All Forum Posts by: Joseph Hoot

Welcome to BP @Wali Rahman! 

Hi all,

We're within a week from closing on our first property in Georgia. We'd like to have it owned by an LLC that we created (FYI, I have listened to the podcasts about not worrying about entities until you get going. However, we went ahead before I listened to those. So at this point, we're just trying to keep the momentum going and start building our processes with the LLC in mind). I was told by my lender that this is a simply process the occurs at the end of the closing. He described this as it officially gets purchased in my our name, then the title company transfers it into the LLC.

QUESTIONS:

1. Closing into an LLC - Does the information above sound roughly accurate?  Can anyone fill me in more on what questions I should bring up to the title company ahead of time to ensure the likelihood that we don't run into any issues at the closing table?
2. Purchase Agreement - could this be done more easily by simply including the LLC as the entity purchasing the property? If I do this, I'm assuming the banks are comfortable with this, so long as the loan is taken out by me personally (at least, until the LLC has enough funding available to support it on their own).

Thanks,

Joe

@Zachary Jones, Welcome to BP. This is a fantastic resource for the many areas you can get into with REI. We only just moved to the area a few months ago from Buffalo, NY, so I don't think I'll be able to help you with area expertise, but I can offer to you to check out the podcasts, join in conversation in the forums, and check out the Education -> Guides in the top menu of the BP website. The ultimate beginners guide is a great first starter. I would also highly recommend the Rich Dad Poor Dad and E-myth books.

I found a property on Xome.  I'm curious, though, if the auctioneers are allow to bid on properties listed on their site.

With regards to this, I am interested in refining the P&S agreement that I would like to use when making offers. At the moment, I have borrowed the document that @Stephen Barton uploaded to the BP FilePlace.  I am using that as my base.  But I would be interested in adding additional verbiage, such as the 15 day inspection period.

I have two questions for this at the moment:

1) With regards to the GAR, do you know if that P&S is copyrighted in such a way where non-realtor's cannot use it? I wouldn't mind trying to model my P&S after what realtor's might expect to see and then adjust to be taylored towards things investors might be interested in... things like you mentioned, @Lynne Jacob, or verbiage related to "and/or assigns..." and such.

At the moment, my SECTION 9 equivalent says the following:

Since this verbiage doesn't include language around "15 days," do you think I should include additional language to suggest something such as "Seller agrees to provide access to the Buyer's representatives no less than 15 business days prior to transfer of title for inspection, repairs and to market the property."?

@Account Closed - I love the response!  Thanks for being candid.   My analysis is just a bunch of numbers tossed into a spreadsheet (based off of many others I've found), so there isn't any extra work on my end.  It was more of a curiosity, since I already have the numbers flashing in front of me when analyzing the other numbers.  But duly noted.

I have been analyzing properties for the last 8 months without making a just yet-- We've been busy doing many other things.  However, we're finally at the point where we'd like to start making offers.

At the moment, I first calculate using the typical BP rules-- 50% rule, 2% rule (I allow them to go down towards 1.25%), 70% rule with flipping estimates, $100/month/door, etc...  But then I go to the next level to attempt to be a little more accurate.  Some properties tend to look like they need lots of work.  Others, not so much.  Plus, taxes seem to range a bit.

I've heard @Brandon Turner talk about including property management with your analysis from the start, so you can easily start using a property management company and not impact your original pro forma estimates. However, given the current market (at least my amateur understanding of it) it seems that some MLS listings are difficult to make my numbers work unless I adjust my numbers slightly towards maybe 5% property management costs, with the assumption that I would be managing the property.

So I'm curious what metrics other investors are using when analyzing a property.  Additionally, when talking "Cash on Cash" and Cap Rates with other investors, is it typically assumed that a Cash analysis on Cash includes the types of expenses I list below?  Also, with Cap Rates, is it assumed to be calculated based on Purchase Price or Fair Market Value?  

Here are the ones I default to and adjust slightly, depending on the property class and area (jobs, distance, etc..):

• Expense, Income, and Appreciation Rates = 1% (I prefer to not bet on any of these. So I feel 1% allows me to account for a little adjustment)
• Vacancy Rate = 11%
• Closing Costs = 2%
• Selling Costs = 6%
• Cleaning and Maintenance 0.8%
• Property Management = 11%
• Repairs = 8%
• CapEx = 12%
• Taxes = 1.2% (I tend to adjust this one frequently, but this is my default)
• Insurance = 0.5%
• Other Expenses = 0.1% (my flex money as a "just in case")
• Initial Renovation Costs = $500

Welcome @Nara Kim! I live up in Alpharetta. Maybe I'll see you around at a REIA

@Jeffery R. Welcome to BP Jeffery.  Rich Dad, Poor Dad is a great book.  It definitely go me thinking very differently!

@James Park, this information is so valuable!  I'm just moving from Buffalo to Alpharetta and can confirm from a primary residence perspective that I am seeing this appreciation first hand as I'm buying my new home.  Based on the area I'm moving into, I can see the massive amounts of homes being built in order to take advantage of the lower inventory.

I know that you've done a ton of work to create this data.  To date I have simply relied on Zillow, Trulia, Citi-data, deptofnumbers.com, bestplaces.net and a few other types of sites to attempt to understand the market numbers.  For a new investor, do you have any other recommendations for where to look to find more of this data type of data for other areas?