All Forum Posts by: Bill F.

@Craig Harris I'd tread carefully when it comes to inheriting tenants. You have no way of knowing the whole story with them renting the unit because you didn't screen them yourself.

Free advice is worth what you pay for it, but if I did buy this property I'd have the current owner tell the tenant they need to leave. If you want to keep the tenant, I'd screen them like you would any other applicant before you close; if they don't pass your standards, have the current owner end their lease before you buy.

@Craig Harris it all depends on what risk premium you are willing to accept. If you went and bought a blue chip stock with a good dividend or a high quality bond, your $25,000 would earn you 2-3% in dividend and/or interest and you have to do nothing; your money works for you.

This duplex gives you 4.75-5.75% higher return over an investment with lower risk, however you have to pay for it, either with your time or through the increased risks ( repair costs, evection costs ect)

Is the 4.75-5.75% risk premium enough to compensate you for this? Only you can answer that question. I don't know the specifics of the Kansas City Market, but 7-8% is not a terrible return in general. I've fallen into the rut of searching and searching for the best deal to come along. At some point all of us need to jump in and get a deal so we can start making new mistakes and not running the numbers on properties waiting for the great white whale that may never come.

Say you do want to go ahead with this purchase, I'd be curious if the property came with tenants, if there are repairs you could make to increase the rent, and if you have factored in closing costs.

Lastly, CoC works well to calculate a yearly return, but it won't capture the benefits of the renters paying off your mortgage year after year. In the first year you'll gain about $1700 in equity. You can hand jam your the CoC for every year you plan on owning the property or I'd recommend doing an IRR or better yet MIRR calculation to see what your returns will look like over the life of the investment.

@Damion Anderson

Congratulations on having a plan and putting it into action before you EAS.

As @James C.pointed out, the VA loan is an incredible opportunity you can leverage to get started in the RE. Purchasing a property with a VA loan and then transferring the title to your LLC does place you in violation of the due on sale clause. You gain the protection a LLC provides of your assets while exposing yourself to the risk of the bank calling your loan. What assets do you have that warrant the protection of an LLC and that is not provided by an insurance property? I think buying a property in your name with a VA loan will present many more opportunities than trying to piecemeal together financing through your LLC. Though the VA loan does limit your ability to flip homes or even conduct the BRRRR Strategy.

With regards to your strategy, you have to think what works best for you and your family. Flipping homes while going to school and living a few hundred miles away seems like a recipe for sub optimal returns on your first deal.  Where to invest depends on where you feel you have the most knowledge. Having lived here for 3+ years and the connection with the RE Investor leads me to believe that at this moment, you have a better knowledge of that area. Nothing says you can't gain that same level of knowledge about the area around USC.  If you haven't already, I'd check out BP Podcast 200 for a great guide.

I'm in the Jacksonville area so feel free to PM me with any other questions.

-Bill

I think the point that @Bryan Wilson brought up is a valid one and the answer will vary state by state. I know that NC is a very buyer friendly state and the offer letter state the offer can be can canceled at anytime before due diligence expires for any reason. Your agent, if you use one, would be a source to answer the technical aspect of your question.

As for the professionalism of doing it for multiple properties; its a balance of probability question. The longer the offer stands, most reasonable people would assume you will try to deploy your capital elsewhere. I have told the owners of one property in my area who have a property for sale to let me know if they consider lowering their asking price. I also plan on using the Brandon Turner tactic of having my agent send the exact same offer with the date crossed out every other month or so to remind them I'm still interested.

@Rousner E.

To follow up on what  @Edmund Ricker said. Real Estate ETFs and REITs trade like and are subject to the same market fluctuations and risks of normal stocks and act less like  RE. (ie. if they don't meet projected earning the market value can decreases). ETFs have less exposure to this than REITs, but at the end of the day they are more like a security and less like traditional RE. 

Hope this helps!

@Caroline S. I read these two blogs: 

http://www.mrmoneymustache.com/

MMM Focus more on the savings and frugality spectrum (or reducing your expenses) 

http://www.financialsamurai.com/

Financial Samurai deals more with ways to grow your wealth through means other than W-2 income ( or increasing your assets). His writing and thought process remind me a lot of Ben Leybovich

Kahn Academy has a great section on Finance that can explain the basic principles: 

https://www.khanacademy.org/economics-finance-doma...

I wish i could have just watched all of those videos instead of sitting through three semesters of intro to Econ and Finance.

Lastly, I highly recommend the Millionaire Next Door.

https://www.amazon.com/Millionaire-Next-Door-Surpr...

It won't tell you exactly what to do and the data is a bit dated, but it will totally change your perspective on what being "rich" is and how the majority of truly wealthy people make and keep their money.

They didn't accept my offer at $70K. It is an estate that is shared between three children. They are set on a price of $81k to pay off note and other bills. They say they can't take any less because the three of them have limited budgets. I asked about short sales and they haven't/won't file for one of those, which I find odd, because due to my limited knowledge of estates, I don't believe the IRS can force beneficiaries to settle debts of the estate.  Also, from my rough calculations using prevailing interest rates at time of purchase, they have around $8.5k a year in carrying costs on the property, of which approximately $5k goes to interest.

I ruled out taking it subject to based on the fact that I don't want to purchase a property for above my price point. I can see the advantages of controlling a property that way, however, at the end of the day, I am in essence buying the property for the balance of the note. I think in this case that number is more than they value of the home and I'm not willing to over pay for property.

Long story short, I have moved on for the time being, but haven't forgot about the property. After a few months and if they haven't rented it, we will see if their price point moves at all based on their carrying costs.

Thanks again for all of your help guys, I appreciate it.

Awesome, thanks for the info. Maybe I'll see you at the next one.

Caveat: I haven't researched vacation rentals in the area extensively or run the numbers. I live about 10 min from Topsail and I know from Memorial Day to Labor Day the Topsail Island is packed with predominantly families. Also I know there is a small market for Marines to rent more long term.  The prices vary widely from $900k+ mansions on the island to $300k ish homes not on the island, but on the Inter-Costal. No matter where you buy one thing to factor in is the price of flood insurance if you choose to finance. It is in addition to your standard insurance, wind and hail, ect..  From word of mouth I've heard flood insurance runs upward of $500 a month.  Again, grain of salt with all this info.

Hope it helps.  

@William Murrell How is the Coastal Carolina REIA? Is it a lot of sales pitches?

Thanks