All Forum Posts by: Daniel Miller

@Glenn Gray The appreciation rate will be minimal. The "tentative" (could change tomorrow) plan is to keep it for 3-5 years and lease it out for a little bit below market rate rent to a quality tenant after fixing up with $6,500 of strictly materials and roof labor. The cash flow will be deposited into a bank account where it will accrue monthly and will be untouched. At the end of the holding period we plan to sell (3-5 years). A decent principal reduction will be realized. Mortgage decreased to approximately $35,000. The existing account balance will be inject into the property. (Kitchen and bathroom will be cosmetically touched up before the first tenant is placed). At the end of the holding period all remaining capital will be inject into kitchen and bathroom. The property's taxable value is currently $42,000. I believe that in 5 years, with a rehabbed kitchen and bathroom, the subject property can be sold for $65,000. It is worth that right now.(after the $6,500 is used to fix, renovate, and rehab.) The principal will be down to $35,000. We net $60,000 and $5,000 goes to closing costs. $25,000 split three ways is $8,333.33. We can ultimately double and a-half our money in 3-5 years with some upfront sweat equity and a major renovation on the back end. This investment would not pay dividends. I think this is pretty accurate and possibly on the conservative side. The money would then be put into another property with all partners go-ahead.

@Alcides Brown I understand what you are saying about partnerships. Ill try to explain where I am coming from again. These two guys are my bros. I talk to them on a weekly basis. My one friend's parents were in RE. They are much older. He now controls $10M worth of legit Real Estate. It is all in Land and Commercial Buildings. He wants a little project to keep busy. I am not concerned with him whatsoever...Ive seen him drop more on a weekend than this investment will cost. He is also my boss and pays my salary. My other friend is a firefighter and wants to keep busy on his days off. He wants a project to have. He is very trustworthy. I have known him for ten years. He used to work in the Finance industry in Manhattan. He wants a place to keep himself busy, and LOVES that he is getting into a deal for less than $4,000. You have to keep that in perspective. We all have credit issues and he is holding the MTG fixed at 5.5%. That is a great rate to lock in. The cash flow, for this particular deal, is not a large concern. Doing a project together, keeping a quality tenant, patiently waiting for principal to reduce, and just getting started are all reasons why this purchase makes sense to us. Remember, beggars can't be choosers. My two friends and I wanted to do something together. With less than $4,000 invested each, and with no banks involved, this is truly a test run to see if this partnership ship has profitable potential.

@Glenn Gray

You bring up some good points. My one buddy has been itching to get into RE. He wants to do a house. I want to do one too yet I do not have the time to handle everything myself. My other is buddy is already in RE. We have two people in RE and one fireman (24 on, 48 off). So, time flexibility will not be too big of an issue.

The issue is the terms. I have zero credit. Nothing good, nothing bad. My other buddies' credits are not good (one from the bust, and another has a credit card issue in the past). The terms are amazing. We are getting in for very little. I think it will be a fun project, with very few $$$ coming out of my pocket. My friends are excited.

These guys are very level-headed guys who are not control freaks. If anything, I am the control freak. They are happy to let me take the lead and we all go from there. They just want to complete the house, have the principal reduced every month with very little maintenance, and realize the appreciation one day. The cash flow is not that important to them. To me, Cash Flow is King, but I will not be doing TOO much of the manual labor and only investing $3500 and being on call 10 days a month.

I manage rentals already. Situations do not pop up TOO often. We will be rehabbing this house completely. Its maintenance costs should be low.

As for the rehab budget. The $6500 is including a new roof, new drywall in 20% of the house, T111 on the exterior (small patch job), new fixtures and faceplates, and many more to name. I think $6500 is on the low end.

Like I previously mentioned, these are two buddies. The partnerships will not be an issue. I am semi-experienced in RE and they have been nipping at my ankles to get into a project with me. Its going to be a simple buy and hold.

One partner has an extra air conditioner that he is donating, the other is a firefighter who wants to spend time working on an investment. I played baseball with these guys. We are trying to learn from this house...I am not concerned about the work with one SFH. Its a team effort and we will pick each other up. I do include Principal Reduction in my cash on cash return. Some do and some do not. It is important to recognize all facets of equity realization.

