 150K for rehab and then put into your proforma what the price would be assuming a 10 cap on purchase by an investor while assuming current sub-market rents (your future rent values seem a little high for that type of property) and current sub-market occupancy. 

I think that would give you a more realistic starting negotiation price, and as the buyer went through due diligence the price may come down based upon what is found.

I know this is very general, if you want a deeper analysis, just contact me off line.

Yes, it is time limited, and you can always suggest changes to the document if you have areas of concern.  

I try and make it a habit to have all of my prospective investors sign one.  More so because it shows me whether or not they are going to possibly be a pain in my *** as an investor.  If they balk at signing this simple document, what is going to happen when they have to sign a bunch of my PPM documents?

Some of our Projects have non-public information that is proprietary to the Project, other times we do not want people physically snooping around our Projects before we have closed.

So, I personally sign them all of the time, and send them most of the time.