RE investors input wanted.

Discussion in 'Business, Investing & Finance' started by Concrete Helmet, Aug 18, 2020.

  1. Concrete Helmet

    Concrete Helmet Hook, Line, and Sinker
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    One of my 2 rentals is currently vacant and I've finished up some small repairs and put out my trusty For Rent sign in the yard. So far I've had 3 people inquire about renting, 2 had dogs which I don't want and the other never got back to me after I said I require a full background, rental history and employment verification....

    A few weeks back a nearby resident and Realtor sent me a hand written letter saying she wanted to buy the house for her son and could pay cash. I disregarded the letter because it seemed like an investor(she's a Realtor)trying to hawk a discounted investment property or she was fishing for listings.

    The house is not a run down rental and other than perhaps updating the kitchen cabinets and maybe the vanity in the master it should bring market value(260-265) or very close. I've put about 35K into it in the last 3-4 years, A/C, roof, garage door, fence, and appliances are all 3 years or less old. It was completely painted inside and out 9 month's ago and I put down new laminate flooring everywhere but the kitchen and bathrooms. In the last 2 weeks I had both bathroom showers and tub completely refinished/recoated and new fixtures installed. The tile flooring in the kitchen and bathrooms was just color sealed and re grouted last week. It literally looks brand new...….even the baseboards have been replaced and or painted....you get the picture by now.

    Yesterday I received an email to the address that I put on the rent sign(I don't like phone calls) and the same woman was wanting to know if I would be interested in selling her(her son)the house and holding a mortgage....I owe a little over 100K and since it's the nicer of my 2 residential rentals I had just planned on paying it off over the next few years and selling it when I retire. It's only 1305 sqft so I think it is somewhat limited as far as appreciation goes realistically, but it is also within walking distance to an A rated Elementary and HS.

    Since she had mentioned having cash in her previous letter I'm assuming she could put down a large down payment. With Florida's forgiving foreclosure protection laws I would want 50% down and I would hold a private mortgage deed at 7% with either a 5 or 7 year balloon.

    Having said all that I'm interested to see what some of you who are in the same position would do? Also if I held 50% of the selling price as a mortgage would I have to pay all of the capital gains on the selling price or just half?
     
  2. FireFoley

    FireFoley Senior Member
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    Lots of options there Crete, all seem decent. I would consult an knowledgable CPA or RE pro about the capital gains if you sold and got 50% up front. Holding the paper can be tricky, but you might get a decent return. Is it possible that they can't get a better rate from a bank? also, is this a property you would not getting back into your lap if they stopped paying? I am with you on wanting a big rate if you hold the paper, but given the market, I would think that some slumlord who has multiple properties would love your place. Selling it outright gives you the cake and the peace of mind of never getting it back. And like you said, in FL, it takes a llllloooonnnngggg time to get a foreclosure finished. good luck. I don;t know what you paid but if you sell it outright it would be a cap gains rate, so if you have losses you can take those against it. All your work/upgrades/upkeep go to the cost basis, which I know you know. And depending on what happens in Nov. the cap gains tax rate might be going north.
     
    • Concrete Helmet

      Concrete Helmet Hook, Line, and Sinker
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      If the story I'm getting is true about the house being for the son I'm assuming he isn't credit worthy or maybe hasn't established and Mom probably wants him out of her house....If so she may be willing to do a big downstroke and then let him build or rebuild his credit for a couple of years at which point he could refi the private mortgage. Something is just telling me deep inside not to let go of this house just yet...But the November thing is starting to loom large in my mind.

      A lot to think about for sure....
       
    • FireFoley

      FireFoley Senior Member
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      Well if she has so much money, even if the son has not so great credit and she wants him out of her garage, she could co-sign for a bank mortgage and probably get a better rate. So perhaps there is a bit of an odor here. Remember to make the decision with your head, not your heart, b/c this is an investment property.
       
    • Detroitgator

      Detroitgator Well-Known Member
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    • Concrete Helmet

      Concrete Helmet Hook, Line, and Sinker
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      Yup. I emailed my proposal to her earlier and I guess those little parts about "fair market value or close to it" and a 50% downstroke left her flopping like a fish out of water.....the 7% rate must have left her gasping for air..:lol2:
       
    • Bushmaster

      Bushmaster Well-Known Member
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      Get your money. All of it up front. No real tax advantage with installment note because you are probably going to be at 15% rate regardless

      What does it rent for. A $250k property I would need at least 3k a month or I would unload and invest the money.
       