I understand why one would not want to include principal reduction, but to me it just makes sense to include it. It is money you are earning (although not necessarily recognizing) monthly

I found this deal at a local REIA meeting. A realtor/wholesaler/investor had a single-family, 725 square foot, asbestos-siding, wood frame, house in a C/C- area four houses down from a major intersection that probably sees upwards of 60,000 cars a day. It would probably not be difficult to rent. It is a very convenient, lit-intersection, location in the county.

I think it will rent for $750

We are going to put $6500 into the house to clean it up. The $6500 is in materials. We are going to do all the work ourselves. Many people say "pay yourself for your time" but in this particular renovation my friends and I are rehabbing for experience and passive income. We view our time invested as part of the initial down payment (and property management as a continued investment in the maintenance of our initial capital investment).

Purchase Price: $47,500

Down Payment: $3,500

Taxes: $775

Insurance (Liability): $600

Maintenance (significantly decreased after the initial capital investment) $1,000

Mortgage: Seller will hold the note for 15 years at a 5.5% interest rate

Monthly Mortgage Payments $375

My two friends will put in $3791.66 and I will put in $3416.66 (I am a commercial sales agent. I found the house and handled the negotiations. I would not normally do this deal without more compensation, but these are two of my buddies I played baseball with)

This gives us a total of $11,000. We will purchase the property ($3,500 plus half of closing costs; roughly $1,000). We will then have $6,500 left to implement our plan.

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$750/month = $9,000/year - 10% Vac Loss = $8,100

Expenses = $2375 Annual Debt Service = $4,500

Total Profit = $1,275 + Principal Reduction (Appx. $1,500 first year) = $2,775

$2,775/3 = $925/$3,791.66 = 24.4% Cash on Cash Return for my buddies and a little bit better for myself (not taking into account our time invested, which as I said before will be just as accurately identified as experience)

It is not much, but we all wanted to do something and we thought this would be a good learning experience and a safe test to try Single Family rentals. The terms are fantastic.

Please give me some criticism! Thanks

Hi @Daniel Paloscio

I am an agent/investor in the area. Nice to see you on here! I do not do foreclosures (currently). Keep this updated! I would like to learn.

@Gavin Welch Hillsborough County/Pinellas County RE Investor. I go to a RE meeting in Pinellas Park on Monday nights that has quite a few Pasco County and Lakeland investors. PM me if you are interested.

BUMP!...

Holy Cow!

Thank you Wayne and Patrick. Great Information and exactly what I was looking for.

Patrick, how do you check for liens in our county? Do you use the public records page and search for MTGs? Is there something else I should be searching for?

I am surprised they are all bid high. There are not a lot of steals now, but every one once in a while one pops on the market. You just have to stay alert.

Patrick in a previous thread we were talking about occupancy licenses. I was walking my dog, Tino, last week and I spotted a great four-unit in a large, funky lot. Its a blue, two-story, building with a three-car garage in the back. The three car garage actually dumps out into a different street.It has a lot like a cheap motel hugging that is hugging 7-eleven. Great property. I went back home and checked the property appraiser's website. It sold for $75,000! Those units can rent for $700 a piece easy. The property probably has a 15+ Cap Rate when operating at max potential. Unfortunately, it was only licensed to be a duplex. Someone is going through the proceedings to retain the four-unit occupancy license. Are you familiar with this property?

Wayne,

I just figured that out...so the list I referenced above was an actual Foreclosure list not a Tax Deed Sale list?

I found another calendar that has one day where there are 50 sales.

I am guessing this is the one I really need to look at.

I found a couple interesting properties on there I might pursue.

Anyone have any horror stories/advice to watch out for?

The MLS in my area is so low on inventory...

Thanks!

I have been interested in getting into tax deed sales for sometime now. I just sat down today to really soak up everything I could about them.

I looked at the calendar and the subject county has approximately 30-40 tax deed sales daily! The only issue is that 99% of their tax deed sales look like this:

Final Judgment Amount: $269,754

Taxable Amount: $101,875

What exactly does this mean? If someone buys the property are they on the hook for the ENTIRE final judgement amount? There is no reason for anyone to buy a property at a tax deed sale in the subject county if this is true...

I am confused. I have looked around but could not find a definitive answer to my question. Thanks!