All Forum Posts by: Bart H.

A couple of things, for your first deal (assuming you have little to no rehab/construction experience), don't try and do anything more complicated than maybe paint, change door handles and MAYBE new flooring.  IMO you will be much better off just buying something that it essentially move in ready as your first rental) 

The conventional wisdom is that there is this vast array of off market and wholesale deals out there. Yes there are some, but for the most part the experienced flippers are working with the best wholesalers. Most of what you see out there are mediocre to poor deals being advertised as off market. I cant tell you how many times I see a deal listed as being a wholesale deal and the actual property is listed for less on the MLS, or FSBO on Zillow.

IF you get a good investor friendly real estate agent, just have them set you up with some MLS searches. Those can be profitable. But it might take viewing several hundred, or maybe even a thousand or more properties to find one that works.

The best thing imo you can do is drive a few up and coming neighborhoods, maybe 1x1 mile or at the most 2x2 mile square neighborhoods, and just get to know everything that comes on the market, and everything that gets sold. To the point that you immediately know what the price should be, and what you would be willing to pay for it.

I will say this, our best deals have come from houses we paid at or over asking on the first day the property came on the market.  And our focus has been in transitional neighborhoods that are up an coming in the path of progress.  IE where is the trendy coffee shop or artists moving to?  

Honestly on a SFH, with 100% leverage, you will have a tough time finding anything that really "cash flows". The question is does it break even, and if it was an 80% loan would I have decent cash flow?

Maybe you self manage the property and use that "management fee" to pay down the HELOC, and now all of a sudden the property cash flows. I get it that you want to model your deals as though they are managed by an outside company (and I agree with that), but early on we personally had our realtor help with showing and screening tenants. Then we manage the property once the lease is signed.

You will save a lot of money doing your own property management, and I early on that extra cash flow is really helpful to getting your first property or two under management.

Stick with it, my wife and I have outside W-2 income, so we have decided to just remain patient until something comes our way, we had hoped to be up to doing 3-4/deals or more a year.  We are about 7 months in since we found the last deal we liked, our longest drought in several years.  don't get discouraged at 2 weeks,  and don't do a deal just to do a deal.

 Stay patient and pile up cash for your deal, and best of luck to you.

So I have a SF house that we will have owned (and lived in) for two years here fairly shortly.

IF after 2 years of living in it, we tear the house down, scrape it, rebuild on the same lot and sell it for say a 400K gain, is the gain taxable?

 So when you are recapturing all depreciation, you are refereeing to the depreciation both before and after the exchange correct?  IE if your prior property had 100K in depreciation, you do the 1031 exchange, there is no tax.  then hold the new property for 5 years, two of those you live in it.

Are you saying you would have to recapture that 100K?  or just the depreciation from the last 3 years (out of 5) that you rented the new property?

Our first flip we did with our own cash and some private credit lines that we had available thru a credit union and a couple of different banks.

We seriously spent just under twice what we thought we would and ended up taking several months longer to sell than we hoped.  (mostly because we finished our project around Thanksgiving).  Had we been beholden to hard money and not had enough assets to complete the project, a small loss that we took might have ended up as a very large loss.

IF you can do it, I absolutely would start out with cash reserves and/or low cost lines of credit instead of using hard money lending.  

 John, sorry its taken me so long to get back to this thread.

Thank you very much for the input.  

I did increase the vacancy and turnover costs a bit in my numbers based on your input.

I actually had thought about the small loan balance, and already had talked to a lender in the area about the small loan amount.  Thankfully they are a small bank that portfolios their loans so they do really small loans.

Unfortunately I put in a bid (not even that much under asking) and the seller countered at full price.  So we passed, at least for now, there wasn't enough meat on the bone to pay up for property, even college rentals in a rustbelt midwestern town with few prospects for growth.

Maybe if the seller comes down a bit in price we will revisit sometime in the future.

It may have already been mentioned, but on your tax advantaged accounts, it is VERY important that you do a direct rollover , Roth to Roth, regular IRA to Regular IRA etc so that you don't end up owing taxes.

You might check to see what your cost basis is on your regular stocks, it might be worthwhile to sell some of them at a time.

We personally have our retirement accounts with a discount broker and have some stocks and some ETF's within it.

 My quote was on a really small loan in central Illinois, and it was a couple of weeks ago,  right before the interest rate on the 10 year came back down a bit, so I could be off a bit.  

The loan from the exact same bank at the first of the year was in line with what the rates were in Dallas, so I figure this one was more or less in line.

End of the day, I think we are in a interest rate rising environment, imo its time to lock in long term debt,  clean up the personal balance sheet, sell marginal properties and be very selective on purchases.

I know we are being a lot more selective in the offers we make.

 Run your own numbers with Net Worth.  There are VERY inconsistent results with them.  There are those who have had good experiences, and some that have had terrible experiences with them, and it varies a LOT by office.  

My sense is most of the properties we see offered from NW are very optimistic with rehab costs, rental values etc..  Maybe someone who is more efficient, is an agent and works in larger volume can do the rehabs for a little less than we can and make them work.  

But if I was a new investor, I would be very careful, do you own numbers, and honestly, I would stick with my own financing and contractors.

You will have trouble finding a DFW SFH that will cash flow in the $250K range before rehab. A $250K-$300K will likely get you $2,000-$2,500 in rent in this area. Throw in high property taxes and it almost certainly wont cash flow.

 Dave Ramsey is direct and to the point.  He tells you there isn't any shortcut and that you need to budget, save, cut down on debt, follow the baby steps.  And its pretty clear those that follow his plan, especially to get out of debt have a lot of success.  There isn't any shortcut to getting out of debt.