All Forum Posts by: Jiri B.

@Account Closed I'm not familiar with your local market, but overall, when i hear "It's just not right for me" that means, the price is too hight. It would be right, if they liked the price.

It's really nice remodel, but i think you have done too much for that neighborhood. The kitchen is very typical but i think you went a little too much on the bathrooms. Typical buyer for remodels, gets all their ideas about what is currently in style from shows like HGTV. Sticking to that type of design and finishes, you will appeal to most buyers. The bathrooms don't seem to fit that trend so you might love it, but it might be hard to find the exact buyer for that taste.

Also i dont like the overall brown color on the walls and ceilings. Ceilings should be white to bright up the space, brown just make it dull.

The longer it sits on the market, even if you get to the right price, people will think there is something wrong with it.

Also many buyers will just view the home to see remodel, but then don't think its worth it. Most of the homes in that location appears to be around 130-160k. So buyers don't think the remodel is worth that much more.

I would just do a drastic price drop, get it sell and learn from this. The next remodel will be better.

Personally, i think even if you break even on your first flip, the amount of knowledge and experience you learn will be way more valuable then just being lucky and making ton of profit on that flip.

@Ryan Manning Starting a business is not hard. Starting a successful business is a different story. I was reading an article recently about majority of PM companies not making it past 2 or 3 years.

I would recommend first working for a property management company as a licensed real estate professional to learn how it all works. You will also gain some connections that way so then you should not have issues being find by investors.

As an investor, when selecting a PM, due diligence is very important. I would not trust a company to manage my properties without proven track of successful records. I would want to know how well you screen the tenants and have good records showing that. I would want to know you can handle evictions in timely and professional manner and that you can maintain my properties to keep them profitable.

Good luck!

@Joshua Boyce I started with conventional loans. You typically get better interest and you are able to get 30 year fixed. I would only expect interest go up so locking good interest for 30 years would be nice.

They are many reason to consider for this, but the few that comes to my mind ares:

- for commercial loans the property can be in bad shape in which would not qualify for conventional.

- there is typically no limit on the number of loans or the amount of money borrowed for commercial loans

- conventional loans can only by issued in your name, not LLC so there is the liability issues

- commercial loans have higher interest rate then conventional loans (typically i see about .3-.5)

- commercial loans are typically 5 years with 20 year amortization so much higher monthly cost

The bottom line, if i was doing my first couple of deals for buy and hold, i would go conventional in my name and then just transfer the title into LLC (typically as long as you pay the loans the bank don't go and check and don't care where the payment comes from - not telling you to do this but i have seen this is a lot). If you have more then 5 properties, then you have no other choice then going commercial. But why not to take advantage of better loan options when you can..

Earnest money is not required by the law so anyone can write an offer with $0 EMD. That said, i would not recommend anyone in this market to accept anything with less then 1% EMD of the purchase price.

If you look at the from the seller perspective, you have a buyer who is not even going to purchase your home but hopefully assign it to someone else and can walk a way with $0 loss, i would not take my house of the market to let this person "try" to make money.

As a seller, i would also expect Due Diligence Money. Which is non-refundable at all. This is probably the most appropriate part to show the buyer you have done your research on the property and will not simply walk away during the due diligence period. 

EMG is typically refundable during the DD period so even if you offer 10k in EMD, as long as you are within your DD period, you should get the money back if you walk away for any reason (but check your specific contract for this)

Offering $0 EMD and $0 DD is a total joke in this market. You are basically telling the seller. "Hey, take your home off the market for me for 6 weeks and miss out on potentially more serious buyers. And i don't even know if will buy it.. Will let you know how i feel about the purchase next month."

Bottom line, if you are a serious buyer, make a serious offer.

@Nathan Birkedal Make sure to talk to a lender first to figure out what you can afford so you know what properties to look at.

You mentioned you have about 40k to invest in real estate. There is not a much. Depending on how long it took you to save them, the property prices might be rising faster then you can save so waiting and more time and saving might not always work the best.

Here is the deal, if you do an investment property, 40k will give you about 175k purchase price. (40k - 5k closing cost and other fees to play it safe = 35k downpayment, 20% down)

That should narrow your search a bit. If you are going for SFH, you can find a decent rental properties for that price.

If you want to get a property that needs work, you will likely need more cash to do the repairs / upgrades so keep that in mind too. 175k means move in ready with no repairs, unless you are able to save more every months and put that into repairs. But for an investment property, its is very hard to do improvements when tenants lives there so you will likely need that cash when you purchase the property so you would need a significantly lower priced properties than this.

There are so many other options and its hard to advice with a limited knowledge of your situation and your goals, etc. If you do house hack, make sure you know what you are doing. There is nothing worse then having homeowners doing their own remodels that is not up to code or bad craftsmanship. Might cost you more down the road (horrible trend from watching HGTV in my opinion)

Since you don't own property yet, i would maybe look into putting 5% down with a conventional loan, live in for 2 years, then turn it into rental.. You will get 95% LTV and very good interest locked for 30 years.

