All Forum Posts by: Matt Vogt

Although you don't like 'house-hacking', it's probably the best solution for your situation. Another option if you don't like the multi-families, it so get a condo or something affordable, live there till you save up enough for the next place, then rent out your primary. You're going to get a lot more leverage if you live in the property first (5% conventional for primary vs 20-25% for an investment).

If you're able to transport them down to Denver, I'm sure a post on Craigslist would get you some interested parties. I would just take a non-refundable deposit to cover your expenses/time in the event that you drive to Denver and they blow you off... I'd bet on $500 or so for a decent set, that seems to be the going rate.

I'm trying to understand your situation a bit better. Are you going to live in the property before it becomes a rental? If so, then you can get an FHA loan. Otherwise, you will be unable to get an FHA, as those are for primary residences and not investment properties. You should be able to hold title in the name of the LLC, however with RE, the mortgage is privately held (and secured by you, not the LLC). Best thing to do, go talk with your attorney to get the LLC created and all of your ducks in a row.

I would absolutely sue if you had enough documented proof. I would also find your BBB and report the individual/company. 

I am wondering how you were able to find two 'duds' in a row to fix your roof though, I would be using this as a learning experience to better your contractor search/vetting criteria. 

Let me get this straight: 

Husband had 25% stake, bought out remaining 75%

You and your husband are going to rehab the property and sell it (to a nephew).

According to the IRS: https://www.irs.gov/Help-&-Resources/Tools-&-FAQs/FAQs-for-Individuals/Frequently-Asked-Tax-Questions-&-Answers/Interest,-Dividends,-Other-Types-of-Income/Gifts-&-Inheritances/Gifts-&-Inheritances

I believe you would pay capital gains only if it sells to your nephew for more than your costs basis (less any associated costs for the rehab). From my understanding, if you merely passed-through the expenses to the purchase price, you would have no taxable gains. I am NOT a CPA though, so I would consult a CPA to fully understand your situation.

Another option would be using your 401K as a source of funds via a loan. Granted you'll need to pay the money back plus interest, but you'll have access to about 50% of your stated value in the 401K, and you'll be the beneficiary of your interest payments. For a conventional lender, I believe that loan amount would add to your Debt for the D/I ratio, so that could be a factor to consider. There are several potential benefits to using your 401K: Quick access to cash (usually just a few days) and you receive the interest. 

On your current property, you should be able to get a home equity line. Typically lenders do them up to 80% LTV, so your 170K house less 122K would give you $14K of available equity. Couple that with the cash available for loan in your 401K and you would likely have enough to close on another property... maybe adjusting some of your pricing criteria etc.

I paid an attorney to do the LLC formation for the first go-around. The cost was in the ball park of $1100 in Upstate NY. The articles of organization were basically a boiler-plate with slight tweaks for our specific situation. Going forward, I will be using the same articles with minor adjustments to fit the new scenarios/partnerships and will file myself. Although I spent more than I needed to, it was worth the piece of mind for my first rodeo. When the time comes for me to create a trust or other complicated matters, I will again seek the guidance of an experienced lawyer. Although it might be costly up front, the importance is getting it done correctly to prevent issues in the future. The main reason why you have an LLC is to protect yourself in the worst case scenario, so it's probably a good use of funds to ensure that it's done correctly IMO.

My legal plan is to have an LLC for each property or potentially small groupings of properties... that way in the worst case you only lose whatever is held in each LLC rather than your entire portfolio. More importantly, the LLC will protect my individual assets in that worst case scenario. It's like having a stop-loss on a long stock position.

I would bid the job with several contractors. Probably a good way to get a sanity check would be to go on Craigslist in the Labor section, search for drywall. You'll likely find tons of contractors. Call a few and ask what they charge per sheet. and tell them how much drywall you'll need. I would assume that a decent drywall service would have some form of tiered pricing depending on volume. $18/sheet vs $14/sheet isn't a major difference, nor is really comparable considering that you two are in different markets. You're not going to find enough 'data points' to get a good feel for the pricing you were quoted.

The best way to find what's typical for  your market would be to ask other contractors in your market. Additionally, if you're doing a whole house, you should be asking for a volume discount.

I would assume a large holding period. Unlike a dense urban setting, a rural property is most likely going to sit on the market for much longer before you find someone who is interested in that particular house. How much profit do you expect to have after your rehab and carrying costs? What does the worst (or 2nd from worst) case scenario look like, could you rent it out and not be too exposed? I'd have a backup plan or two in your pocket before pulling the trigger. It's always good to be over-prepared and ready for the worst thing. Additionally, if the market deteriorates, the rural properties will likely get hit the hardest. 

I would use landscaping to change the visuals from the curb. I would be using some large shrubbery close to the house, or build some raised flower beds there with a few large bushes to help disguise the lean. If you're seeing the flat earth and then the house, the lean will be fairly noticeable, however if you add a middle transitional layer, you will do a much better job blending it all together.