All Forum Posts by: Anna Laud

@Stuart Day

Hi Stuart!

I agree here with what Jaron has said in basically letting the numbers do the thinking for you. While the inherent, knee jerk reaction in some markets is to get it now simply to acquire doors, if the numbers don't make sense to do so; it's not a deal. 

I thin it sounds like you really need to reverse engineer your financial goals and work in a backwards fashion to make a numbers based decision. If you have a goal in mind, you can further break it down into what it takes to get there, and the fastest path accordingly. 

You may find that two or three flips on your own would offset the corporate gig, just as you may find that a few 1%+ houses and being more passive would equally be beneficial overtime, just as you may realize that Airbnb could be your bread and butter plan of action. 

Without any specific goals in mind, it's hard to determine where your time/money should be allocated it seems. I can only speak for Indy on specifics, but here's a possible scenario; 

Let's say you find a duplex under $200K, 100% occupancy with over a 1% monthly rental yield- how many of these duplex properties would get you to your financial goal? 

If it were a flip here, let's say you're looking at maybe a $15K-$20K outcome - again, how many of these would it take to reach your goals? 

Just applying that logic to your market and determining what your goals are with what is realistic would be most helpful. 

In being familiar with what's basically the carpenter side of things as you've described, while that will save you personally in overhead on this kind of rehab, you're still (I'm assuming) going to be factoring in hiring for things that are not in your current wheelhouse maybe plumbing, electrical, laying tile, roofing  etc. - so maybe the idea of being the solo contractor on this isn't as realistic? I may be totally off the mark here as well and maybe you're a fully licensed contractor ready to go. 

One thing here that you are at least having the win on is the automatic re-list for any flipped properties and paying yourself a commission as well as into your cap right away. 

My best advice would be to determine your goals and work backwards as to what makes the most sense in your market, as well as considering the overhead you still may have in terms of subcontractors/contractors if  you aren't able to do it yourself as well as holding costs eating your bottom line alive if you can't personally crank out the work fast enough. 

Hope that helps! 

@Shane Gamrat

Hi Shane! 

I think the numbers here would likely dictate what you do most of all. The things to consider it seems would be;

1. Do you have the financial means to move along into another dwelling if you keep this one as a rental? Not needing to sell this one for a down payment on another property to avoid PMI (which only protects the bank, not you personally usually needs 20% down to avoid)

2. How much rent would you be able to get from this rental now? Is it decent cash flow, or would you be better off going into more of a house hacking situation? 

3. What do the numbers look like as far as your gain here? Is it enough to sell now and be ahead as far as a new place to live personally as well as getting into REI?

The other part of this is in your super hot market- are you staying near by to serve as PM in this situation? If not, factor in your PM cost as well here. 

Using the numbers as a gauge is usually the most sound way to decide what to do as far as selling or going the buy and hold route. If the numbers are in your favor either way, what is the renter pool like for renters in manufactured homes in the area? 

If you're able to find renters and the numbers work out in your favor, this might be a way to have your first 'door' as a buy and hold investor. If the profits from selling this property could help move you into a better REI situation however;

1. house hacking and using this sale as a means for down payment there

2. You already have other funds now saved for a down payment and using the profits here for an additional down payment on an investment property 

or

3. Not house hacking and using the profits here to get into a higher retail value home for future refinancing at a higher appraised value and using those funds for REI

Bottom line, I would go over my numbers carefully and see what made the most financial sense to do. I would try to not let emotion play a role here and outweigh what it says on paper as to what makes the most sense to do- ergo being too eager to have one buy and hold property if it made more sense to sell. 

One step you can do is get with an agent in your area for a CMA, to see what it would sell for in a professional opinion as well as ask about what rent/renter pool looks like in the area for manufactured homes.

The other thing I would suggest would be to get with a CPA and simply go over the numbers if you're not comfortable doing so on your own and want unbiased advice. 

The third portion to this would probably be to speak with a lender if you haven't already to obtain pre-approval if you deiced to sell and have some idea of numbers to work with after you've met with an argent and CPA.

I can try to help with the agent portion if you need it, and they may have CPA references as well as lender references if you get to that point. 

Hope that helps some! 

@Christopher Tom

Sure thing Christopher!

