Thom's Deals

Thanks for the comments. I'm checking with CPA but I believe getting the refi money now and then selling later would reduce taxes a huge amount since when the sale occurred I would be paying back a loan where as if we sold now there would me short term cap gains taxes.
Thom

Great to see you last night at the rei club. The speaker was great and had some good systems in place to fixnflip100 houses a year in SoCal. However I'm sure you agree it was still not as good as Matts training!!

Before departing from the original plan, I would question the appraisal. That might be a first, questioning an appraisal being too high. With 2 price reductions and no sale at $99k, the market reinforces your ARV more than it does the appraisal. In the area, are properties renting for 1% of value or .5% of value? Assuming that the realtor originally listed it realistically for a sale at $125k, that is also substantially lower than the appraisal. If it were me, I would spring for a BPO and another appraisal. The property is already a feasible purchase for a buy and hold rental with positive cash flow. The downside is placing yourself in a potentially upside down position with negative cash flow if the original appraisal was incorrect. Weighing the downside, the price of a couple of months worth of potential negative cash flow is a small price to pay to confirm or refute the original appraisal versus the consequences of being upside down with negative cash flow because an appraiser got it wrong. You don't have many options with a property that is upside down with negative cash flow. Your talking about an extra $50k of capital which doesn't seem to be a problem with your partner since he funded a deal in excess of that. Partnerships are ok until you sail into uncharted waters. You always have to ask yourself what happens if the partnership needs to be dissolved for some unseen circumstances (job loss, health, etc). That being said, would you feel more comfortable having to sell that property with a $90k loan on it or a $142k loan on it? Just my opinion and I may be wrong.

I would refinance up to an amount where the property income would break even, but not go to negative cashflow... the reason is that when you prepare your financial statements which the banks request everytime you refinance a property, you don't want it to show negative cashflow

Another strategy that I have used, is to refinance two or three properties under one loan; obviously, you don't want to do this if you intend to sell only one of the properties in the near future...

wishing you and Lisa the best!
Val

Thom!
I forgot to mention.. I love the idea of your kids selling eggs to neighbors! Very cute, and it will teach them entrepreneurial skills at an early age!

As a kid, my brothers, sisters, and I would sell avocados to our neighbors! My grandparents had an avocado orchard (in Mexico); so we would be allowed to have the "B" avocados that were set aside; we would wipe them, trim the stem, weigh and pack them in 'kilo' bags (we got pretty good at it so we didn't even have to weigh after a while). Then we would go to neighbors to sell, and that was our allowance money. An experience that I will always treasure
Val

I really appreciate your opinion and all you said is true and great advice.
However, In talking with my partner we decided to take full amount and use the extra capital to flip a couple properties and then pay down the principle to stop the negative cash flow which turned out to be $80 a month. We are still working on refinancing a couple others deals 4plex and duplex that have more cash flow that we will keep higher to offset the temporary negative cash flow. By flipping a few houses, I'm trying to build up a 6 month cash reserve to pay our monthly family expenses as i prepare to leave my day job and get into investing full time.

Hey! Thanks for the advice on the cash flow and clumping multiple houses together for a refi.

Great story about selling avocados! I love it! Its all those little things that we did growing up that we did not realize at the time which help us become who we are today.

Owners of property did not pay for last 4 months. Company we bought trust deed through started foreclosure process and paid us back the money that we had into it the original 16k. So now we will invest it into another trust deed as soon as one come available. The trust deed was paid for 14 months so we received that money also.

This one was on the MLS as an REO. My agent brought it to our attention. It was rent ready and they were asking 133k, ARV was 150k so we offered asking price and got it back in Feb '14'. Partnered up and used OPM on this one 50% equity and cash flow with the intent to do cash out refi.

We call it a duplex but to clarify it is 2 houses on one lot which happens a lot in Merced. It is a 3/1 and a 2/1. We installed a fence so each house would have a private back yard but that was all for money in, so here's the current numbers:

Purchase price 133k
fence install 4k
All in for 137k

2/1 rents for 600
3/1 rents for 850
total rent $1450 monthly
water, sewer, garbage: $153
management 144
maintenance 100
insurance 82
taxes 110

cash flow: $861

This house is right down the street from deal #10 which appraised for 190k so we will see what this one appraises for since it is next on the refi list. We would be happy to get all the money back and still have a couple hundred bucks cash flow after the refi on this one.

