All Forum Posts by: Daniel F.

@Ashley Gish

One more consideration, I do not think anyone has mentioned, should be capital gains tax on the sale of your rental in UT. If you made a good profit on that sale, the government is going to want their cut before you pay down your student loans. That alone may make a 1031 into a new rental in your area a more appealing option.

That said, I have not sold a rental yet, but it is my understanding that if you are going to do a 1031 exchange you need to act fast...

Best of luck in whatever you decide!

@Aaron K. Unfortunately, I have to agree with you, thanks for sharing. It is far from a done deal... just out of curiosity, what would you think about these numbers on something like a BRRR deal. I could get it into good rental shape for around 40k. Market rent would be around $500 over the mortgage.

@Aaron K.

Hi Aaron,

Still trying to figure out if there are any financing options other than a conventional loan, but to start the rent would only be the mortgage payment, so we would not see any profit at the beginning and realistically we would be operating at a loss with repairs. I agree with the statement that if they can not afford their mortgage now how will they afford the rent, and that is our biggest concern and part of the reason I asked about lease clauses that would make for an easy exit, if needed. For the most part the rent shouldn’t be a problem, it is all the other expenses of owning a home that have put them behind. Like I said, we are not doing this to be a charity, but we are trying to help out a friend so we are prepared to put money into our investment, if/when needed. I know this goes against many principles of real estate investing, and I am not trying to justify it, but our other rental which started out as a primary, cost us money each month for about five years when we first moved up, but has since doubled in value and rent, and cash flows very nicely right now. Not expecting it to double in 12 years again, but we are taking a long term view on this investment too.

The liens are IRS tax liens from the business they lost around 2012. Even with paying these off we would be getting this home for around what it cost in 2009, with a larger downpayment, the other was an FHA, our payment will be lower than it currently is.

Thanks,

Dan

Hi,

Another new member, who has found a lot of great info in these forums and would appreciate some advice on our situation. We are looking to help out some good friends, knowing full well that friends and investments do not mix well, but please hear me out. We are looking to purchase their home and rent it out to them before they go into foreclosure.

Market data for SFH in this zip code as of Nov 2018 – Median sales price: $599,900. Months of supply: 1.6. Median days on the market: 37. Median percent of List price to Sales price: 100%

The house – SFH 3 Bed, 2.5 bath, 1620 sqft. For what it is worth, Zillow puts the value at $490,000, but condition is not great, I would say C4, possibly C5. Condition could make conventional financing tough, although our mortgage broker says he can get us into a C5 with our credit and DTI. I would expect to drop 100K to get this house up to market value, but not until they move out when their kids are done with school. Current mortgage is FHA with a balance of $275,000 with liens of 70-80K, we have our title company looking into this, but the sale price would probably be close to $350K, not leaving much equity. This is a C/D house in a solid B+ neighborhood.

Us – This would be our second rental, solid equity and great long term tenants in our first. Landlords since 2006. DTI without claiming rental income from either property would be 32%.

Questions – What are your thoughts on financing this type of purchase? This seems like too long term for a sub2… FHA is assumable but we won't be living there so that probably won't work. Conventional is certainly an option, but we just want to see if there are any other ideas that we might be overlooking? Any advice on removing or negotiating liens? We know this is crazy, and we are not trying to be a charity, but financially we can afford to help out some friends in need, in return for an asset, so what terms can we add to a lease to make an easy exit, if needed? Any other considerations, besides the obvious friends and money do not mix, that we are missing here?

Appreciate any advice.

Dan