It's probably more atypical than typical to consider not only purchasing a property with an ex, but living with them there as well, so I'm only assuming here that there is a very unique dynamic involved that would make this even a consideration in the realm of possibilities. 

I would defiantly make sure all things are discussed prior to moving forward and planned out on paper with proper legal council in advance.  In the chance happenings that things went from civil to uncivil in time, at least there would be some documentation in proceeding forward in a plan of action beyond the bloodline trust and might help with the yearly maintenance of things over time as well.

A unique situation, but professional advisement and planning steps could make doable- well worth paying for now in consolation as well as having legally drawn up.  Upon further reflection, probably worth a quick discussion with divorce attorneys as well - this may effect who claims children on taxes if there isn't already an every other year/shared-joint custody plan in place as well as child support if that applies- I would feel better verifying there weren't changes to be made here that came up in time (maybe you've already talked about it) or, if there were changes to be made I would want them outlined ahead of time to avoid going back to court if possible and drama ensuing. 

@Christopher Tom

Hi Christopher! 

This is a bit unique maybe in everyone living there as well as the general idea of sharing something with your ex in an assets acquired after the dissolution of marriage, but I might have one helpful suggestion. 

I would verify this with an attorney, but it seems like you would be able to purchase this house jointly and have it set up in a Bloodline trust. The bloodline trust should ensure that it goes only to your children for inheritance purposes and should offer some protection as well from creditors maybe as well as any possible future spouses on either of your parts.

The other form of protection here would be (again, please verify) that it should be protected from any future spouses of your children. If they were to hold the property very long term, in theory it would only be able to be passed along to your grandchildren. 

Again, it's probably best to verify this with an attorney to be sure, but I'll include a link that explains more about it as well. 

 https://www.begleylawgroup.com...

Hope that helps some!  

@Alex Szymkowski

Hi Alex! 

It really depends on the terms of the contract here as to how it would specifically go. Technically, it could turn out not so well as the agent could be entitled to both side of the transaction as a dual agent, receiving both the listing and purchasing commission- actually standing to make more in some cases (the full commission and not the split commission), in some scenarios without being the 'procuring cause' of the sale. 

If you're ready to do this now and have financing in place or cash ready to close immediately, then your fiancée's uncle could have a conversation with the agent about, well to put it honestly, being fired. If the agent has spent any money in terms of having a photographer out, marketing, etc. - that's the minimum they would likely ask for in terms of compensation while they could be entitled to ask for the full commission. All of this is assuming it's not an open listing agreement, and instead an exclusive right to sell.  

If the house hasn't been listed yet, again according to the terms of the contract specifically, he could have a window to back out maybe. 

There's always a chance of mutual dissolve/resolution if the agent would agree to it, that would depend on the agent however and the dynamic they have with your fiancée's uncle.  

Best advice would be to look over the contract thoroughly and see what specific terminology is used and if there is any grace period before listing. My other advice would be sure you're able to financially complete the transaction to avoid any messy family dynamics as well. 

Hope that helps some!

@Ethan West

Hi Sterling! 

It sounds like you've had some pretty amazing appreciation here and I can see why you're thinking of selling right now. There are a few things to consider here maybe; 

no.1 You've had some professional input on market value - if you've had more than one agent give you numbers that average out like this, odds are they are pretty accurate. 

no.2 Interest rates remain low right now, it's (in a lot of places) it's a seller's market and the kind of appreciation you're seeing in numbers indicate to me you're not in a flat market, but a more reactive one- good for now in your position but down the line is not a guarantee

no.3 If you're thinking about building a house here, I would be very certain the market could carry it- meaning if you're banking on the small pool of buyers that could afford the value now, plus a home (if interest rates remain lower and we are still talking about being well over $1M in market value)- is this something that your area can easily absorb or is there just a large pool of buyers that can drop or be approved for $1.5M+ in your area (I'm just adding in a value of what you said now plus an average home maybe). If you're looking at less of a buyer pool, you might be outpricing yourself for the market. You're already on the high end of things maybe in price point , and it's usually easier to unload the worst house in the neighborhood than the nicest one kind of logic- even if you're not in an actual neighborhood. 

