All Forum Posts by: Matthew B.

Oh, man...

I've posted about this before here: http://www.biggerpockets.com/forums/67/topics/1756...

You have to let them do whatever they want to do. Just pretend you live in North Korea and the inspector is Kim Jung Un. 

He's gonna be looking at what you're doing and determining whether or not you need a permit. In my area, if you're messing with anything structural, roofing, windows, exterior doors, fencing, electrical, plumbing, etc. you need a permit. 

Now if you're just cleaning up junk and not tearing apart the house, he's most likely not gonna make you get a permit. Sounds like he saw what looked like construction debris and assumed you were doing work on the house. Or maybe you were doing work on the house. Either way, act dumb, plead ignorance, and go through his process. It's too late to get away with anything now.

Good luck man!

Definitely a scam. Don't do it. It is incredibly difficult to get financing for anything, so something that easy is not real.

It needs to be on the MLS. If you're worried about paying the commission, find a flat fee broker so you only have to pay the buyer's side.

I deal with Lowe's a lot, and if you're buying anything over $2,500 you can get a quote at the Pro Desk. It's usually 10%-15% off. I assume Home Depot is the same way. I've never done it with appliances, although coincidentally I also have a 4 unit coming up that I'll need appliances for. In addition, I get 7% off at Lowes with an LAR account combined with a Community Buying Group discount. So my 15% savings turns into 22%. 

I'd definitely go to Lowes and Home Depot and get quotes. You never know until you try.

I believe you're talking about short-term vs. long-term capital gains. The 15% would be applied to long-term capital gains (more than one year) and the higher rate would be applied to short-term capital gains (less than one year). There's also the dealer tax, which would be applied on top of the short-term capital gains rate. 

I had a tax attorney tell me that I should continually recycle the LLCs I use to flip houses so that there's no established history for the IRS to base the dealer tax on. Run a dozen or so properties through and then dump the LLC. Of course, the IRS could catch you doing that, but apparently it's very unlikely.

I also know guys who have flipped hundreds of houses with the same entity and never got hit with the dealer tax.

In my opinion, the risk and hassle of holding the properties for over a year outweighs the tax savings. Go make money and let the accountants figure it out at the end of the year.

I made a list of 9 different portfolio lenders in my area and I've spoken with the loan officers at each. They all seem to give the same vague answers. I get the feeling they have a lot of "investors" calling about these loans and it almost seems like they don't believe anything you're telling them on the phone. Maybe I should go visit in person?

I've actually been banking with a portfolio lender for the past 2 years with the intent of using them for financing when the time came, but now they are refusing to lend on the ARV, and only want to lend on the purchase price, even though the properties are seasoned over 1 year.

So you basically got a LOC in your personal names that was secured by a property owned by your LLC? I wasn't aware I could do that. Was it through the commercial department or personal banking? Are you using the LOC to finance flips or buy and holds?

We would ideally be using the flip money for living costs and to purchase more rentals, not pay down the mortgages before the 5 years is up. With longer term financing, we could allow the rentals to pay themselves off and keep rolling the equity into new properties. At least that's the strategy I read about so much on this site (BRRRR). The investors doing that must be purchasing in their personal names because it seems very difficult to do if your properties are owned by an entity.

Your estimates seem alright. It depends on what you buy. But the labor is extremely high, at least for my area. Your contractor will be making more per hour than my lawyer.

Always negotiate. Always get at least 3 quotes.

I have a small rental portfolio consisting of 3 SFR's and 4 MF units. All were purchased within the past 2 years with cash - no mortgages. The cash to purchase the properties was obtained through my flipping business. All rentals are owned 50/50 by myself and a partner and held in an LLC.

Me and my partner did not intend on purchasing so many buy and holds, but the deals that presented themselves were too good to pass on. As a result, much of our cash that we were using to flip properties is now tied up in the rentals. The thinking at the time was that we could just do a cash out refi after the properties were seasoned, and continue our flipping. Well, now it's proving very difficult to do that.

I've gotten the run around at several different portfolio lenders in the area, and they want 3 years of tax returns for the LLC, which we don't have (LLC that holds the rentals was formed in late 2013). They also only want to offer commercial loans with balloon payments due in 3-5 years since the properties are not titled to an individual.

I'm looking for advice on how to proceed. Our flipping business has slowed considerably because we don't have the cash to finance more than one deal at a time. We have 100% equity in the rentals that is just sitting there, but none of the portfolio lenders want to touch it.

Do I wait a year or more until the LLC has enough income tax history? Do I somehow title the properties in our personal names to get financing? I know there are tons of people on this site who are way smarter than me. What would you do?

In my area you have to put down a 5% deposit at the time of the auction and you lose that deposit if you walk away later. You have to have deep pockets if you want to continually shut someone out.