All Forum Posts by: Brian Larson

@Michele Moreno 

I have been to the MB FIBI a few times but not recently as my sons soccer tends to be on the same day :( But I highly recommend it. They very much have a similar vibe to BP in that there are no guru's are people selling. The Long Beach ones are usually larger and you see many of the same folks

@Reggie Maggard I saved the $44K (full amount of purchase, closing, holding costs so far) I had some private money lined up to use but I had enough to do it on my own and I didn't have another Buy & Hold to acquire so pulled the trigger :)

It will be interesting to see how it turns out and also to compare the 2nd flip (I have another thread on that one) to this in regards to holding costs. Sure the CoC return on #2 should play out much better but it will be fun to compare even at different price points.

Thanks @Jerry K. 

Good hunting skills :) You must really know the area.

I have seen you on here regarding liens in the past. I would love to speak with you at some point.

Here are some pics. Sorry for not getting in original post.

Before outside. Total mess

Inside not much better

Looking much better outside

Kitchen and common area after cleanup

So as you can see, I have not even sold my first flip yet but here we are working on #2. I have promised @Kyle Larson that we will not acquire another property until 1 sells AND this house is at least 60% done with the rehab.

• Distressed sale listed on MLS.
• Purchased for $115,000
• Using hard money lender. Paying a premium (15% with no origination but it was my offer so I could build trust with this lender). I also did the math on 10% @ 2pts vs 15% and if sold under 6 months it is better to pay the premium with no points. 
• Closed on 10/17

House Details:

• Built 1975, 2 bed/2 bath, 1850 sq ft house
• This is a dated but very large house. We will convert to 3/2
• Estimated Rehab is $30k
• Estimated ARV: $195k

Rehab Details:

• Rehab started on 10/20
• Compared to our other property this is much more thorough rehab :)
• Hired contractor to rearrange space, create 3rd bedroom, fix flow and update baths
• Removing old tile throughout (glad someone else is doing this, what a mess)
• Paint, flooring, new baths, light update of kitchen, etc
• 6 week timeline but there are some things lining up to maybe shrink this to 5!

I will update this post with picture shortly. I need to original, awful pics put up :)

Brian

**PICS COMING SHORTLY**

I just found this thread and figured I would post even though the rehab is complete and the property is listed. I have another just starting and will post in another thread.

Note: I live in Los Angeles area and am doing a remote flip. Due to J Scott's book and his podcast I decided to make sure the flip was with someone I could trust intrinsically and would care about the job as much as I do. Thus my birddog, estimator, GC, project manager and everything else is @Kyle Larson my brother who is local to the area. 

Purchase Details:

• REO listed on MLS. Started at $49k in January of 2014
• Put under contract for $28,000 in late June
• Closing delayed 2 months due to electric work needing completion (bank paid $4k to get new work complete)
• Closed on 9/17
• Purchase Price: $28,000 ($2k below our our target acquisition price)
• Paid cash, rehab costs out of my pocket as well to keep minimal holding costs (outside cost of money and opportunity cost)

House Details:

• Built 1985, 2 bed/2 bath, 950 sq ft on 1/8 acre lot near a creek and now defunct golf course
• House looks like its manufactured. Had to triple check it wasn't...it isn't :)
• Estimated Rehab was $13,500
• During inspection we found termite damage that would cost approximately $2K in tenting and repairs. Since we saved the $2k on acquisition we rolled with it
• Actual Rehab with termite was $15,500 (fantastic job on estimate by my brother on his first flip. Also thanks to J Scott's estimator worksheet
• Estimated ARV: We went conservative - $75k
• Currently listed (as of 10/17) for $87.5k

Rehab Details:

• Remove old carport and porch
• Rebuild and reface deck
• replace both Baths
• New flooring throughout
• Fix siding, paint exterior
• Drywall work, paint and baseboards throughout
• Heavy landscape cleanup, gravel, etc
• Appliances, cooling/heating and inside electrical were all good to go
• Kitchen could have used an update but was in good shape and at this price point was just right for the area.

So this is less of a diary than it is a summary but we still have to sell! I am excited at the possible profit and feel very good about turning the neighborhood eyesore into a nice home for a small family or older couple looking to retire by the creek. Win/Win/Win

Brian

Thank you Bob. Great insight on recast. I am not sure if that will make it work but will investigate.

I will reach out via PM now. Thank you!

First, sorry for the long post. 

