All Forum Posts by: Liz Ridgway

my first purchase was a Condo as a personal residence 13 years ago, converted to an investment property 7 years ago. Although I wasn't in the investor mindset at the time, I quickly learned the importance of knowing how the HOA and the financials are managed. Within weeks, I found myself on the board and 13 years later, still serving as President.

For my unit, there were 2 major challenges.

1. Previous board had no business sense and had a terrible property manager. The reserves had been depleted and were not being funded. The roof had been leaking for years and instead of replacement, board was paying (a lot) for repairs. The HOA was considering a hefty special assessment for a new roof. Additionally, several units were YEARS behind on assessments.

2. The association shared common property with a larger association. The larger association was corrupt and was bullying my association into bad contracts with vendors that were friends.

It took about 18 months for me to turn the place around. We had to write off a lot of the old debt but now we are 98% current with assessments and have fully funded reserves. I don’t know what will happen when I sell. Dealing with the neighboring association is a huge headache. It has been an invaluable learning experience but the cash flows are too low to keep this as investment property. Owners that are not on the board are extremely vulnerable financially to fraud and general mismanagement.

It has taught me to remove emotion from decisions. I’ve been contacted by residents who have yelled, cried, begged, etc for all sorts of things (my car got towed, why did the pretty tree in front of my window get removed?, why won’t you cut down the tree that is blocking my view?, someone left a couch outside of the dumpster, why won’t you buy new pool furniture? I didn’t know we were 6 month behind on payments so please take my word that we are good for it and waive fees.....). If you have the time to be on the board of every condo, you can manage the margins. Otherwise, too much risk

Thank you for the great focus questions! @Jim Goebel

1. Currently reside in Nashville, TN (renting). We move for jobs in the hotel industry with next potential move around July. Strong chance that we will stay 3-4 more years for husbands career advancement but also open to moving as needed. 

We use a property manager for the FL Condo. The TX house is self managed with the help of next door neighbors.

2. Analyzing both scenarios now along with market outlook 

3. I’m handy, but inexperienced. Would need to hire most work done. Would be my own manager and would interview contractors, collect bids, supervise work. Husband is not handy and not willing, but I’m okay with paying for necessary work to be done correctly. We are both willing to live in a fixer during Reno.

4. We have $25k ready to deploy now. Remaining cash would come from sale of 1 or both of the current properties. FL would yield approximately $15k and TX would yield $25k for a total of 65k

5. Agree, it’s been my biggest learning and bigger headache. (Had to become President of the board 10 years ago to protect the investment and while it has been educational, has also been a time suck).

6. Definitely willing to hold the sale of both homes for better market timing. Would rather optimize vs rush for cash.

7. The VA loan benefit deserves digging into. We are eligible for $100k and have used $44k of the entitlement. This leaves us $56k but must be used towards primary residence. Will only be approved for properties that pass inspections. It is a lifetime benefit and funds can be reinstated by paying off the loan(s). For those that may be interested, find an overview here: https://www.vamortgagecenter.com/second_va_loan.ht...

I really appreciate the guidance. I also hope posting from the browser vs the app allowed the paragraph formatting to work!😉

Rents for $1995, self managed with handy neighbors next door to call in a pinch

I recently left my career in hotel event planning and group sales because I decided that if I am going to be spending 60-80 hours/week working, I would rather put those efforts towards something that will yield better financial outcome. My husband and I own 2 properties, both purchased as our primary residence at the time.Not understanding how to evaluate these purchases for cash flow has left us in a sub-optimal position for our budding RE portfolio. I’m posting to help me gain focus, but I welcome comments and suggestions! 1. FL Condo: Purchased 2007 $142k, Refinanced 2015 30yr fixed 4.9%, $89K loan balance. Mortgage $628, HOA $130, Condo Assn Dues $260. Rented for $1175, take home after 10% mgmt fee is $1075.50 *converted to investment property in 2011 at bottom of market, tax value was $50k. Concerned about basis when I decide to sell **Orlando market is finally coming back to pre-crash levels and home values expected to rise up to 35% by 2021 2. SFH iN suburb of Dallas/Ft Worth: Purchased 2015 $242K, 5% down +ClosIng, total cash $11K (VA loan), 3.65%. Current value $275K, $228K loan balance, Self managed, Rent $1995. Mortgage/Tax/ins $1930, R&M $175. NeIther meets the 1%+ rule. Both In growIng markets. Trying to decIde if we should sell one or both for cash for better buy & hold rental Investment wIthIn next 6 months. Currently lIvIng & renting In Nashville, TN

Investment Info:

Single-family residence buy & hold investment in Fort Worth.

Purchase price: $242,000
Cash invested: $11,000

Purchased as primary residence, converted to rental at 2 year mark

What made you interested in investing in this type of deal?

Focused on a primary residence we liked, modest home in great neighborhood

How did you find this deal and how did you negotiate it?

Real estate agent/MLS. Home had multiple offers, our letter to owner sealed the deal even though offer was not the highest

How did you finance this deal?