no.4 The waiting game- if other more commercial properties are being built in the area - again a toss up in what this does to your value- could increase the value of the property, but could also take away (for those looking for that more out of town feel) or you could be looking at being bought out all together by a commercial development as they look to re-zone. I've worked with two sellers that were bought out by Meijer here in Indy and they were able to walk away with three times what the market value of the properties would have been to sell to end users. Is this a guarantee though? Not at all.

no.5 To quote Will Rogers and Mark Twain however "Buy land, they aren't making anymore of it" or versions thereof - land is one of those more buy and hold things usually unless you have subdivision development  in mind, rezoning etc. Now you could get into more of a cash cropping scenario and think of this more as a generation wealth building tool, if you were to add more farm ground to it. At that point you'd need to get into education process about crops, see if you can swing something to get in on anything that would be more beneficial financially like a USDA tobacco base etc (that's just a girl from a farming family talking who does this personally) or something like wind turbines. I would explore all options with the ground before going the house building route if I could add more acreage if I were keeping it personally. 

no.6 What would you do with these funds/profits? Meaning what's the plan (REI?) to see the highest return from them- if you sold now, you could possibly make a few other savvy REI moves and stand to come out even further ahead.

Overall, you've seen some great appreciation it seems and it seems like (based on what you said) that you're looking at making a decent portion in profit by selling now. Will that hold out? I'm not sure, but I would think that maybe you would be looking at some time beyond 7-10 years and for sure check out all other options (with the current land and adding more). Seems like you could be in a great position now to sell, a bit of a toss up if it will hold out that long(in the 7-10 year mark range and not need to go beyond that) and if building a home would outprice you from the rest of your market. 

Hope that helps some but obviously I'm not a market expert in your area like the pros you've already had out, only  offering professional and personal advice from Indy!

@Shane Hearn

Hi Shane! 

It depends on how many washers and dryers you’ll have in this building but on average you should be able to pick up a commercial grade washing machine for around $4k on the lower end of things. If he’s not using commercial grade and has simply installed washers and dryers from a big box store with coin systems, it could be even less expensive.

If you simply break down that (on the low end) $90K/yearly you’re looking at $7500/mo. If you needed to replace one washer a month then over the next two years, it seems like after your debt service you should have the cash flow to do this.

One thing here I would add is that you might be able (if not already in use) to maximize some services that might not currently be offered in income generating avenues. Vending machines can be little gold mines, as well as selling laundry soap, softener, bleach etc. in small commercial packets.

To further maximize your cash flow you can consider offering things like having food trucks come in during your busiest times and making the laundromat more of a destination- let’s say the Sam’s taco truck comes in and on Saturday/Sunday afternoon can turn over about $500 in profits, from that and the use of your parking lot for their truck- you could easily generate another ‘parking fee’ of $100/ weekend. In six months you’re on your way to a new washer at no cost to you. Two different trucks at once- you get the idea...

I would also consider the possibility of offering some overnight or long term parking as well if your facility parking lot could accommodate it. Let’s say you could have 3 RV’s parked in the back of the laundromat each parked for $200/mo. Again, six months out and at no cost to you there’s washer/dryer funds.

There are endless possibilities for this it seems, depending on your layout and how you generate more income to help offset the cost of equipment if you needed to- keeping in mind your equipment would be deductible.

Thanks to the Tax Cuts and Job Act of 2017 (TCJA) you’re likely going to be deducting expenses like this at bonus depreciation in year one (verify with CPA)

Overall if you’ve gone over the numbers and they make sense to you, there are numerous ways to go about generating capital to invest in new equipment if you need to.

Overall it seems like you’re possibly standing to net some gains here after your expenses - to be very clear on it, you could always take the P&L statements to another CPA for more of a third party, unbiased opinion- that would be my advice and get clear on what you can write off from the start if you need to, as well as making sure all of the numbers look accurate.

Hope that helps!

@JJ King

Hi JJ! 

Yes you're probably right about speaking with another company and seeing what they have to say as it seems like one foundation or slab should cover all attachments to the dwelling. The term in law suite may have thrown them off- I suppose had the wording 'bonus rooms' been used, it might not have been an issue for this rep. Good news is, that's going to be pretty easy to clear up it seems. 