Before I found BP I started investing in SFR's in Phoenix metro area. I bought on the basis of rent covering PITI and thinking I was good. Surprise, surprise, I was not. It has yielded -$200/month over the past 6 years...yikes.

So, this is the last property I have from that era and now have the opportunity to sell (been waiting on tenant to move out as they have been there for 4 years) but due to what I owe, this is painful.

Here is my scenario and options as I see them. Thoughts?

First, the basics details:

• - Amount owed on loan: $139k
• - Asking price: $129k as-is, $134k with $2k work put in

The property has rented well (low vacancy, good tenants) BUT looking over the past 6 years I have a NEGATIVE cashflow of $200/month (if only BP was here in 2002 :) so I am looking to dump the property in order to get this off of my balance sheet.

Other details:

• - Passive losses of about $30k tied to property
• - Purchased for $153k initially and depreciated to a cost basis of about $108k today
• - last tenant has been there for over 4 years at $950/month

I see 3 options.

1. My thought was to sell the property for a loss, pay the bank the difference (Short sale is not an option for me today) writeoff the loss and get the passive losses applied to income this year. This would be a big loss up front (~$18k) and the taxes will not zero it out on next years return as far as I know.

2. Lease Option the property with a 2 year lease. This will secure rent (barring tenant issues) the next few years and hopefully will give the tenant/buyer a way to buy at an agreed price that is close to what I will owe at end of 2 years, will save me RE commission and get me much closer to that net ZERO.

I really don't know how to market or find lease option prop managers/agents but will go that route if folks think that makes sense.

3. Keep the property and rent it back out, eat the $200/month, hope for better market and sell in a few years. At least I would not eat the $18k this fiscal year.

Any other thoughts? Am I missing anything? Part of me wants to purge the younger/dumber me but at the same time I do not want to lose that $18k as I have some interesting RE purchases on the horizon and have 2 flips under contract that I could surely use the $$.

Thank you for reading this long post, I appreciate it.

Brian

I just don't see it and would not proceed. Maybe if you purchase around $190-195k range.

To Bills point, holding costs and timeline are all out of whack. $10k buying closing costs? 45 days? Buying CC seems very high and 45 days would essentially be you selling the place 2weeks into rehab... not likely.

Good luck either way

b

@Eric Gaudio  I am looking for a property manager in the area. I need someone I can bounce deals off of and get perspective on area and rents. I would love to connect to see what your background is and where and what you would prefer to manage. 

@Ben G.  I am looking to break into the area and need a good team to help me get going. 

thanks

brian

There are many good posts and great encouragement ehre but this  post by Jon is what I would put at the top of your list. 6 properties that cash flow is fantastic, but how long have you had them? I, like you, thought I was doing really well and was cash flowing quite nicely on 2 properties bought pre-BP.

Truth is, I was right...until vacancy. I had tenants for over 3 years and was feeling pretty good about myself, but as soon as the units went vacant there was the realization of repairs. Not just holes in wall, carpets, paint but facia boards, roof, full AC tune-up (Phoenix) new landscaping, windows treatments and more. This was to 'fix' the property AND needed in order to attract new tenants and keep the rent where I wanted. It then took a while to rent at that rate and suddenly the 50% rule that I didn't see in years 1-3 jumped to 70% in year 4! All told, I probably average around 45% expenses across the 2 properties over 6 years. The point is, my cashflow was not nearly as good as I believed once stuff happened. I think that is Jon's point. If you are closer to 1% you will struggle where as you will have much more wiggle room and 'real' cashflow after big repairs if you get closer to 2%

I realize you may have a totally different experience and our markets are different but I wanted to point out that the expenses can catch up to you and that's why getting 2% is great. I have never had it, but it sounds great :)

If you are newer, I suggest taking a look at the blogs. Mark Ferguson has a great blog showing that you do not have to necessarily fret over the 2% rule. I think he gets around 1.3% and he does quite well. I am finding the best deals (for my taste) in my area are around that same mark. If you are under 1% it just doesn't work...usually.

as others mentioned, ROI, COC return and more all play into if the property is a good deal or not. Great to see you cashflow on 6 properties.

check out the blog from Mark here, its a very good read and may bring a bit of piece of mind:

http://www.biggerpockets.com/renewsblog/2013/07/14/why-the-2-rule-can-get-beginning-investors-into-trouble/

Brian

Agreed with others. The numbers do not make sense if the repairs are over $20k and it sure seems like they will be.

Walk or maybe even jog from this one