All Forum Posts by: Andrew Herrig

Hello all, I have been lurking around here for several months and have made a post or two, but figured it was time to introduce myself. I have been learning a lot from the forum, blog, and the amazing new podcast.

I recently purchased an REO duplex where one side is already tenant-occupied and the other needs quite a bit of work. I am definitely learning how to build my team of contractors/realtor/etc, and getting my feet wet in landlording.

I currently hold a full-time job, but would really like to transition out of the corporate world in the next 5 years or so. I am hoping to make my next purchase a rehab so I can try the fix and flip side of the business. I am very interested in specializing in the older, historic homes in different pockets of Dallas, but I feel like I need to get experience in some lower value homes first before jumping in. I'm currently researching my financing options for flips. I hope to eventually establish a modest pipeline of rehabs and use some of the profits to buy rental properties for long term cashflow.

I would love to hear from the contingent of DFW members out there, hear your stories and what strategies have (and have not) worked for you!

My wife and I recently purchased a duplex as a rental property investment. My question is, do both my wife and I have to sign the lease as landlords or can it just be one of us? This is in Texas, which is a community property state.

Thanks all for the advice. Sounds like at this point it would be meaningless to set up an LLC. I still plan to when I acquire enough properties that I can't get personal loans on them anymore, but that will take some time. At that point I would definitely like to bring an accountant in, but I'm hoping with one property I can manage myself for now.

Steven Hamilton II, I am still researching how owning a rental property affects my taxes. For example, it is a duplex and one side needs some work so I know there are some things I can deduct as repairs and others I will have to depreciate over time, correct? Also what kinds of deductions can I take for time spent managing the property or driving to and from the property? As Jennifer Lee mentioned, I know there are differences between a "real estate professional" and otherwise for tax purposes.

George Paiva, I am definitely planning to set up a separate account, though I don't believe escrowing security deposits is required in Texas. I'd like to find a local bank to establish a relationship with that will eventually be able to grant me commercial or portfolio loans.

I know the issue of LLC's has been beaten to death around here, but I am having trouble finding the answers to some of my concerns. I am about to purchase my first rental property in my own name which I plan to manage myself. I know the prevailing wisdom is that you should hold the property in an LLC, but then you have to get commercial financing, and I hear that transferring into an LLC later is a risky process. So for now, I plan to hold the property in my name.

My question is, should I still set up an LLC to manage the property? I like the idea of having a separate entity with its own bank account set up to handle all real estate related tasks, but am unsure of the ramifications of doing this. If I own the property in my name, but manage it through an LLC, how are taxes and deductions handled? Is all cash flow from the property then considered as the LLC's profit and loss?

I recently discovered that I can take out a "loan" from my 401k at my day job at the Prime rate (currently around 3.25%). This seems like a good way to get access to some cash to put 20-25% down along with a conventional loan on a property.

My question is, how do I do a financial analysis on potential deals when using essentially two loans of differing terms? The conventional mortgage would be 30 years at, say, 4.5%, and the 401k loan has a maximum term of 5 years at 3.25%. I generally look at cash on cash returns to compare deals. Is this a situation that IRR (internal rate of return) is better at handling than ROI?

Just as a follow-up, the seller accepted another offer before I submitted mine. I'm sure I will be back on here asking about my next possible deal!

Annual taxes are $3250. One unit was recently vacated, the other is about to be. Both had long term tenants, one was there for six years, so low vacancy up until now. For my calculations I assumed 8% vacancy. I am not sure about insurance or maintenance - I assumed 1% of purchase price and 10% of rents respectively.

I will be managing myself and hope to use this as a learning experience before moving on to other investment properties.

Hi all, I am getting close to putting in an offer on my first investment deal. Was hoping for some outside opinions of what I am getting into.

The property in question is a duplex, 2/2 and 3/2, ~1350 sq ft each. Rental comps seem to be around $950 for the 2/2 and $1050 for the 3/2. The property is in good shape, just needs paint and maybe minor updating in the kitchen (refacing cabinets).

It is listed for $160k but I am hoping to get it for $150k or less. Assuming $150k and $5k in improvements I get a cash flow of ~$450 per month. Would be financing around 4.25% with 25% down.

Gross rents = $2000
NOI = $1000
Debt service = $553

Anything I should be watching out for? Any red flags?

Thanks,
Andrew

It was built in 1982. The HOA covers all exterior maintenance so I assumed I would save a little there. Can you explain how you came up with the $1879 profit?

Hello all, I am just starting to get into the real estate game and am looking to buy my first property hopefully by the end of the year to buy and hold. I have been analyzing a ton of properties to get a feel for the numbers in my area.

Here is one I am currently considering. It has been on the MLS for a long time and was recently reduced. The numbers don't seem to be too bad, but there has to be something wrong with it for it to be sitting so long. Maybe someone can help me out?

Here are the facts...

3 units are 1-1, 4 units are 2-2, rents are $500-$540 on the 1-1's and $700-$740 on the 2-2's, with one vacancy currently.

Purchase Price = $195,000
Downpayment = 25%
Closing costs = 2.5%
Loan = 20 years at 6% (is this typical for a commercial loan)

Assuming rents on the low end of the range, that is $4300/mo gross rents. To calculate expenses I estimated the following:

8% vacancy
2.7% taxes (of purchase price)
1% insurance (of purchase price)
10% maintenance (of gross rents)
10% management (of effective rents)
$1024 HOA dues

I end up with a gross income of $51,600, vacancy loss of $4128, and operating expenses of $29,410 for a net operating income of $18,062 and pre-tax cash flow of $5489. While this is not an outstanding return it seems decent, so I am at a loss as to why this property has been listed for months now. Help me analyze this deal!