All Forum Posts by: Christopher Brainard

@Oliver Martin

I would sell the property, while you're still in the tax exemption period for owner occupancy. Property values in Las Vegas has significantly rebounded since the crash and I doubt you're going to continue to see 30%+ appreciation in the coming years - I'm expecting a more modest 5%. You would need an appreciation rate which will outpace your tax exclusion in order to make more money from holding it, which I think is doubtful. Additionally, that same equity could be used to purchase rental properties which would have a much better Gross Rent Multiplier than what you currently have.

-Christopher

@Jerome Harrod II

As others have stated, E&O insurance is a big reason for brokers to not support this type of activity. Lawsuits are never fun.

I suspect that it goes deeper than that though. I used to be a big supporter of wholesaling and it sounds like you're doing things the way they should be done. With that said, after becoming a member of bigger Pockets and reading what a lot of wholesalers are actually doing, I find it difficult to support wholesaling and would not participate in assignment of a contract as an agent. 

-Christopher  

@Derek Hutchison

The only person who can really answer this question for you is you. It really depends on what your time is worth vs the money you can save vs other opportunities that are out there vs how much you're paying for your money. 

For me, I'm not borrowing any money, so taking a bit longer to make more money makes sense. It also gives me something to do during the day, since I seem to be going stir-crazy since giving up my W2 job.

If you're paying high interest rates on the money, its probably going to make more sense to pay someone to do the work and get it done as fast as possible. Mortgage Interest is evil.

-Christopher

P.S. Any month where I make a 25% profit is a good month. Congrats on that!

Hi Josh, and welcome to BP.

First, Let me suggest that you don't run out to spend a bunch of cash. Although you're working with two top producers, real estate can be a fickle business. We're also headed into the slower season and fewer sales means less commission. 

With that said, occasionally you're going to be stuck driving clients around. While some people do prefer to drive themselves, when you have clients that don't know their way around a neighborhood or a GPS, you're going to need to stick together. With that being said, I do drive my Porsche Boxster most of the time, but I also have access to my wife's Ford Fusion when needed. If I had to choose one car, I would choose the 4 door. You can always fit 2 people in the fusion, but can't fit 4 in the sports car. You can always find an alternative solution - a buddy of mine rents a car when he needs a 4 door, but that seems pretty cost ineffective to me. 

On a side note, I sometimes choose which car I drive based on what I'm doing. If I'm looking at an investment property that I'm personally buying, I will take the Fusion. I don't want the seller to think I have an excessive amount of money and can afford to pay a dollar more than I offer on a property. If I'm visiting a distressed seller, I will take the Porsche. It seems to give them a sense of comfort and belief that I have the financial means to solve their situation.

-Christopher

Hi Evan,

I'm not a mortgage banker but the answer to your question is absolutely not. The grace period doesn't mean you can skip those payments, you must make them, they are just providing a bit of time since payments sometimes get sent to the old processor and need to be re-routed to the new one.  There is no reason to risk damaging your credit for no potential gain, as the use of a couple thousand dollars for a few weeks will not have any real benefit on your investing activities.

-Christopher

Hi Kathy,

If you are unsure when you may (or may not) make your next purchase, I think paying down the existing mortgage is a good idea, however, I wouldn't focus on the property that has the smallest loan balance. I would pay down the property with the highest APR. While it is nice to own a property free and clear, paying off the property where you have the highest interest rate will yield the best return for your efforts.

-Christopher

Hi Donald and Welcome to BP,

The % depends on the property, current condition, and age. For me, I'm calculate 23.3% for Vacancy, Capex, and Repairs, however, I only use these figures for pro-forma calculations. Don't forget to include taxes, insurance, HOA Dues, etc. As others have pointed out, this often runs 50% of the gross rents.

In reality, I have a contingency fund which totals 10% of my entire holdings. I'm using this as a 'reserve' fund, so when things come up, I pull from that fund to complete the necessary work and then replenish it from rents until it is full again. If you're planning on only using rent to cover all repairs and expenses, you can be easily burned by an AC that goes out or a roof that needs to be replaced. This practice also shows financial stability and will help you obtain commercial financing in the future. 

Also, you can't use the security deposit for anything, while you're holding that money, you need to put it into a separate account and hold it. The security deposit ultimately belongs to the lessee and can't be part of your operating budget.

-Christopher

@Ryan Dossey

In you were buying in Nevada, you are required to disclose you are an agent per NRS 645.252(c). The standard Realtor form also has a specific field to detail which state that license is from. This applies if you are a principal, related to the principal, or have some other interest in the property. 

I would be surprised if most other states were not setup the same way. I would check with your sponsoring broker, but I don't see the harm in disclosing. If you're dealing with distressed properties, this may even be seen as an advantage - makes you look more legitimate. 

-Christopher

@Barbara G.

I have to agree with @Marcus Auerbach here. Moreover, it sounds like you're looking to make the perfect place for a family to live - unfortunately, we need to get you thinking more like a slumlord! I'm kidding ... sort of. Improving a property is great, but you need to be able to balance renovations with cost. Most tenants aren't going to treat a rental property super well, so keeping in budget, using appropriate fixtures, and finishing on time are key to making a profit. I think you would benefit from having a bean counter on your team to ensure the properties are working for you, not you for the properties. 

Additionally, you desperately need a qualified real estate agent on your team that can provide accurate comps (sale and rental) for your properties to ensure you don't overpay when you buy or sell yourself short when you exit. Zillow is fine for a ballpark estimate, but it is not an accurate way to value your property. Your agent can also help you figure in Capex, Repair Cost, Vacancy, Taxes, and other fees to ensure you have sufficient cash flow. I don't know the area you're in at all, but these purchases seem like the cash flow may be light, when all expenses are taken into account. One of the biggest problems new landlords can face is over-leveraging and then being pounded with unexpected costs.

Good luck to you with all the new properties!

-Christopher

@Bao Nguyen

I think i may have taken it mentally a few more steps than you envisioned. So basically, you're thinking an 'al la carte' real estate service provider? Something like, I decide I don't want to do a rehab on a property myself, so I call up the hot line, and have someone from the office sent out to do it for me?

-Christopher