All Forum Posts by: Ryan Shaw

Ian,

I'm in the middle of my first broker selection process here in Virginia so I'm by no means an expert but I have had several interviews already. Some questions I picked up along the way that I didn't have at first:

What is the E&O premium and what is the deductible?

What fixed costs do agents have at that brokerage (desk fees, membership fees, etc)?

What marketing materials, if any, does the broker provide for listings?

Who places and later removes  the sign in the front yard (some brokers pay a service to do this)?

What is the average sale price of properties transacted through that office?

How do they handle CX on self-transactions (big issue for you as you plan to be active like I do)? Some appear to welcome self-transactions and others do not. 

Does the broker have a minimum sales quota?

Obviously the CX split and bracket structure are important too.  Real estate won't be full time for me in the immediate future so I'm looking for a broker with low fixed fees as opposed to a higher CX split. 

Josh & Clifton,

Just wanted to add my name to this thread as another BP member in the immediate area who would be happy to assist in any way I can. To date I've only managed my own rentals but am in the process of getting my VA real estate license and want to expand beyond rentals to flips and new developments.

Josh - have you considered utilizing a manufactured home from a company like Foremost? Given the expected sales price that may be your best bet to minimize $/sqft.  You can also finish most or nearly all of the interior work yourself (or at least outside the principal contractor) if you lean more towards inputting sweat equity like I do.  Please let me know if I can be of further assistance. 

Thanks to everyone for the helpful relies.  Based on the parts costs for each of the multiple control boards that could be the problem (dryer apparently has three) I think I'll opt to simply buy a new unit that I know will work rather than risk throwing good money after bad.  Looks like this was one of the few times when one of those extended warranties would have actually been helpful.

Can't confirm if it will respond to a cycle programmed with the door open.  I'll have to investigate the unit in person tomorrow.  It's almost like it's stuck in a "wrinkle release" mode but the display isn't lit up in any way (including the wrinkle release button).  It's as if somehow the drum motor has bypassed everything but the door safety switch and just comes on whenever the unit is plugged in.  No other lights or anything appears.

Hope there's a veteran DIY/handy guy who can point me in the right direction.  My tenant called about a strange issue she is having with her dryer and sent a video to verify the symptoms.  When the door is closed and the unit is plugged in, the drum spins, even when the unit is off (no display on screen) and there is no heat.  If you open the door the drum stops (door switch works fine).  With the door open, the controls appear to work as normal (power button and cycle selection knob appear functional).  I see two (potentially related as they showed up together) issues.

No heat - Maybe a bad heating element?

Dryer runs whenever it's plugged in and the door switch is closed - Not sure what could cause this

Any thoughts out there?

Dryer is an electric Samsung, model number DV395ETPAWR/A1

Alexandra,

1) No LLC for us as it would have put us in danger of the DOS clause to a level we weren't comfortable with. We had been landlords for 10 months when we first approached Wells Fargo. House #1 basically neutral in terms of cast flow when you consider any real maintenance/capex allowance but we had/have an excellent tenant in place who has a signed lease well into 2017. House #2 also has a signed lease as part of Wells Fargo's approval for House #3. For the record WF was the 3rd or 4th bank I had a sit down discussion with and they were the first willing to do the loan.

2) I'll explain how we structured the change over from OO to the first tenant for our current move as an illustration of the process we've had success with. We are scheduled to close on house #3 on/before October 14th. Therefore we signed the tenants lease for house #2 into effect on November 1st with the standard first months rent and security deposit due on signing (which was done in late September). At the same time we also signed the first addenda to the lease which detailed the proration of October's rent as contingent on the exact move in day. The prorated amount of October rent is due November 1st. Because November's rent was already paid, the tenant isn't burdened with a double rent payment and we don't have to deal with refunding/chasing down more money because we guessed wrong on the October proration. Basically we get November (first full month) early but October (the prorated month) late.

