All Forum Posts by: Aaron H.

Cross country doesn't matter, you can do the same things I listed in any market.

Will be tough from most banks. Your best bet would be a local portfolio lender/community bank, but there's nothing you can do but ask all of them until you get to a Yes. You may be able to help your case if you have a way of cross-collateralizing the loan with something other than cash (equity in a primary residence, other properties, etc).

Otherwise, you could look for private money or a hard money lender - but you'll obviously pay a lot higher rates.

1) Ask a local real estate agent with access to the MLS to do a search for recent cash sales in the neighborhood. People that have done cash purchases before (especially multiple in one area) are more likely to be investors.

2) Attend your local REIA meetup and network

3) Buy a BP Pro membership and post it in the Marketplace

4) Click "Store" at the top and buy the new book on raising private capital, lots of other ideas in there.

It's less precise than exactly calculating out the lifespan and cost on every major system for your exact zip code and specific property, but it's also more precise than using a round 5% of gross rents (or whatever). There's always going to be a tradeoff between precision and convenience. Like Alvin said, there's a point of diminishing returns with trying to calculate all of it out, and actual cap ex expenditures happen based on real life, not your estimate, so it's mostly down to how much precision you need to feel comfortable. For me, I'm just trying to get a sense of whether I'm looking at $100/m because everything is brand new, or $500/m because everything is falling apart. The difference between $100 and $110 is irrelevant.

The reason the approach works reasonably well is because CapEx on a 100K house and a 500K house ARE actually pretty similar. A roof on a 1500sqft house is going to cost basically the same - the roof doesn't care whether the interior has granite countertops. The difference between the cost of 1 story and 2 stories is a small percentage of the total cost, especially averaged out over 30 years, so isn't really worth overanalyzing. A water heater is going to cost the same in both houses. Sure, your cap ex expenses will differ somewhat based on the price of the house, but think about it this way: in your example, the 500K house is 5x more expensive than the 100K house. But there's no way the Cap Ex is 5x more expensive. And if it's 1.2x more expensive, that's not really an important enough difference to worry about.

I wouldn't necessarily suggest using Brandon's exact numbers or using the same numbers in every state. But once you have a ballpark (e.g., a typical roof in WA state is $5000 or whatever you find out), you can use that number for each major area you invest in. But I'd also guess the price difference for a water heater is pretty similar in most markets. Do enough research to have a reasonable average ballpark on the major systems, make your best guess about where you're at in the replacement cycle, and call it good. This just gives you a way to say "this roof has 5 years left, not 30 years" and know that it will increase your cap ex estimate by approximately $X/m

If you're intending to rent it, insure it as a rental property. If you have to make a claim, you don't want the insurance company using that as an excuse to deny coverage. Plus rental policies will be more likely to cover things like damage from tenants.

@Scott Garber "Ratio Utility Billing System" - it's one mechanism for sub-metering your utilities and passing the costs on to tenants.

With 1 week your options are going to be limited to private money or hard money. If you don't already have private money contacts, your best bet is finding a hard money lender.

Most lenders care about what you report on your taxes. If you have a tax return that shows the vacation rental income, they can count it. Many commercial lenders will still be able to take a look at a deal and count rental income even if you haven't reported it yet. But there's no hard and fast rule - it will differ dramatically from lender to lender.

Not a CPA, but if it's been your primary residence for at least 2 of the last 5 years, you're not taxed on capital gains up to 250K (if you're single, higher if you're married).

Either way, if you do owe capital gains on it, you're taxed on capital gains when you file taxes for the year in which the capital gains occur. So if you sell today (Oct. 2018), you'll pay the taxes when you file your 2018 taxes (presumably before April 2019). Many people choose to send the IRS a check when the sale occurs to avoid getting hit with a big tax bill 6 months down the line. You may also incur late fees if you didn't make estimated tax payments on a quarterly basis and end up with a bunch of gains at the end of the year.

Brandon's book on Rental Property Investing (in the BP store) has an awesome quick chart to help estimate Cap Ex (it's in Chapter 5). I think he said he stole it from Ben Leybovich or somebody else that knows what they're doing.

For each big cap ex item, you know either the average life span or a shorter number of years if e.g. you know the roof is going to have to be done in the next 2 years. If you don't know, use the average. You also know the replacement cost for each item. So if you know a roof costs e.g. $5000 and lasts 20 years, then you need to save $250/year, or ~20/month for the roof. Just make a small spreadsheet with the average lifespan and replacement cost for each big item, adjust a few year values when you're analyzing a property where you have additional info, and you have a pretty good estimate.

Or just call it 5% of gross rents and move on with life :)