All Forum Posts by: Tim Rector

Looking into going to the upcoming Indy Tax Sale.  I reviewed Indy guidelines.  Downloaded the list of properties (over 1000) as a pdf file.  The pdf is not possible to sort/filter etc.  Has anyone figured out how to get the pdf into an Excel format so that one can sort on min bid for example?

Also, I would appreciate others advice on attending a Tax Sale in Indy.  Any watch-outs, pointers etc.

Also, are there any statistics on the number of properties which actually have the deed transferred to the lien holder due to the owner not paying off the tax bill (plus interest) before the redemption period expires (1 year)?

Thanks.

Hi. A bit of background first. I previously owned a SFH as a rental a fews years back which I did some renovation to before renting. Had a bad experience with renter and ended up selling the property. I purchased for $40k put in $25k and sold for $105k. I also owed a duplex with a partner which we did some renovation prior to renting. We rented for 3 years and recently sold. I made $20k on the sale. For both properties, we did not have a property management company.

I work full time.  I have the funds from both home sales sitting in a money market fund (~$150k).  Also, I have access to equity money from my primary residence.  For the funds I have in cash, I'm not really wanting to put into the stock market at this point due to volatility.  Additionally, I would like to put my home equity (>$200k) to work.  Currently my home mortgage rate is 2.99%.  My mortgage is my only debt at this point.

So, I have been looking at various options for investing.  I could go the route of private lending.  I am currently talking to someone about this arrangement and a 10% return.  There is another option which would pay 9%.  My concern here is that the interest paid would be taxed as normal income which would be around 30%.  But it seems this is a more conservative approach/more passive option which would be feasible while working full time.

Another option I have been looking into is getting back into rentals (Class B).  I like the tax advantages and the fact that the loan is being paid down by the tenants while (hopefully) the property is appreciating.  Of course there could be tenant difficulties and maintenance which would challenging while holding down a full time job, but I am considering going with a property management company to help with that.  I don't really want to get into major renovations after purchase due to my limited time available to work with contractors and managing their progress.

A third option I am looking into is a turn-key rental set-up like Midsouth home buyers. I like their model. Seems that they sell the property at retail prices so you are not getting any discount, however the property goes through an extensive renovation. The rents meet the 1% rule from what I can tell. The benefit here is that it seems more passive but I wouldn't be getting the house at a discount in term of the purchase price. I ran the numbers on one property. Purchase price is $82k. Monthly rent $860. Monthly cash flow $306 (includes 10% monthly PM fee). @ 20% down = $16,400. ROI is 22%. This is better than the 9 to 10% ROI I could make through private lending. Another benefit would be that I would be getting the tax benefits since the home will be in my name. I am leaning towards this option and would like others feedback on anything else I am missing which I should consider.

Thanks for your feedback.

@David de Luna

You are suggesting Morgan Stanley Insight Fund Class A.... that's not too conservative of a fund. Aren't you concerned the fund will drop and you will lose before you need to liquidate for lending out?

Thanks

I am starting out as a private lender for home flips. It may take 1-2 months to find a suitable home which meets all criteria based on my deal finders feedback. In the meantime my cash is sitting in my savings account earning .02% interest :( My question is for other private lenders, where do you keep your funds while waiting for the next deal? I am guessing where the money is stored needs to be easily liquidated in short order and not at risk of dropping in value.  I do have a Fidelity account where I could move the funds.  I could wire the funds directly from Fidelity when the funds are needed once a house comes available.
Looking for suggestions for where other private lenders keep their cash when waiting for disbursement.  I am guessing liquidity is a key.

Thanks.

@Brandon Wells ,  I am interested in attending this event.  Please include me in the invite.

Thanks.

I wasn't sure the appropriate forum to post this under so I may need to move it. So here goes....

I am starting out as a private lender for home flips. It may take 1-2 months to find a suitable home which meets all criteria based on my deal finders feedback. In the meantime my cash is sitting in my savings account earning .02% interest :( My question is for other private lenders, where do you keep your funds while waiting for the next deal? I am guessing where the money is stored needs to be easily liquidated in short order and not at risk of dropping in value. Looking for suggestions.

Thanks!

@Will Barnard to answer your question.. the contract states that I will receive a 10% return on my loan value regardless if the loan is for 2 months, 6 months or a year. So if the loan is for $100k, then I will receive $100k + $10k whether the loan period is 2months or one year. It follows then if I loan $100k each 6month period (time to purchase, renovate and sell) that my annual percentage rate is 20%. I hope this makes sense.

Following up on my original post. I have more info now..

I will be drafting a contract with the deal maker for 10% interest and a quick deed on the property as collateral. The fixed 10% is paid on the loan amount when the house is sold. My money will not be pooled with other investors and will be used for one home at a time for purchase and renovation.

Would I then need to pay normal income tax on the interest paid? For instance, I loan $100k for 6months and get $110k when the house sells ($10k interest). I put the money back into another property in the same year.

If I am taxed at say 30% rate on the interest, essentially my 10% interest gain is reduced to 7%. Sound right? If so, is there any way to legally avoid any tax consequences I should consider?

Thanks.

I have been looking into diversifying into some passive income from real estate.  I have $120k in company stock which I liquidated this year since the stock is trading at all time highs and next year isn't looking good for the company.  I have renovated a few properties in the past and rented out, but I don't really have the time to do this since I am employed full time as an engineer.  I was talking with a friend (I've known him for 10 years) at my church who runs construction crews for someone who flips properties.  The way the arrangement works is:  1)  The business owner researches properties at auction and selects properties which can be turned for a profit.  2)  There are a pool of investors who have money available for purchasing the properties from auction and cover the renovation costs.  3)  My friend (from church), reviews the property and gives an estimate for the renovation and one of his crews completes the renovation on the property.  4)  The business owner then sells the property and returns 10% return on the investors funds used.  The business owner flips between 12-18 houses per year.  My friend has worked with the business owner for a number of years and has a good working relationship.  In fact, he said that he works with the business owner on a hand-shake model.  My friend spoke with the owner and he is looking for an additional investor since another investor recently dropped out.  The business owner recommended that I provide my funds to my friend to keep in his account for using towards the home renovations/auction purchases.  My friend mentioned that he could write up a contract stating my funds provided and agreed upon 10% return on investment for each property flipped.  As I understand, the agreement is that I don't review the properties as that is left up to the rest of the team.  The investors provide the funds and the rest of the team handles the property selection, renovation and selling.

My questions -

1)  My friend asked me what I would like included on the contract.  Suggestions?  Should I request a statement from the proceeds on each flipped property?

2)  Any other questions I should be asking?  Any concerns?

3)  I assume that as long as I roll the investment returns into another property flip, the taxes can be avoided.

Thank you.