Personally for me, i would want at least break even after all expenses. 1% is really tough right now for a property in a nice neighborhood. If you get something that needs work, you might be able to build some equity right-away and do BRRRR.

Even if you get 0.7%, keep in mind that as long as the market keeps going up and inflation stays high, you will likely be able to charge higher rent every year so eventually you cashflow will grow large. (also some expenses too and you can't never assume the market will always go up).

@Ben Kirchner I feel your pain with home warranty companies! I probably used 4 or 5 different ones and never had a good experience with any of them. I only had home warranty because it was offered by the seller's agent so saved me $400 for the first year when purchasing a property so why not. The only problem was, that renewing cost was double and depending on your plan, they also charged me $100 for every service call. After doing the math on the properties and the money i "saved" it was just not worth it.

They went out of their way to replace every possible part before replacing the entire item and every time, the issue was "something else" so i just kept paying and paying for the service calls. Most of the time, the warranty did not even covered the items (broken window, water leak outside of the property, parts of hvac etc). Or only covered part of the replacement.

It also took them 3 months to replace a non-working stove (faulty circuit board) so they kept coming back and ordering different parts. It was drop in stove, so when they could not get 20 year old part anymore, they had no choice to replace it. But the new one was 0.5inch wider so they had to cut the counter top and cabinets, which was not covered so they just left it the in the middle of the kitchen and i still end up paying for all that.

I no longer get or care about home warranty for investment properties. I can typically get those smaller items fixed for the price of the service call or even lower and its not worth the hassle.

If you are hoping to get the HVAC replaced or other appliances by them, it might work out unless it takes few more years and by then, you already spend that money on the home warranty and service call fees and they might not even cover the whole thing once it comes to replacing.

They are here to make money and they will go out of their way to replace parts before replacing the entire item.

Also keep in mind, that if tenant breaks anything, including the appliances, they are fully responsible for the repair or replacement cost.  This does not include regular wear and tear or issues caused by malfunctions of course.

Accidents however happens and if its a good tenant and we have no other issues with them, i might just pay the bill and have it as expense. But i make sure they know about it. However, if you have a tenant that calls you and say the washing machine stopped working and the appliance repair technical clearly states the issue was cause by the tenant, then guess who is getting the bill?

You should not be paying for anything that the tenant breaks and your lease should also cover this. And if you discover that after the tenant moved out, you have their security deposit. If the issue was not property reported (as per the lease) then the tenant is also responsible for that.

Just make sure you are using a good leasing agreement and that you are screening the tenant well. This will prevent many issues.

As it was already mentioned here, it depends on the type of property you have and its also market specific. For example,  here in Raleigh, NC tenants especially in single family homes or townhomes under 250k typically don't own their own appliances. Not having one there already, will results in tenants just looking at other properties.

The easiest way to find out what is expected is to look at the current listings around your property and see how many properties offers them or don't offers them.

Appliances are not expensive and they are also tax deductible. I would do whatever is typical in your local market to stay competitive with your rentals.

I don't use series LLC and honestly don't even know if its recognized here in NC.

But i do structure my businesses with multiple LLC's. Yes, you have to pay $300 annual fee but you don't have to have separate bank accounts, credit cards, etc for every single one of them.

I also separate my LLCs (my business ventures) not only by assets value but also by business activity.

So my structure would look something like this:

-- LLC for real estate transactions (buying, selling real-estate and handling clients) - you would have your own bank account here with credit cards etc.

-- LLC for property management (purely for PM, you still have your bank account here, credit cards and trust account, then this LLC is the Property Management, the other LLC is the client)

-- LLC's to hold property titles based on the equity value. So you might have one LLC for couple of properties that might have higher equity value that justifies the cost and hustle of the owning the LLC. And then you might another one for say 6 properties that dont add up with that much equity. Once you grow the equity of some of the assets, you might want to move title into separate LLC. There are no bank accounts, credit cards, nothing like that. Its purely to hold title and cover liability.

In my mind, there is no point of having one LLC for every single property you own especially if you don't have enough value in that bucket.

There are also trusts and other legal means you can do to move properties around and protect your investments. It does not always have to be an LLC.

I'm not an attorney so im not trying to give any legal advice on how to structure your business but this is what works and make sense to me.

@Allyson Edwards the problem is likely the high price as it was mentioned here several times. When you get told by other people, investors or even realtors that you can get certain rent on those properties, always verify the data by looking at rented comp and how long those properties were on the market.. Trust but verify.

If you don't want to sell and want to keep the higher rent in order to stay in positive cashflow, you might try to consider a short term rental option. You would however need to invest in the furniture etc but you will typically be able to charge much higher rent. I don't know that area to give you the proper advice, so you would need to do research if that is even an option there to make it work.