Made my first real estate investment! Have some questions.

Starting Out
12yFollow

Made my first real estate investment! Have some questions.

Trevor M
Dickinson, ND · Member since 2013 · 2 posts · 0 votes

My background.

Work in ND oilfields rotationally, 20 days on 10 days off.

Im 22.

Short term real estate plan is flipping, Long term is saving until I can buy 50+ unit apartment building.

My first deal was a foreclosure 800+ sqft 2/1 on 1 acre. Bought for 17k cash (Actually cash advanced a few k to make it work, On an unrelated note, I would highly recommend SDFCU credit card, If you have a 720+ Experian you can cash advance at 6.99%)

Needs 6-8k in rehab, Ill be rehabbing it myself.

Short term plan is use it as a weekly cabin rental when im working in nd, live in it on days off.. Long term sell to someone from the twin cities, it's located in cabin country, WI. My home area.

I figure I can sell it for about 40k-50k after rehab.

Theres also a possibility of an addition and going 3/1 or 3/2. Its an L shaped place that would be conducive to an easy addition, but im not sure if I actually would make any more money on it.

On to questions. How do you all feel about value rehab? By that I mean using materials that might not be my personal favorites, but the added value to cost ratio would be better. Things like using granite remnants and refininshing recovered hardwood.

This is the first house I have owned, any tax things i should know? I dont suppose I could write off the cash advance interest?

Since I plan on selling it would the rehab cost be a write off?Would I need to form some type of business to take advantage of this?

Any other tips or advice is welcome.

0Reply
31 views

Most Popular Reply

Tom S.
Real Estate Investor · Burlington, VT · Member since 2010 · 2k+ posts · 1k+ votes
12y

@Mitul Patel , @Trevor M

There are many posts here on the pros and cons of LLC's. My personal experience with a number of rental properties and the advice of my attorney was to simply get a good umbrella policy ($500 per year for a $2M policy). He stated there's a lot of extra paperwork, costs, and restrictions with an LLC. In addition, banks generally won't loan to them.

- Tom

1Reply
See this reply in the discussion

6 Replies

Jump to latestLatest
  • Mitul Patel
    Contractor · Fullerton, CA · Member since 2013 · 19 posts · 0 votes
    12y

    You should set up a legal entity if you plan to invest for a long time. Check out your state regulations and expenses on seting up different types of entities and pick which ever suits you better. LLCs are more commonly used for investing.

    0Reply
  • Trevor M
    OP
    Dickinson, ND · Member since 2013 · 2 posts · 0 votes
    12y
    Originally posted by Mitul Patel:
    You should set up a legal entity if you plan to invest for a long time. Check out your state regulations and expenses on seting up different types of entities and pick which ever suits you better. LLCs are more commonly used for investing.

    Ill look into that. Are there any benifits to not going this route?

    0Reply
  • Mitul Patel
    Contractor · Fullerton, CA · Member since 2013 · 19 posts · 0 votes
    12y

    For long term and large scale investments there are no benefits of doing it as sole proprietor (No corporation or entity). Your exposure is very high. I am not expert on this but from what I know you get tax benefits as corporation or legal entity that you do not as Sole Proprietor. And the most important reason to go this route is to protect your personal assets from a legal claim. A renter in one of your investments can sue you and your exposure will be limited to that one corporation under which that particular investment property is vs. putting your cash, and other investments at stake when you are sole proprietor.

    0Reply
  • Tom S.
    Real Estate Investor · Burlington, VT · Member since 2010 · 2k+ posts · 1k+ votes
    12y

    @Mitul Patel , @Trevor M

    There are many posts here on the pros and cons of LLC's. My personal experience with a number of rental properties and the advice of my attorney was to simply get a good umbrella policy ($500 per year for a $2M policy). He stated there's a lot of extra paperwork, costs, and restrictions with an LLC. In addition, banks generally won't loan to them.

    - Tom

    1Reply
  • Mitul Patel
    Contractor · Fullerton, CA · Member since 2013 · 19 posts · 0 votes
    12y

    Hi @Tom S. I agree with you and that is why I said I am not an expert. I was speaking based on my experience setting up my general contracting firm and the advice I received from attorny when I was setting up.

    0Reply
  • Jassem A.
    Investor · PA · Member since 2013 · 1k+ posts · 602 votes
    12y

    I probably wouldn't spend too much on fancy materials since you already had to dip into credit cards. I would be careful using it as a weekly rental unless it's someone you trust because you could be stuck having to take someone to court and not being able to collect rent for a couple months depending on what the laws are there.

    I wouldn't bother with registering an LLC until you have many more properties. Home owners insurance with liability coverage will probably be enough. You can write off the repairs on your schedule E.

    If you can make the property bigger with an addition, you can probably collect a higher rent. The biggest hurdle would be getting the approval from the planning department. If you do it yourself they will make you draw some plans in a format that they specify and then pay for permits. Since you have all those days off it might keep things interesting and would be a learning experience.

    0Reply
Join the conversationCreate a free account to reply, vote on answers and follow this thread.
Log InJoin for Free