Hi Everyone! I'm Bobby Cooksey posting from Honolulu, Hawaii.
I'm new to the Real Estate world. I've been around it by working in the lending industry for 8 years as a loan processor. Also worked in Escrow and Title as an assistant. For the last 9 years I've been in the Financial Services industry as a business processor. Real Estate is where I want to be, so I've been learning a lot from the BP podcasts and the forums. Practicing my analyzing deals, and telling friends and family what I'm learning.
In sharing this with my uncle in San Antonio, TX, he told me that one of his customers just inherited his mom's home in SA but does not want to own the property and wants to sell it. My Uncle told me his customer is thinking of selling for $130K. The 4bd 2ba with swimming pool, per the tax assessed value is at $180K. Needs about $25-30K in rehab work. Right now, I'm looking at this as a flip. I'm still trying to get info to analyze this, but how do I start? I may partner with my Dad who has a HELOC to get the 20% down (I have $10K and my Dad can come sin with the rest). Is it okay to do this as a DBA just to start or do we set up an LLC? Any advise on my specific question, and anything else would be appreciated. Thanks.
My first suggestion is to find out the fair market value of the home before you take that 130k Price tag. Maybe get a desk appraisal done on the property. if it is worth only 180-200k the numbers may not work 130k + 30k rehab + closing Costs+ Holding Costs
You don't want to spend more than 70% of the ARV (Including rehab costs)
Welcome to BiggerPockets! I invest and live in San Antonio currently. I started 6 months ago and I am about to close on my first rental property. I can attribute a lot of the knowledge and confidence I've gained since then to the forums, podcasts, and members on BiggerPockets. I hope you can get the same if not more use out of it!
As for the property you are looking at, I'd definitely get a CMA for comps in that area if you want to flip it. The assessed values of properties that are on the Bexar County Appraisal District don't usually reflect what properties are actually selling for based on what I've noticed. But if the ARV is $180K, I would also consider holding it and using the BRRRR strategy.
B- Buy with short term loan (ie. hard money/private lender).
R - rehab to increase the ARV.
R- rent the property out to good tenants.
R - refinance up to 80% of ARV into a conventional mortgage (pay back initial lender and get all your cash invested out).
R - Repeat the process now that you have little to no cash invested
This way you would minimize the amount of cash you have to invest and could even avoid using the HELOC if you can purchase it low enough. They key here is the refinance, you have to be sure that the property will appraise at the value you need it to appraise at. This would give you a cash flowing and appreciating asset with no cash invested. Just a suggestion. Good luck!
Welcome to the group Bobby! A few things going on here I'll try to address.
First the LLC Vs. DBA. A DBA is primarily used to simply establish a business license and or bank account. It will not provide or create separation between you and your new business from a legal (protection) perspective. An LLC is used to separate and protect your personal assets from your business. For example, something terrible happens on this flip your considering and you are found negligent / liable… An LLC will provide for a cushion and offer some protection and in most cases, it will protect your personal assets (Not Always). You can also consider purchasing additional insurance coverage (business and/or commercial) depending on the specifics of your deal.
As for the value of the property, Do Not use the tax assessment as your litmus for determining if the deal is a "good one or not". Hire an independent appraiser to help you figure this out.
But lets assume for a minute that the tax assessment is fairly accurate and the property is worth about 180K. Will the 25-30 K you plan on spending drive appreciation and add more value, or simply bring the house up to livable standards and a value of 180K?
Next, considering this is your first deal, you WILL go over your budget, it's nearly guaranteed. That said, your margins are already very slim after taking realtor fee's, holding fee's, overages and capital gains taxes.
Based off the limited info, I'd say this is not the best deal for a first timer to try. Best of luck in whatever your choose to do!
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Wishing you the best!
I would suggest setting up the entity first and determine the % of equity each person gets and lay out the individual responsibilities. I am in business with family and we set up the corporation first.
Thanks everyone for the good info and suggestions. I've taken notes on your suggestions and will keep them in mind as I move forward with this possible deal, or others. Thanks again!
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