All Forum Posts by: Brian Ballard

Welcome to Bigger Pockets!

Sounds like you are just looking to fix a few and then be done. Possibly talk to a CPA about establishing an LLC for tax breaks on capital gains laws. May cost a few hundred now put would save thousands in taxes... capital gains tax is 23.8% of your profit.

With little initial capital you can look into hard money lenders. 
This site has a section on them.
https://www.biggerpockets.com/hardmoneylenders
Look at the LTV (loan to value) they lend at as you will typically need to come up with 30% of the purchase price yourself and then pay them interest and points.

Are you looking to mostly work in the lower valley?

I'm all over Maricopa county so if you have any questions feel free to reach out.

Most of them are pretty honest and you have to trust them unless you have access to an MLS. There are 5000 agents registered in my city.... if one is shady or lazy just never use it again, plenty more.

Every management company I've talked to or worked with has checked anywhere from $25-50 each application.

If they can't afford a $35 application fee then they probably won't pass the credit check and normally leads to "I'm sorry, I dont have the rent right now!"

It matters how you structure your take of the contract... Without a licence you are not allowed to collect a "commission" or broker a deal. Terminology is important here, as it is with any legal document... You can collect a " Finders Fee " on a property you have a contract accepted.

Realtors don't like it because you may use one to get all your information but then when you get your investor involved they will typically have a different one they like to use.

It's like lease options in Texas. The state made them illegal but don't call it a lease option and change a few minor details on how the deal is structured and it doesn't violate any laws.

Learn your local laws and use them to your advantage... but the goal here is to not step on anyone's toes. 

Lease options are simply getting the seller or a property to sell the house for an assigned amount and agreeing to that on contract over a certain period of time.
After this, negotiating with the buyer to purchase the home for a higher price while paying the mortgages + some, essentially so you make a profit off of this along with a down payment payable to you upon signing of the contract.
Have seen this mostly with homes that have high days on market and wont sell accompanied with prospective buyers that have a low credit score and cannot qualify for mortgages. This is sometimes referred to as a sandwich lease option, pinching both to improve your income.. negotiating skills important.

If the buyer wants to back out that's not your obligation to follow through with it if your contracts are worded correctly, it falls on the seller. You shouldn't care if they do because you can assign a new buyer to the home and start the process over collecting a down payment again.

Like stated above. flip homes are buy/fix/sell type stuff.

For an ARV at $125k you would need to offer $75k to make 15% on an all cash offer at a full restore approx at $20k. Looked up this house and its too new for any restore... Would need to dig further if it can cash flow in the area as a rental. Looks like a good first home for a new family... but not a investor blowout.

Sorry, did not include this as well. You didn't say what type of real estate you wanted to do.

An LLC should be used as a buy and hold.

An LLC with an "S corp" election should be used for wholesaling and rehabbing homes.
"S corp" election from an LLC is a LOT less paperwork... literally only adds one paper to your normal LLC that get sent to the IRS.

Contact a CPA for specifics and advice. Most states don't require a lawyer for any of this... Just some one with google and an intuitive mind ;)

Best of luck, 

Brian.

I don't know about Oregon but to make one in Arizona it costs about 200 to do everything yourself. I payed $2000 for my first LLC but that was for an entity company to establish everything and send me books with all of the necessary paperwork along with a class on what it was all worth and doing. The problem is there is no standard for any of this... Doing it yourself the first time you run the risk of having this LLC preventing any of the protection really being enacted. You use them to cover you on liability risks as well as tax benefits so having the right papers and people in place plays an important role. For your first it could be worth it to pay a little more if they will cover EVERYTHING and go over it with you... so in the cases that you will need more it will be an understood method and won't be such a pricey endeavor.

In any manor $5000 is way too much for something that financially costs them almost nothing. Do a little research in your area and I'm sure you can find a much better offer.

For something that long you might be better off with a mortgage.

Most HMLs will only do about 70% loan to value requiring a gap funder for the remaining 30%, you will need to show them comparable homes to prove its worth as well. Be aware of them charging interest AND points.

You can look them up by state here...
moolahlist.com

Bigger pockets even has a section on them...
https://www.biggerpockets.com/hardmoneylenders

I am not a CPA so from my experience...

For wholesaling and flipping... an LLC with "S corp" election ( not an actual S corp). Arizona even allows "Series" LLC's which you can have multiple properties inside of it while keeping them in their own corporate veil under one LLC instead of requiring multiples. Under this if you make passive income with one property in less than 12 months it is taxed as short term capital gains and labeled under ordinary income. Then it is your job through deductions and other means to keep your tax bracket low so this is below the 23.8% that is taxed for capital gains ordinarily. Make sure it is set up properly and documentation is flawless, if the corporate veil isn't there, all that is left is you and your assets.

Find a good CPA that is familiar with these laws and real estate investing. Not all CPA's are familiar with real estate laws so be sure to ask them. There is a lot more to it like the structuring the business (your title), how to take dividends from a 401k through your LLC, acquiring EIN numbers, and maximizing your deductions.

You may also want to contact a lawyer about a trust. If anything ever happens, anything that is deeded over to a trust is protected.