The other portion of your question and getting down to the tax benefits of it are going to be best addressed by a CPA yes, as you're going to be going off of a % base or SqFt base and it sounds like it isn't a true 'duplex' equal down the middle in terms of sizing- to then split your deductions 50% down the middle would fall into the real of we don't go there and mess with Uncle Sam that way and stay out of trouble. You do need to verify with a pro on the amount you'll be able to right off as expenses vs income etc. this way. You're likely ahead on capital gains as owner occupied goes, but the actual breakdown in terms of % you need to be clear. 

As far as zoning goes- maybe not as big of a benefit there as you're not building it into a duplex, it's already there. You can easily call your local zoning board and ask a hypothetical question of 'say one had a SFR they wanted to turn into a duplex, what would the tax implications for this be" to verify on the property taxes. In my book you're already ahead being 'one parcel' however now.

I think meeting with a CPA would be best and they may very well advise you not to mess with the zoning on an attached structure that's already there. 

Hope that helps some = ) 

@Mike Van Kleeck

Hi Mike! 

If you're looking for more of 1% houses with an avg purchase price between $80K and needing cosmetic rehab to those upward of $150K in SFR and being rent ready now at 1%, Indianapolis is still a good market for this and fits nicely under ‘landlord friendly'.

We still have some duplex deals, even on the MLS that are over 1% monthly rental yield as well, and not in Class D areas.

Most of these 1% houses are in our Class B and Class C areas, and Indiana property taxes are pretty low for out of state investors by comparison to other markets, capping off at 2% for out of state investors.

For example, we’re in the works right now with one property for an out of state investor that has a monthly rental yield of 1%, and the taxes next year on it will cap out at 2% and still be under $2500 total for the year, at $1050 semi annually when the homestead exemption is no longer on file. This one was ( at asking) just under $110K and rent ready, Class B- area.

Overall Indy has also seen the market change with fewer houses being listed, but we aren’t seeing the huge jump in prices that places Texas, Vegas, etc. are and perhaps this includes Memphis as well.

I would say if you’re simply not interested in Indy (I mean at least worth the Wick’s sugar cream pie ha) you should venture into the Midwest more and look for other ‘like Indy’, historically flat markets.

If you’d like to know more about the Indy market, I’d be happy to share an Indy area guide I’ve put together and cover any questions you’ve got, including PM's here in Indy- just send me a message. 

Hope that helps!

@JJ King

Hi JJ! 

As far as the property tax implication goes, you're talking about two attached structures, therefore should be one parcel- not having two sperate tax bills it seems. 

I'm a little confused as to how this was worded- if you're planning on being owner occupied on the one side and having the STR on the other, or if you're thinking of having a long term tenant on one side with a STR on the other.

I'm not sure what the benefit would be to have a long term and both term rental both, over having the same of each- it seems like you would have more PM overhead than would be worth it as usually PM's for STR cost more than long term rental PMs- there's simply more work involved.

If you were doing owner occupied on one side, this would make more sense to me- or if you were planning manage yourself on the SRT.  

I would probably revisit the home warranty company as well and make sure they understand it's an attached structure and they aren't thinking along the lines of a converted pool house etc. that isn't attached. 

As far as your insurance goes- the conversion would need brought to their attention as well as your lender's. 

I'm coming from the POV of having this situation personally - while I don't have a mortgage, I do have a 'mother-in law' quarter's to the Northeast wing of the house; attached yet separate driveway, entrance, HVCA etc. Having said that however, I'm using one insurance policy, paying one parcel of property taxes, etc. 

I would say that it may pay to have another home warranty company give you quotes and make sure they realize this is an attached structure- it doesn't seem like this is accurate in not covering; what would happen for the end user that wasn't using this for income generating, but simply an extension of their square footage? 

If you do run into this being a more duplex only situation as far as the home warranty goes, that may very well play into your decision obviously. 

You will need to let your mortgage company know as the terms of the loan product could be dependent upon owner occupied use or that of SFR rental alone, and you don't want to have anything come up there. This is the same for your homeowner's insurance as well.

I think once you verify with your home warranty company (ies) on coverage, home owner's insurance, lender and get hard numbers as far as PM's go (unless self managing), you consider the possibility of having a less desirable rental (if mixing long term and STR both- long term renters wouldn't usually want to have short term renters attached/that close by), your decision should be more easy to make based on numbers alone.

Hope that helps some!