All Forum Posts by: Nathan Grabau

You want to create an LLC here. If you are concerned about the partnership agreement, discussing how you want it set up with a CPA and then having a lawyer write the contract is ideal. For example, one thing you can do is assign separate returns for equity, cash flow, depreciation/ paper losses etc. This could be particularly valuably if you have a partner or you are in a dramatically different tax situation and you can benefit from depreciation at a higher tax rate than a partner. No sense in splitting the paper losses/ depreciation when one of you is in a 12% tax bracket and the other is in a 30%+ tax bracket! My CPA is now my first call when I am trying to set up a deal or legal entity, to figure out the most tax advantageous way to do it for all involved.

What kind of insight are you looking for? 

I would think about owning a manufactured home, if you do not own the land and pay a lot rent, almost like owning an RV. Can you make money renting it? Yes... Can you renovate them and increase their value? Yes... Does it increase in value over time? Probably not. If you do own the land, and it is a manufactured home on land you own, this is different, and you have the opportunity to have appreciation that you capture, as opposed to appreciation that is captured outside of you favor in the way of increased lot rent. 

 Another roofing contractor here, if you can get insurance to cover it do it. Otherwise do not. We do work on roofs that are 50 years old and have a typical lifespan of 20 years. Anyone who is quoting you typical lifespan is just trying to lead gen. A roof having minor leaks is not like a furnace failing in the middle of winter. It is very easy to bubble gum a failing roof until it can be replaced. 

Age of a working product should never be used as a factor for replacing it and roofs will keep working for a long time after granular loss has began. This is someone coming from Colorado too, with 300+ days of sunshine at high altitude and very cold winters and wet springs. 

In my mind you only replace a roof on a house or non sensitive commercial setting(ei not a server farm) when you have leaks that cannot be fixed, or you have a insurance event like a hail storm.  

I have house hacked with friends, and have had a monthly or bi weekly house cleaner the whole time. You can certainly create a stringent clean up after yourself policy, but if that is not necessarily your personality or you are house hacking with friends for roommate, I would hire a cleaner. Will save you tons of headaches to not have to argue about who's turn it is to clean the toilet or floors. 

Besides that what I have found is that if I try to interact with people who rent rooms from me as roommates, and they treat me like a landlord, there is always more than enough overlapping respect there, where we are showing each other more respect than the other expects in any given situation. 

Also, I have put a king of the hill clause in my contracts with roommates, essentially saying the only space they have domain over is their rooms, and if I am occupying a space, I can ask anyone to leave it. I balance this by having very short term notice for tenants/ housemates to leave. I have not had to use it, but it is a good thing to have and be able to remind everyone that you are in charge, but they are free to leave. 

You don't need to get all your money out for the BRRRR to be successful. You got the property with less than 20-25% down, and have almost 50k in equity from 17k.

Cash flow being so low is not great, but with rates where they are we probably have to lower our standards a bit for cash on cash returns and enjoy the deals that do pencil. Your activity is generating 33k in equity, plus positive cashflow, which will improve over time, especially if you refi soon. 

This also depends on the market you are in. I have different standards for what my Colorado BRRRRs get in cashflow vs my Iowa BRRRRs. 

As long as your bank will fund it, I would not worry about this. If I were you guys, I would try to 1099 my time through the contractor I work for to the bank and see if they will "pay you" for the time you are taking to do this work. It is a weird situation, and I would just make sure whatever you are trying to do you have in writing just so everyone is on the same page. 

If you come in under budget, most likely the bank will just reduce your loan balance, potentially when you refi the construction loan you could get cash out, but I would not bank on this. It is technically a conflict, but it seems like most of the conflicts of interest here are in your favor. This sounds like a great opportunity to me! 

I would get a professional in that you are paying to confirm they are gone, but I would not worry about this if your inspector says they are gone. 

While any property can get bed bugs, if you are buying property that is very cheap and has cheap rent, especially for the area, I would be aware of the tenant pool you are pulling from, and make sure that you are okay in your head with managing a property with that tenant pool. 

I think that your 81k of potential cash could generate a lot more than $305 a month, so I think that selling is the right move. I think you are certainly on the right track here. If you want to deploy any of that capital into the CO market let me know. We are actually starting to see cashflow come back with 25% down on investment properties, which was not the case for a while! 

You have to be familiar with the foreclosure process in your area. Each state has different laws about the process for foreclosure and how long someone has to catch up their payments before they actually lose possession of the house.

In Colorado, we can require specific performance, so if a seller signs a contract to sell, we can legally force them to sell the property once they go under contract. I am not sure if your state has similar rules, but this could allow you to be willing to get the mortgage current once under contract to stop the foreclosure process. I would consult an attorney on this though to see what recourse you have if someone does not want to sell after you get them out of foreclosure.