Lessoned learned: Houses that are along a back alley can be harder to rent. Installing a fence to give privacy allowed the houses to get rented really quickly and we should have installed the fence sooner. Its nice not to do any major repairs and still get equity and cash flow!

Nice I love to hear about cashflow in Ca of course anywhere outside of san diego right. nice cashflow, nice refi's pulling $ back, cant wait for you to leave your job you are going to explode with deals my friend. You going to fibi thur night? I am if so see you there.

Wow how time flies! Had some refi set backs on cash out refinancing 4 properties in CA - 4 plex, duplex and 2 other SFR (2/1 and 3/1). We have called about 60+ banks and qualified one only to have them waste Oct-Dec and then tell us they did not want to lend because we did not live in their branch area (after they had said they would!). Now we have used a broker and found a bank here in SD (not sure how we missed this bank!) that will refi all 4 into one loan on a 5 yr arm at 25 yr amort. Currently in under writing but hoping to hear back soon about getting houses appraised and terms. Really need to refi these properties to get the PM back so I have the freedom to walk away from the day job. Have done a few more deals so i will post them over the next few weeks. Keep moving forward! Momentum is building!

Hope everyone is doing outstanding! Looking forward to the EDGE 2015!

Thom

sure wish my family had been an entrepreneurial family.... i remember selling greeting cards door to door when i was young.

Appreciate the kind words. Time seems to fly by....I'll make some time this weekend to post a few updates on deals. Hopefully it can help someone else along the way in their REI journey!

See you at the EDGE 2015!

Michael

This deal came from a bandit sign. Owner had inherited the property from his dad several years back and the same family had been in the house for 13 years. He wanted 75k and I offered 50k. This property is zoned R2 so a second house could be added or original house could be added onto form a duplex in the future. This was a turn key rental that needed no repairs upon purchase but in the future will need repair if tenants move out or for future fix and flip. For now we will collect the rent and look to cash out refi. Partnered up again for 50/50 cash flow and equity split after refi or 50/50 split on future fix and flip. Heres the final numbers for the deal:

Purchase price: 50k
Closing cost: $650
Repairs: 0
Self managed: 0
All in for $50,650

Rent: $650 (deposited into our bank acct)
Water/sewer/garbage: $110
Insurance: $60
Taxes: $40
Maintenance: $75

Monthly Cash Flow: $365

Future exit strategies: Cash out refi leaving min $100 monthly cash flow. Fix and flip: repairs 10k. ARV: 85k. Seller finance: 5-10k down carry 95k for 3-5 years at 8% or other reasonable terms.

Yes, can't wait for EDGE 2015! Look forward to seeing you soon!

This was another deal from a bandit sign. Owners (sister and brother) grew up in this property and inherited it when their parents past. It had been vacant for 6 months. When I first meet them at the property we went inside and loomed around to see it was in pretty bad shape. This was a 2/1 about 530 ft2 on a 9,000 ft2 zoned R2 for duplex or to add another home to the lot. As I came out of the house an ambulance and police car drove past the house and stopped at the neighbors house. It turns out the owners cousin lived in that house and had just past away. Seeing that this was no time for negotiating a home sale I told them to be with their family and that i would call later next week and then I left. When i called them later that week they had wanted 40k and I offered 30k. They accepted and then they went through an attorney to get the house into their name and approve the sale. This process took several months and then it finally closed. I decided before closing to wholesale this to my younger brother so that he could get started with his first investment property and get his money wiring for him. I assigned the property for $500 and then used that money to purchase a dumpster for demo and cleanup to help out. This deal was about getting my brother excited about investing his money in RE and about working with my title company to go through the process to get my first assignment deal done. Money was not the motivation. here's the final numbers:

Purchase price: 30k
closing cost: $650
assignment fee: $500 (used for dumpster clean up purchase)
Repairs: 12k

All in price: $43,150
ARV: 75k

Rent: $695
water/sewer/garbage: $110
maintenance: $75
self managed: 0
taxes: $25
insurance: $45

Monthly cash flow: $440

Providing an opportunity to my brother to get his money working and providing him with cash flow and equity is more rewarding than any profit I could have made with this one. Some of his exit strategies could include: flipping to retail buyer, seller financing to buyers or holding it, cash out refinancing and later adding a second structure to increase the cash flow. The deal was a win win win on many levels!

Nice deal Thom. Sometimes it not just about the money is it.

I cant wait t catch up next week