VA loan allowed for no money down. Still put 5% plus closing costs

How did you add value to the deal?

New energy efficient a/c and heat pump (paid cash). Sweat equity on painting, landscaping, general curb appeal

What was the outcome?

Renter found within 2 days of listing, will stay indefinitely. Positive cash flow that should reach the 1% rule in 5 years. Appreciation exceeds inflation

Lessons learned? Challenges?

Did not meet the 1% rule. We were more focused on a home we personally liked along with the hype around the appreciation in a booming market

Thanks John! @John Thedford (I am not sure if I can tag if we are not connected) I have a property manager (also a real estate agent) and when I asked her about doing this type of appraisal, she responded as though I was asking for something totally out of the ordinary and said they don't do that type of service.  I was trying to explain my tax situation and she said the price at conversion didn't matter... Obviously, I should get a different property manager.

My hesitation around getting a formal appraisal is that I think the IRS will say I have a capital gain when my reality is that I have a real loss.  I don't want to be dishonest with the IRS, but I DO want to explore all of my options before committing to a course of action.

@Cameron Skinner - Thank you!  I am addicted to podcasts and your interview was one of the first.  I am desperately trying to find guidance on this issue.

@ Bart Hedgcock - I certainly will :)

Hello BP!

I am in search of a CPA to guide me in tax strategies for my only investment property which is a condo in Orlando, FL.  I am willing to work virtually.  

- I reside in DFW, Texas

- I tellecommute for a business in Baltimore, MD.  Maryland is still taking income tax and I need discuss any strategies around this.

- My husband works for a business here in the state of Texas and does not pay income tax.

- My husband and I purchased a 3/2 SFH in Tarrant County, TX in June in which we currently live. We will convert this home to a rental when we move for work (most likely in 2019).

- We are likely to move to Colorado where we will purchase another home, live in it, and convert to rental if we move again.

- The FL Condo is upside down. Purchase price of $143K in 2006, I resided in it until 2011. Converted to rental in 2012. Did not understand tax implications so I did not do a market analysis to confirm FMV at the time of conversion. My guess is about $50K FMV in 2011 and current estimated value of $80K. Negative cash flow ($390 monthly condo dues). I did a ReFi 30yr fixed at 4.99% in 2015 with $93K remaining balance. This is where I need the most advice.

- Due to income levels, I was only able to claim 50% of losses in 2015.  I project ability to claim more this year due to maximizing tax-advantaged accounts.

- I have always done my own taxes but am considering paying for professional prep this year.

Thank you for any suggestions!  

~ Liz

Following!  

I only have 1 investment property at this time and I have purchased a SFH 3/2 in Texas which will become a rental when I move in 2-4 years. My specific need is guidance on an investment property located in Orlando, FL (upside down, converted from personal residence to rental at bottom of the market, trying to understand best option for calculating basis and when/if to sell). I am physically living in NRH, TX and I telecommute for a hotel based in MD. Lots of variables this year!

I feel your pain.  Every day, I have to say to myself "I love having a job."  I don't love my job, but I do value the paycheck.  I have treated my career like a game with a focus on growing my base salary.  That has allowed me to stay focused on the bigger picture rather than getting discouraged by the aspects of my job that are not fulfilling.  Now that I have 15+ years under my belt, I not only have the cash flow necessary for me to embark on the next part of the plan, I also have great network and invaluable skills to show for my time.  Self-discipline is important in any career, and imperative in entrepreneurship.  It sounds like you may need a little practice in that department.  I certainly do not want to be a wage-slave forever, but right now, it is a step I can't afford to skip.

So many people get a job and think that is all there is to it. I work for a Fortune 500 company that has locations all over the globe.  I have moved 4 times to advance my base salary and sometimes, my position within the company.  That would not have been possible if I had parked myself in one location and become a slave to the job waiting for the next opportunity for promotion.  Get creative, approach your career like a game, and you may be surprised at how much more enjoyable it becomes.  

As I grow more educated in the area of personal finance and investing, I am realizing that the $$ sitting in my 401k could be doing much more for me.  I am 36, $140K fully vested in my company 401k.  I do have other self-directed retirement accounts but prefer not to use those for real estate.

A) If I were to leave the company, what are my best self-directed rollover options that would allow me to invest in physical real estate (no REITs)?

B) Any suggestions on how to do an analysis on the best ROI between

- Leaving current employer for another company in order to roll my 401k (would experience increase in health insurance cost, would give up 22 days of paid vacation per year most likely for the standard 10 days, up to $20K reduction in annual base salary, etc)

OR

- Stay with current employer, grow base salary by 3%/yr, continue to invest the max 401k contribution to realize max allowable personal income deduction

Side note, I telecommute for a job in Baltimore, MD while residing in DFW, TX. I am still seeing MD state income tax but am having trouble confirming that this tax is valid.  MD is not one of the states that is known to tax telecommuters.  So, I could eliminate my income tax by leaving current job in favor of a local employer.

Thanks all, looking forward to the discussion!