All Forum Posts by: Bill B.

1) Too bad you’re not married…$50k incentive to get married  :-)

Anyway.

2) Sell every time you think about it. Save $50k in taxes and then double your cashflow with a government guaranteed bank CD. 
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Yes, you can still reinvest in real estate but you don’t have to.  Not to beat your current returns.  And that’s before you pay the $50k penalty for keeping it. Heck, if you’ve lived in your new home 2 years turn it in to a rental and buy a new primwry with all your new cash. If not, put the cash in the bank until you hit 2 years and repeat. Well done. 

I assume this deal has been shown/advertised to existing experienced MHP owners in your area and they don’t want the deal. Even with their experience and systems already in place. You need to pay 10% less than the people who are “good at it already”.  If the seller is stuck on their price. Take your price plus a reasonable market interest rate and figure out the payment. Then figure out what terms it would take to make their price the same payment. 

You’re afraid of losing money month to month. Imagine having to pay someone 5-10% commissions to find a buyer at 10-20% less than you paid. That’s how you lose real money. Especially if you don’t have the money to bring to the table, so you can’t sell. 

99% of the time an owner occupant is going to pay you a higher amount than an investor/landlord, so it probably won’t come up. 

I never even considered it until I did my first one in January. Let me tell you why.

They put down 25% ($150k)

There’s a 5 year balloon. (The shortest allowed under Dodd-Frank for owner-occ)

They’re paying 7% (Barely a consideration. But I was going to put the money in the bank anyway as I didn’t need it.)

They are paying for professional loan servicing 

And most importantly. They offered $10k over asking, zero repairs, zero appraisal, AND, they were my only offer in 45 days. 

Even with what I hope will be a positive and risk free experience, it will only be a complete lack of other offers that would ever make me consider it again. If you have other offers go that way. Otherwise get at least 20-25% down as you still owe all closings costs (likely 8-10%) so 10-15% down won’t cut it. 

It may also depend if they are paid per hour or per job. I can tell you first hand that the people building new houses in my sub-division are here 7 days a week. And if you start talking about roofers the nails guns start darn close to 7am and run until sunset. Certainly it’s not the same guys working all those hours. But work’s getting done. 

But I think the biggest companies and the smallest companies run different shifts than a solid “get the job done middle of the road sized contractor”. Honestly, If you like the timeline it doesn’t matter if they work 1 or 7 days a week. Just get a timeline before they start. If it’s 3 months or 12 weeks. Get a 3 week, 6 week, 9 week “goal”/were on track estimate from the contractor. If they want to get paid more often get those goals written down at that interval and pay when that works completed. Don’t get too far ahead!

The time and cost estimate accuracy is way more important to me than the work schedule. The only way I’ll know they’re way behind before it’s too late is if they told me where they’d be at that time. 

I assume you talked to previous customers and looked at their work. 

The Vegas version I looked in to a decade ago took a 50% Managment and doubled the monthly HOA fee if you spent more than 2 weeks there. (Or it wasn't available for them to rent out for more than 2 weeks in any given year.) They basically wanted to rent out hotel rooms you paid for. (The platinum off the strip next to Ellis island.)

Ps. I looked it up to see if anything changed. The HOA fees are $720-$1,700 and it's "only" an extra $750/mo fee, not necessarily double, if you live there. And you can do that for 60 days per year now. I couldn't find a definitive management fee.

It’s like a condo at MGM except you can never convert it to a primary residence. So you lose 80% of your buyers. That does help keep the price down, a little, but that’s because it keeps the appreciation down. 

What’s your current living situation? (Rent/own/monthly payment?)

The easiest way to make close to a $2k/mo difference in your life is to cut expenses $1,500 ($2k after taxes) by finding something you can buy for anywhere near your rent. And then (or step 1 if you already own.) find a friend/relative/co-worker, or two you like to rent a room from you. 2 people paying $750/mo each is pretty close to your goal in one step.

If you rent or the thing you own is too small to do that get your friend to help you fix up a “dump” you can get cheap but feel comfortable living in day 1. (Cosmetic dump not safety/mechanical dump.)

Before it had a name the first place I bought cost me about $1,500/mo and I had 3 work friends pay me $750/mo each. I was moving out of my parents place and had never paid rent. I didn’t like the idea of it, so I came up with that plan instead. While I was only making $750/mo, not $2,000. I wasn’t paying any rent. You can do this. It’s not hard, it’s just feels glacially slow. 

As a side benefit I dated and eventually married my neighbor’s HS friend. (Even though neither knew until she pulled up my house one day…) :-)

100% what @Luca Papa said. 

Find some co-workers, friends, relatives, people you like to rent rooms from you. Rent any extra rooms through STR if you're brave/pushing for max return.

My first home was with 3 friends paying me more rent than the mortgage payment. It was fun, free, and a great way to learn. 

You want to pay as much as possible as his gain will be tax free while your gain will be taxed. Plus you’ll have a higher basis to depreciate. 

Assuming you are an only child I would ask him how much cash he wants. Then I would adjust the rent and finance terms to provide him with the amount of cash flow he desires. (Ex: 26 year loan at 7% on $300k, payment is $2090, rent is $1,900. He sends you $1,900 you send him $2090. He will owe taxes on the interest at year end. So make sure he’s got enough coming in to cover that.)

Don’t forget your property taxes will probably go up, and he should have renter’s insurance.

More difficult if you have siblings to make sure everything “stays fair.”

It doesn’t matter if you sell it for more or less than your purchase price as you’ve adjusted your cost basis with the depreciation. If it’s providing a bad return let it go. You’ll still owe depreciation recapture even if you avoid capital gains tax. 

Simply switch realtors. I wouldn’t work with a realtor I didn’t like, much less one that couldn’t understand my concerns. Good luck.