All Forum Posts by: Derreck Wells

@Mark Updegraff - I was thinking along the same lines. Way to think outside the box! I'm 99% positive that you will avoid that tax, you're not transferring ownership of the property, it's still owned by "123 Any St LLC", you're just adding you as a Manager of said LLC and removing the seller. However, I'm not an attorney, I'm a Handyman, keep that in mind. If you happen to own the LLC and you take on a partner, you would then add him as a Manager, correct? Any property you own wouldn't be charged a transfer tax in that situation, so why would it be if you add one manager and remove another?

I'm self-employed so my verifiable income is pretty low and I don't have a huge down payment for a mortgage. So I've been thinking creatively about how to get a buy and hold to get some verifiable income and that was one of the solutions I was planning on implementing. There's a ton of rental properties around here that are held in the LLC. So my plan is to buy the LLC and assume the existing mortgage.

There's an investor around here that has all his properties in LLCs, even his flips. He's an upstanding member of society (He's won awards for his humanitarian efforts.) so I'm quite sure that the LLC hasn't ripped anyone off and would stick me with a liability. It's in my schedule to call him this afternoon and see what I can make happen.

I'd say do your research. Here in NH, we can access the state business directory and look up any registered business, including LLCs. (https://www.sos.nh.gov/corporate/soskb/csearch.asp) and see the annual reports. There may be something like that in your state as well. It's a place to start, it won't tell you if they're being sued, but it tells you if their state registration is up to date. You can also see the name of the managers and then research the person who started the LLC. If you Google their name and it comes up with a bunch of hits claiming they ripped someone off, then it's probably best to avoid that one! Search the registry of deeds and check out the existing mortgages too. Make sure you know all the money the LLC owes!

Good Luck!

@Joshua Dorkin - No apologies necessary. You have to do what you have to do, when you have to do it! I appreciate the help the site provides and was planning to upgrade as soon as I could. Now it's done sooner rather then later!

Thanks!

Quick question, if I go Pro monthly now, can I upgrade to annual after Christmas for the $150?

I have to say, your timing absolutely sucks on this. I'm a single Dad with sole custody of both of my kids. Money gets TIGHT before Christmas as it is just because people do less to their houses in Nov and Dec, so I get less work. It's going to be impossible for me to come up with the extra $150 now.

One thing that should always be considered with the plumber vs handyman debate is insurance. If your state requires a licensed plumber to do the work and you have an unlicensed handyman do it, your insurance company won't cover if there's a flood later.

I have a customer that had a licensed plumber install a kitchen faucet. Simple job. Two weeks later she went away for a weekend and due to a manufacturer's defect the faucet broke and flooded her finished basement causing over $15 in damage. The plumber's insurance company covered the damages. If a handyman without insurance (most Craigslist handymen aren't insured) had installed that faucet, even her homeowner's insurance wouldn't have touched it.

I'd leave the units as 3/1 and upgrade the fixtures and paint. You'll have the lowest priced 3 bedroom rentals, or like someone mentioned, list them as a 2 bed with a den or office. Call the upstairs rooms the beds and the downstairs, the den. Bedrooms can be small, most people only sleep in them and do their living in the "living room".

Pretty them up and get em listed. Run an ad as a 2+den/office and another as 3/1 and see what you get more calls on.

Price them competitively, don't worry about the size of the beds in the price. It's a 3 bedroom, rent it as such!

On the 2 + office, rent those at the same price as the 3 beds. They may be more then the 2 bed comps, but it has an office/den, increasing the value over the comps.

I'd start at $1000 and see what response you get. you can always lower it.

And I wouldn't convert anything, just update it all to current standards.

I don't think the OP is really after cash flow. Having a free place to live when he's home seems to be the goal here.

