All Forum Posts by: Robert Leonard

@Craig Koehne the key point that your contractor made was about the buy and hold investors that you will have to compete against in the 50-150k price range.  An outdated house built in the 70s-80s in well kept condition is worth more to a buy/hold investor because they wont' rip out what's clearly dated, while you would if you were going to flip the property.  It's worth more to them as is and you will have less opportunities because of that.  That's a market condition that it sounds like your contractor is familiar with.  I have very similar conditions in my home market.

It comes down to your finances and whether or not you have funding lined up to be able to invest at a slightly higher price point?  It may be best that you just stay at the higher end of the 50-150k price range and accept less opportunities to invest until you build up your resources for bigger and better deals?

@Kevin Brewer there's a disclosure that's a federal requirement.  Its mainly about informing your tenants about "How to Protect Your Family From Lead In Your Home" which is the title of the required publication that goes with the disclosure.  You may have something local in addition to the federal rules, but most of what you need to know is found here:

http://www2.epa.gov/lead/real-estate-disclosure#propertyml

Any time you have peeling paint, your property is due for maintenance.  When your house was built before 1978, you need a lead based paint certified painter/contractor to do the work to make sure they follow practices that contain any dust or paint chips created in the process.

@Rob Cee people like @JC Gauthier and @Darryl Shurgin are the reason Dodd-Frank exists.  You made a bad investment, so you can pass your loss off to some schmuck who thinks you want to owner finance a house to them.  BUT all you really want is to capitalize on their large down payment and find as many other suckers to do the same to, to recover from your bad investment?

Sorry folks, this is a loser and you should man up to your own bad decision and move on to your other respectfully profitable deals.  What these people are suggesting is a pure scheme to rip people off.  Call it whatever you want, you wouldn't recommend a deal like this to your sister or a real friend - it's a pure rip off. 

Here's a suggestion - take your loss like a man, live and do your business with some integrity.

@Account Closed I get your question.  (I think it was vastly misinterpreted.)  I think you should just maintain an extraordinary amount of insurance for your asset protection concerns until you either sell or refinance the property. 

If/when you refinance, presumably after you have a huge amount of equity paid down by your renters ;-), then you can transfer it to your LLC when you use a commercial loan through a portfolio lender to cash out refinance. Ask me how I know this. :-D

@Account Closed you need to execute the sale before you get to 3 years after you move out. If you want to go that rout, I would put it for sale after 2 years of renting so you don't risk going beyond the 3 years.

@Account Closed you already have lots of good feedback above to consider.  One more factor that wasn't mentioned yet is the tax free capital gain you will bypass if you hold the property.  I'm a buy/hold guy, but I've sold my personal residence when I had a huge capital gain that I could take tax free.  Tax free is hard to come by and you are in the ball park of 50k for your gain.

If it was my decision, I would sell and take the gain.  Then I would look to reinvest in two properties with minimal repairs needed that I could put 20% down payment on.  I would keep 20% of the cash available for a cash reserve. 

This is based on my experience and what's possible in my market.  You have to decide what you are comfortable with and whether or not your are ready to become a landlord.

One other thing that comes to mind is you said you bought a bigger house. Were you able to put 20% DP to avoid PMI? If not, you stand to make an "automatic" ROI by paying down your principal to get rid of the PMI. Unless you have an FHA loan that now has PMI for the life of the loan. Just another thought to consider.

@Tom Scott anyone who tells you, you need one year or even six months seasoning before you can cash out of a property, hasn't spoken to enough small banks or credit unions.  You can cash out with NO SEASONING, 1 day of ownership.  You just have to keep talking to the right commercial, portfolio or community investment bankers or whatever lender at the institutions I mentioned.

Tom, you even used my golden goose analogy that I use all the time.  That's wild! 

@Andrew B. are you doing any buy and hold investing along with your flips?  If you are, you could pay off a property so you would own it free and clear (FAC).  Then have your PML secure their loan against that FAC property with a loan that can act as a line of credit (LOC).  You could then use the LOC for your rehabs and pay it back after you close on your rehabs.  Then use the LOC when you have the next project under way. 

Your PML could make the decision once to fund XX% of the value of your one property.  They wouldn't have to make decisions over and over about whether or not they want to fund your next property.

This is the same setup I'm arranging with my banker.  (I am a buy/hold investor.)  After some discussion with him, he explained the advantages and as soon as I complete the rehabs I have underway now, I'll get a LOC on each property and use that to buy with cash and then cash out of those properties when they are complete.

@Tom Scott I think you nailed it with your thought of "if I can buy like a wholesaler and fix it like I was going to flip it, why not hold on to it?"  That's my thinking exactly.  The flip is my "plan B" on all of my deals.

I'll send you a colleague request and we can talk more details, but I think you are right on the money with your thinking.

The SD-IRA strategy works if you have a significant amount of money built up in a former employers 401k or IRA that you've funded on your own. Otherwise you can only start building up in an IRA on your own until you have enough to start investing with. There's a lot to know to set it up and then use it properly. I use it personally, but the stars lined up just right (not part of any ingenious plan) and I had a former employer's IRA and Roth IRA savings that were positioned perfectly for this purpose.

@Christopher Meaker it's good to think of ways to finance deals, but this one won't work as proposed. The VA loan program is for owner occupants. If a vet will actually live there, you can do up to a 4-plex. You can protect yourself on a property like this by having adequate amounts of insurance. Whatever you do, don't try to beat the system.