All Forum Posts by: Lucas Martinez

@Ray Martinez

It completely depends on your market. Are there backup offers? The seller isn’t obligated to repair anything. Some flippers may feel a sense of duty to provide a quality product, but most don’t really care.

If there are backup offers, you’re probably out of luck. If not, and they would have to go back on the market if you pull out, you may have some leverage. But assuming that they have to repair things that they should have done correctly during the remodel is incorrect.

Coming back to the title of the thread, can one of the accounting experts on here summarize the benefits of a Real Estate agent forming an S-Corp to receive their commissions, assuming that agent makes over $100k in commissions per year? 

I think valuation depends greatly on the lot and area. In my area, ADUs definitely add value. 

Regarding county codes preventing it, the new state law (as of last year) supersedes county codes and requires them to allow ADUs under a set of less stringent guidelines. So counties don't really have a say in the matter. 

@Eddie Starr

Definitely illegal to have lenders give you kickbacks/referrals. Very big no no.

@Kyler J Sloan

It’s not just the expense of the cameras themselves you have to think about, it’s the cost of hooking up internet for however many months you’ll be renovating. That can add up.

I never add internet and cameras until I put things in the house that could be stolen (furniture, TVs etc). Until that point, the most valuable things in the house will be your contractor’s tools, so you can bet they’ll lock it up.

If you don’t trust your contractors enough to just leave them a lockbox you need to reevaluate your contractors.

@David Arsene

Because I hadn’t thought of that 😂

I like that idea a lot actually. I had tunnel vision on the cash out refi, not thinking of combining a rate/term with a HELOC.

I’m gonna look into that. Thanks David!

@Will Barnard

The only reason I would opt for the 7/1 instead of the 30 year is so I could take the excess cash flow from the interest only loan and invest it in additional properties. 100% agree that rates are going to increase significantly over the next 7 years, but my thinking is that I can make more money by investing those savings now. If it allows me to buy another rental property, I think I'm ok with paying a higher rate on a 30yr down the road. 

They can't do anything that you can't do yourself. Just set up your own notifications on Redfin/Zillow etc and find a realtor in the area(s) you want to purchase. Those agents will have more access than you have, but your local realtor won't be much help. 

@Dan Heuschele

Here’s a question for the group, as it’s clear a lot of people in here have studied ADUs from an investment perspective…

I'm kicking around the idea of adding an ADU to my primary residence. I have a large lot, and the idea would be for the ADU to one day become the guest house. In the near term, though, I would rent it out as a furnished rental on a 30-day basis. In my location, I'm confident I could get $5000/month easily for this.

Now let's use some round numbers to explain the rest of my thought process. Say my current mortgage is $3000/mo. If I do a cash out refi to pay for the ADU build out (say $300k build cost), and it increases my monthly mortgage payment to $4000, I'm thinking it makes sense to pull the trigger. I would go from negative $3000/mo with my existing mortgage to plus $1000/mo with the ADU being a 30 day rental, thus turning my primary residence from a liability into an asset.

My current thinking is to do this as a 7/1 interest only loan on the refi in order to keep cash flow as high as possible. I would then redeploy that capital into other investments. Then in 6 or 7 years refinance to a 30yr. But I’ve thought about doing a 30yr fixed out of the gate as well…it just means significantly lower cash flow and less opportunity for additional investments. Positive is that it locks me into a great rate.

For the sake of discussion, let’s assume all my above numbers are accurate (I know I’m not including tax, insurance etc, and I’m just using round numbers).

I’m looking for people to poke holes in my thinking.

Is this a good idea? Would you go with the 30 year out of the gate or opt for the higher cash flow of the I/O ARM? Is there anything I'm not considering?

Your agent in NY shouldn’t be your main resource. You can ask them for a referral to an agent in Memphis (if they have one). Your agent will then get a referral fee if you end up buying something through the agent they sent you to. But you need someone local to that market who is licensed in Tennessee and understands the market. If your agent in NY is telling you they can help you more than that, you may want to find a new agent (unless they are dual licensed in NY & TN)