All Forum Posts by: Rob Wilcox

Thanks to everyone! Very helpful. Rental for us is strategy number 1 so there seems to be a different view. 

If you were going to flip the house, which option would make the house more valuable?

Hello BP, My partner and I closed on a SFH that is currently a 4 bedroom / 1.5 bathroom of about 1,200 sqft. The bedrooms are small, 3 of the 4 are 10 x 10. We purchased the home off market for about $150k and there are multiple homes on the same street that've sold within the last three months between $240-$260k (these have been 3 bed / 1.5 bath and 2 / 1's) so we feel good about a solid ARV around $250k. We are considering going from a 4 / 1.5 to a 3 / 2 with a master suite, as the back two bedrooms could very easily combine to create a very large room of about 25 x 12. Does anyone have experience of making a change like this kind of change and having it payoff? Or, would anyone advise just keep it as the 4 small bedrooms. We are definitely going to make it a 2 bathroom regardless of this decision. Thanks to all in advance for their insights!

Short answer is the city will only make it a legal and conforming duplex if starting from 1954 it has been rented consecutively as a duplex, which there is no way to prove. 

So, on to the next property. 

My partner and I just did this. Our attorney was adamant that each property is kept in its own LLC (unless your states recognizes series LLC') and has its own bank account. All income and expenses need to stay in the same account for the individual property. Yes you need a business bank account and address. Think you could also organize as a general partnership agreement that holds all your LLC's. Regarding financing. I don't know enough about that yet but we've been told it is all based on our individual income and credit until we build up a big enough portfolio.

Today was a day spent in multiple city offices trying to figure out the zoning of a duplex my partner and I have a contract on. After nearly a day of work, we've discovered that this "duplex" which is listed as such on the tax assessors website, is not actually a duplex at all. It's a SFH in the zoning and development office and this was confirmed by the office of building. In addition the office of building is saying that the only way this could be considered legal and conforming is if this property was functioning as a duplex since 1954 without and 12 month disruptions in either of the units. The question...what would the more experienced investors do? Run away as fast as possible? Or, would you still consider the acquisition if the numbers worked? Appreciate the help!

Will go to the zoning office on Monday and try to figure this out. 

One more question, it's odd...

When looking at the previous HUD agreement, the duplex sold for $115k + about $7k of fees (to wholesaler and REA). This puts the cost at $122k. But...for some reason they added $150k into the settlement agreement, which totaled the whole deal at $227k, but then they backed out money again, so it looks like it sold for $150k in September last year.

Trying to understand why they would do this? Anyone might know why folks would do this? Is this legal and legit?

Thanks for the helpQ

Have more info on the deal. We've discovered that it sold for $125k in September of 2016 and the wholesaler is trying to make a small amount on this deal. Sounds like the seller needs the cash due to another development that he got in over his head. From a cashflow perspective, it seems okay. The challenge is more about getting the capital back out of the deal since we likely refinance in a few months but only able to get 80% out of let's call it a $120k appraisal (recent appraisal I've seen is $115 - $135k). The strategy would be this: Buy at $134k ($80k HELOC, $54 cash). GRM with existing tenants is about 7 and 50% rule is about ($800 - $350 debt service) puts the cash flow at $450 / month. In 6 months. Cash out refinance, call it $120k, we take the max $96k out. Pay our cash back of $54k, pay down the Heloc by 42k so we have the property fully financed with $96k on a conventional loan and $38k of HELOC and now the 50% rule puts us around $150 cashflow (debt service moves to about $675 with the refinance). We can move on to the next property. Does this make sense?

Thanks so much. 

The wholesaler did not give me hose comps. I found them. 

If you don't mind, you okay if I PM you?

Also, should we be concerned about section 8? 

We've heard that section 8 often pays "above market rates" and therefore if we go outside of section 8 it may be difficult to raise rents? 

Thank you for the continued help regarding the comps. Not sure where to find the duplex comps. Thanks for the two you shared. 

We are working with a wholesaler for this transaction and have not found a good broker (over a 6 month search) who handles multi-family homes. Again, this is our first deal. 

Is there a good place to find comps for duplexes online? Zillow doesn't seem to show it easily.