All Forum Posts by: Drew Dim

Would you make this deal?

So I have come across a condo that I am interested in as an investment property but want to know what others would do if in my shoes.

Specifics:

Asking price $55,000 (Has been on the market for some time and I wonder if a cash offer could very well get it down to around the $45-$50k mark (+or -).  So let’s say $55,000 out the door with closing which is about right when I ran the comps. (Not a realtor by the way)

This 1bed/1bath condo could realistically rent for $900 as others are asking $950.

HOA = $390 (includes electric and water etc so basically no living expenses besides internet/cable) Seems really high and I imagine it will only grow

Taxes = $110 (ball park)

Insurance = $50 (Honestly I have no clue, so I’m guessing)

Cash Flow $350 a month

If I did this correctly the CAP rate = 8% and it's pretty close to the 2% rule

I was considering all cash because the $350 per month cash flow – any kind of mortgage payment doesn’t seem to be worth it.

-At what point would it be worth it? Say if I could get it for $45000 out the door etc? It's an older condo and I know when large expenses occur the HOA comes knocking door to door so I would be prepared for those misc. thousand dollar expenses as any given time.

If the numbers make sense and I place an offer, I'll request more info regarding the HOA, like how much $ do they have in reserve, how old is the roof/AC units etc, are there any pending legal actions or other large expenses that could be looming in the very near future.

-***- Lastly, what things should I look for in regards to the property being a condo?What are the Pros and Cons of owning such a property.  Any advice on purchasing a condo for a rental is more than welcome.  

My goal for this particular property would be strictly for cash flow.  Any realized appreciation would simply be viewed as a bonus, and I would plan on holding for a minimum of 5-10yrs (hopefully longer).

Thanks for any and all advice, especially from anyone who has owned/rented out a condo before.

Drew

JR, it depends on the state.  In an attempt to cut out predatory lending in Texas you have if start foreclosure the property must go to auction.   "rent-to-own" must convert to this as well after 6 months.   Good idea to talk to a real estate attorney as I learned this while in the process of owner financing some raw land.

4 is my understanding as well.   If you're married then it could be 8.  One you reach that magic number a lot of folks get creative and find private money or hard money.   

anyone out there have any advice?

so I've filtered through the archives and didnt see an exact fit to my question so here goes.

I have a lot that will have potentially 3 spec homes build on them. The 1st is under way and will be completed Jan/Feb of 2015. The 2nd will start and finish in 2015 leaving me with a potential gross of $200k+ I have a W-2 and the properties will be build under my LLC.

I've heard that the profit $100k per build will go attached to my normal taxes as earned income ONLY I would also be taxed under self-employment and the "new" Obama tax!  

(per 2 CPAs)(Yes "we" can) thus taking a substantial hit on the profit vs. the normal "earned income tax" like I originally thought.

Would it make sense to have the LLC file under an S-Corp in 2015 in preparation of selling 2 houses, pay myself 1/3 profit as salary, then the other 2/3s would stay in company/ and eventually be paid as dividends thus saving from self-employment tax/ Newere Obama Tax and possibly if held for over 1yr tax drops to 15%?

I don't care to walk a grey line and risk anything w/ an IRS audit, but want to save as much $ as possible to throw back into more growth?

(Too bad 1031s arent an option)

Also if the land was purchased at $20k per slice/lot and i valued them as $50k once sold, would the sell of land be taxed as a straigh capital gain and not be subject to these other taxes?

Any initial guidence would be appreciated as I will be working w a CPA, just want some initial feed back.

Thnx

Drew

The DEA has a data base you can check addresses to verify, but I'm not sure how up to date it is. Also isn't that something that has to be disclosed when selling/renting the property. If so, it could create some major head aches for you! I'd think twice, bec. I know professional clean up and remediation and extremely pricey.

Are you having this house built?

Howdy! And welcome! My wife's from Redding and we got married on Shasta. Love the area, and good luck. We know some people who have got the quad-plex route up there and it seems to work very well for them. Best of luck and welcome. Drew

thank you all for all of the advice.

Wish 1031 would have been an option but glad I asked.

Thanks again!

Drew

my understanding is it's still 2yrs. And as stated that the plan for the 3rd house. Its getting it from the llc to me personally. Basically I'm buying a house for cost with the true retail value being almost double what I would buy it from. You cant sell a house to family for a $1, so does that "rule" follow to this example?