All Forum Posts by: Justin B.

After reading a lot of responses here, I think I can put it into perspective.  It really depends on the situation so I'll lay out a few:

If someone I didn't know called me out of the blue (just a random new buyer) and they wanted to see a house well below my commission line (Where it's worth it for me), I would probably tell them I couldn't help them but try and refer them to someone who might be able to. It's possible I may not know anyone but would try to help if I can.

If I worked with an investor who had bought some nice commission deals from me in the past, I'll show whatever they want, regardless of commission because protecting that relationship and future business is really what you are doing.  The listing and commission are irrelevant at that point.

Building off the last scenario, if it was an investor but I had never worked with them before, I may ask some more detailed questions around the normal property for that investor.  If this was a special case and he had bigger properties usually, I'd do the second scenario.  But if it was his first property, my assumption is that where his normal property is (right or wrong, that's the assumption) it's the first scenario result.

That's just 3 scenario's and you can see they yield different results.  It really is all about the context.  Being a realtor, I'm sure you get to interact with LOTS of people and while you never want to be an *** about it, there are certain situations that just don't make sense.  Also look at it from the buyer perspective.  As a buyer the play here is not to just walk away and never deal with someone again.  As the buyer, ask questions.  Ask if the realtor knows someone who can help you.  If he's a good realtor, try to understand his situation and don't ruin a good thing if it's there.

I have a question to pose.  Trying to be open minded, I can certainly see the realtor's point of view (I am not defending it either way).  In my day job, I am in sales.  In a way, realtor's are sales people.  I run across clients all the time that don't fit my companies model.  I always try and direct them to someone that can help (as I want to maintain a relationship).  I wouldn't say "No, I can't help you", I'd say "I don't think I can help you here but let me help you find someone who can" and then I do.

There are a variety of reasons why a company wouldn't fit our model, one of them being there is no real money to be made with them.  If I was a realtor getting a lot of listings where I can expect $5k-$10k commissions, I don't think I'd be showing $500 commission properties.  Time is the only resource out there that is 100% finite and you have to make decisions on how to spend it.

The question is, how would you handle it?  I don't think a blanket "You show everything no matter how small the commission" is a feasible answer because it's just not realistic.  I'm curious as to the thoughts.

I'll second REIGuard (formerly or still NREIG, I'm not sure).  You should be able to do what you need.  Worst case, insurance is pretty cheap if you carry a high deductible and if having to pay for a full year severely hurts your return, then you are way too tight already.  For a FLIP and no one living in it, all you are really trying to do is protect against total destruction or something very large.  I don't see a need to carry a $500 or $1,000 deductible.  Get a $5k deductible and protect yourself against total loss.  If you are using licensed contractors, they should be bonded and insured so if they do anything that destroys the house, their insurance should cover it.  99% of what you are trying to protect is against damage that would destroy the house (Weather, Fire, etc).

Not really sure why Dee feels so strongly about this, but if that's his opinion, he has the right to give it.  I don't necessarily agree with it in this case (I'll say why later), but if Dee was going to borrow money from family and friends and he wanted to cut them in on the deal (profits), I wouldn't disagree with that either.  It's however you want to handle your deals.  There isn't a wrong way to do things (unless you aren't being truthful somewhere).

Now, for the reason I disagree in this case.  I am going to make an assumption.  That assumption is that you were up front and honest with your family and friends on what they would be getting.  If you were and they are happy with what they are getting and want to lend you the money, it's all good.  So my assumption is that you told them what they'd get and how it would work, they are happy, and all is right in the world.  With that being said, yes, you can write off that interest.  As long as you are 100% using that money to fund real estate deals and it's not a situation where you've used any of that money for something personal (like buying a jet ski), then it's absolutely an expense that you should write off.

To touch on another point, you should issue them a 1099 for the interest you have paid them every year.  It's not your responsibility whether or not they actually report it.  You have no control over that.  If you issue the 1099 and file it, and they don't report it, the IRS goes to them, not you.  If it's someone that isn't used to doing those kinds of things on their taxes, when you send them their 1099, you can remind them they need to report the income on their taxes (since they are family and friends), but it's not required.

I didn't read all replies but didn't see the actual $'s.  If you are cash flowing $500/month but could only pull out $50k reasonably, it might not be that big of a deal.  However, if it went from $300k to $600k, then you have options.  If you sell, you will owe a LOT of taxes.  I'd recommend doing a refinance and pulling out money tax-free.  You reduce your cash flow on that one property but if you're talking about major $'s here, you can use that to buy several more properties and overall cash flow would go up, and then you have multiple properties appreciating all from the same cash.

Again, it really all depends on your goals, but based on my goals, that's what I'd do.  Keep in mind my advice is based on limited knowledge of your situation, but if you have the opportunity to pull out cash tax-free and increase the number of properties you own + increase cash flow, it's a no-brainer in my opinion.

I don't see why it can't be both.  Personally, I think investing for appreciation with no consideration for cash flow whatsoever is not smart (vice versa as well).  For me, I put more of a focus on cash flow, however, if I feel the property is not going to appreciate (or go down in appreciation because of the area it's in), I may not purchase.  It's a sliding scale though.  That being said, I'd take less cash flow if I felt appreciation was going to stellar in the area.  The more cash flow possible the less I care about appreciation (and vice versa).  Of course, if anyone can do that and be right every time, they are either lucky or from the future :).  But, that doesn't mean you can't make an educated guess.

$250k if single and $500k if married you can PROFIT off a residence you've lived in for 2 of the last 5 years.

Capital gains only apply if you sell an investment after you've owned it for a year.  Shorter than that and it's just ordinary income.

I have several MFR's that cash flow nicely with only 20% down. If I realized it would take 70% down to cash flow, it would fail my "5 minute" analysis. Move on :).

I know every market is different, but having to put 70% down to cash flow is pretty ridiculous.  If that's what the market says, you need to find another market.

The simple answer is that it's not true at all that you must own a primary residence before you can buy a rental property.  I'm sure lots of folks on here are examples of just that.  It's funny, I see all kinds of posts here on BP where someone told them "you can't do X because of Y' and 99.9% of them are just bad advice.  Unfortunately sometimes folks who just don't know the answer give one like they do.  Regardless of anything you are told, always do your own research.  You'd be surprised what you can do in the world of real estate especially if the things that do matter (debt to income, cash on hand, location, etc) fall into place.

I won't comment on any legal aspects because I don't know wholesaling, but what I got from it was you wanted a cash buyer and he couldn't be a cash buyer.  If you weren't willing to close on the house yourself, then I think you did the right thing by letting him out of the contract.  I'm assuming the buyer was able to do a conventional loan through another route. My take on it is this.  You could have stuck to your guns, not let the seller out of his contract, and continued on.  You would have had every right to do so, but again, would it have thrown negative shade on your reputation?  Can't say, but it's possible.  There is something to be said for what you did.  It looked like the arrangement wasn't working out so you parted ways.  I don't think there is anything wrong with that.  It's a good lesson learned so just take that and move on to the next one.