Don't assume that they are telling the truth about costs and income. Get sellers 1040 Schedule E for the last 2 years or so, that's what he's claiming as income to Uncle Sam. Ask to see utility bills that owner pays, ask for the name of their building manager or maintenance co., and check with the building dept about any permits that have been pulled for that address (will show you the age of the roof, etc.). Take the permits and contact the construction companies listed on them. Those guys will know things! The guy that put the shingles on the roof, for example, would know how solid the roof actually is. Maybe the plywood needed work but the homeowner didn't want to put up the $$ to do it, so he just had them shingle over soft plywood. Same with the drywall guys and the plumbers. They know things that the seller may not, or that the seller may choose to forget!

I would shop around for a manager. I wouldn't use the Realtor who already told you he doesn't like doing it. If someone doesn't like their job. they're not going to do it well, and if you're overseas most of the year, you want someone that you will know is taking care of your house.

Yellow letter line template right here in the file place...

http://www.biggerpockets.com/files/user/amandafox/file/lines-for-yellow-letter

I'd check the assessors database and see what the town has it assessed at. Also, you should be able to tell when the current owner bought it. This info can help you determine an offer price. You're trying to figure out why the owner is selling. If they've owned it for 20 years, they probably don't have much of a mortgage on it and may accept a lower offer. If they have a big mortgage, they're certainly not going to to take less then they owe. If they have problem tenants, they will be more likely to accept a lower offer.

You covered a lot in your post, but there is a lot more involved in buying at a discount then just the numbers, you're dealing with an emotional person. If it's presently owner occupied and they're retiring, they will probably have some emotional attachment to the property, especially if they've owned it for a while and they renovated it because they love the property. You can play to that by stressing that you'll be owner occupying as well... that the property will be your "baby"... that the property will be well cared for... that the property will help you out of a tough spot... that the property will help end world hunger... you get the idea. Emotion.

However, if you're comfortable with a $150k offer, then just put it in. The agent will always say they have other offers, DON'T PAY MORE THEN YOU'RE COMFORTABLE WITH!!!! Make your offer and stick to it.

You mentioned it's renovated. If it's a flip the owner obviously has a target number to make a profit. You can tell if it's a flip if it was just purchased a month or two ago. If it's a flip, you can't really hurt the owner's feelings by lowballing. He'll know it's just part of the game.

With all that said, if the numbers work for you at $150 - $160, go for it! Even if you end up paying a $100 or so a month to live there, can you live anywhere else for that amount? It beats being homeless!

And I would not use the seller agent as a property manager. You will be living there, manage it yourself.

I'd be interested in the replies as well. I was considering local vs toll free.

There's no "conversion". Read about Section 8 on wikipedia here ... http://en.wikipedia.org/wiki/Section_8_(housing)

Basically the Gov pays you, the landlord, a portion of the tenants rent. You are then responsible to collect the balance from said tenant. If you accept Section 8, your apt will be inspected annually to make sure it's up to standards, which can cost you some repairs as Section 8 tenants tend to not take care of properties as well as people who pay full price for them.

The benefit to accepting Section 8 is that you are getting a large portion of your money every month. In this area, Section 8 will pay a percentage up to $1200 (I think) for a 2 bedroom. So if you rent that 2 bed for $1400, you're guaranteed $1200, then you have to chase the other $200. (If you really want it.) The plus to not chasing it is that if you want a tenant out, you can then use that unpaid rent as reason to threaten eviction to the tenant and they will pack up and move. If they get evicted, they lose their Section 8 benefits. They don't want that, so they just move. In states like MA where eviction is long and expensive, it's a plus for them to just leave!

So basically if you only wanted $1200 and you price your unit at $1400, you'll get what you wanted anyway, plus an easy eviction when the time comes.

The down side is more annual repairs. The tenants just don't have any "pride of ownership" so to speak. They're not paying for it, they don't don't take pride in it.

Of course this is a generalization. Some will take care of the property and will pay their portion of the rent on time every month. But in my dealings with repairing Section 8 units, more don't then do. You need to expect the worst and hope for the best.