3) We self manage both rentals (we will be living in house #3). The properties are all in the Winchester VA area.

My wife and I are in the process of closing on our third property, all of which have been bought as owner occupied single family homes.  We lived in the first for 2 years, and will be leaving the second after just under 1 year.  

In our experience there was no trouble from the banks holding the mortgages on houses 1 and 2 when we decided to move out and put a tenant in. However, as Dawn suggests, they did both have a issue with trying to pass the properties into an LLC because of the DOS clause. The biggest obstacle was getting a bank that would accept a signed lease as part of our debt to income ratio so that we could qualify for the next house. Wells Fargo is actually doing this for us this time around.

For us we were willing to take on the extra burden of moving multiple times in order to start a rental portfolio into which we put down 5% or less (0% for the first house via USDA loan).  Large down payments make your cash flow look better but they don't actually make you any more money (other than the reduced interest on the smaller loan amount).  Provided the property still cash flowed, I'm sure just about everyone would buy with 100% financing if they could find it. 

Direct responses to OP's questions:

1) Transfer of a property that has a mortgage into a new (no liquid assests) LLC runs a legitimate risk of triggering the due-on-sale clause with no way of responding short of fire selling the property. If you have a strong written lease and only the one rental property, there's relatively little benefit to the LLC

2) Jumping 150k+ up in price point only to then count on additional appreciation seems a bit too optimistic.  I've never counted on appreciation (or, to be fair, depreciation) in any of my real-estate scheming, most primarily because I plan on a long term buy and hold strategy.  Aside from avoiding full scale D & F neighborhoods, cash flow has been my primary diagnostic measure.

3. I certainly understand the itch to put your liquid assets to work.  My only caution is that you can only spend the money once, so don't go buying the first opportunity that comes up just because you're motivated. 

Prior to getting married, I purchased a home by myself with a USDA loan.  To this day my wife is not on the loan or title.  We still have this house and use it as a rental, USDA loan is still in place (no refinancing).  That was 3 years ago.  Now, married with our first child, we want to buy another home and would like to use the USDA program.  However it is our understanding you can only have one outstanding USDA loan at a time (we're aren't relocating a great distance).

Question - Can my wife utilize our combined income and/or a cosigner to qualify for a USDA loan solely in her name given that I already have a USDA loan by myself?

To my knowledge, we meet all the other USDA requirements in terms of geographic location, total household income, etc.  Just curious to know if each spouse can hold a loan independently?  Insight from someone who works with this program would be much appreciated.

Richard,

Two good points. I'm deliberately conservative on the timelines and counting until the property would be sold not just rehabed or built. Holding costs would be minimal given that this would be an all cash transaction.

Also to give further input, this house could rent for about $1,500 after the option 1 rehab. 

Potential deal is an SFR that was built over top the border of two adjacent lots (original builder owned both). Assuming I can acquire both lots, here are the options I see along with ballpark numbers and time frames. Purchase price is the same under all scenarios. Assume all options net at least 50k.

1:

Rehab - 100k

Sell house and both lots together - 300k

Gross 200k less purchase price

Timeframe - 1 year 

Risks - Over budget reno (house is in pretty poor shape)

2:

Demolish existing house - 20k

Sell lots individually @ 90k each - 180k

Gross 160k less purchase price

Timeframe - 6 months

Risks - Difficulty selling vacant land (note - lot 3 doors down sold 6 months ago for 125k)

3:

Demolish existing house - 20k

Build spec on both lots @ 175k each - $350k

Sell individually @ 300k - 600k

Gross 230k less purchase price

Timeframe - 24 months

Risks - Larger holding costs, over budget construction

Option number 2 is my default preference in that it's the most simple and in my mind least risky in terms of catastrophic failure.  While it gives the smallest return, it's also the fastest to reach resolution.  Has anyone had successful deals where the best option was to tear down the existing property and sell the cleared lot(s)?