      • Concrete Helmet

        Concrete Helmet Hook, Line, and Sinker
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        Thanks Bushmaster. A lot of ways this could play and then throw in an election and some social/economic instability and it gets my head a little foggy thinking out all of the scenarios.
        One side says sell now hold the money and wait for the market to come back down when you could buy a similar property for maybe 20-40% less.....or let it ride through possibly another down cycle while tenants are paying off the rest of the mortgage then either cash out or keep renting it for income...

        BTW houses in the C.Florida area of this size and value rent for $1,500-S1800 monthly. What area are you in that brings 3K a month for a 1300 sqft home? Perhaps it would be worth me moving my house to your area..:lol:
         
      • Bushmaster

        Bushmaster Well-Known Member
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        I base the rent on what I pay for the house. I am in unusually great area for renting. For henlandlord that is.

        Most of my rentals are 3br 1 or 2 ba houses built i the 60s. I can pick them up for 50-60k, renovate for 5-8k, and rent for 750 -825 per month. I base my acquisition cost on what I can ren i for. Mostly rent should be no less than 1.2% per month of acquisition cost.

        That covers PITI and allows me to cash flow 35-40% of the rent. Does not doctor in repairs.

        This works because of the tax and insurance rates where I am and also noting low interest rates. There is a really good inventory of these types homes in this area as well. I am doing a 10 unit mobile home park right now, even though I an call it a park due to a moratorium on parks, and we are doing our part for the acqusition from existing cash flow.
         
        • BMF

          BMF Bad Mother....
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          Crete, get your money. This is a seller's market. If her son can't afford it, he shouldn't be buying it. Find a buyer who can. Also, I'd get some comps from any realtor friend you know so you know the true value of your property. If this "realtor" is really a realtor, she's going to try to get the best deal for her client - which is her son, not you.

          And on that note - it sounds like you're ready to sell, so sell. The market is at the tippy top right now, so no better time to sell for you. I have a few realtors I work with and they are all saying that they expect some sort of bubble by the end of this year, after the mortgage/foreclosure protections (from the virus) expire. This virus is causing a lot of people to lose their job or have reduced incomes. With interest rates the housing market is way overpriced. Get out while the gettin' is good! I sold a condo/rental two years ago after the tenant moved out and don't regret it at all. I only owed about $50K on it and figured I'd keep it long term, but after the last tenant moved out I got tired of dealing with all the f*ckheads (prospective tenants).

          That's amazing! Where I live, you're lucky to get .5% - so I don't own any rentals in this area (DC/DMV/Arlington).

          The "1% rule" is getting harder and harder to come by in any metro market.
           
          • Concrete Helmet

            Concrete Helmet Hook, Line, and Sinker
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            I love the 1960's concrete block construction houses in our area because they are easy and inexpensive to renovate. I wish I could find them at your prices... In this area those 3 bd 1.5 bath1200 sqft houses are selling between $200-260k depending on location. My 2nd rental house is from that era and other than worrying about slab leaks it been good for the last few years and has a steady tenant. It's not a terrible neighborhood but $1250 is about tops you can get for rent there. I paid $180k and it went below 100k in value a couple years after but it's now in the 210-215k range and I'm at down to about 90k owed. Gonna hold on to that one as it rents really fast and is easy on the check book to repair and update.
             
          • Concrete Helmet

            Concrete Helmet Hook, Line, and Sinker
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            I know what you mean about f @ckhead prospective tenants....why do people who don't own a home and have a hard time paying their bills feel the need to own dogs.....Nothing against dogs(I owned a German Shepard and Rottie) but I just don't want them in my rental houses because most people don't clean up after them(smell) and they tear the f vck out of the yard.

            I get what you're saying about selling and the market being at it's peak but the flip side is even if the market drops someone else money is paying down the mortgage and increasing my net worth. In my case I've already replaced all of the expensive items like roof and A/C so there is little chance I'll be incurring any great expenses over the next 5 or 6 years. Make sense?
             
          • BMF

            BMF Bad Mother....
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            Nothing wrong holding onto it either...but you should always have an exit strategy (w/ any business). If the market tanks, or drops off even a little bit, you're going to be holding it another 5+ years anyway. If you're confident you can always rent it, then hang on. I wouldn't sell to this realtor though, unless she offers fair value (and again, it's for her son, so she'll want to squeeze everything she can out of you).
             
            • Concrete Helmet

              Concrete Helmet Hook, Line, and Sinker
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              The Realtor is off somewhere flopping like a fish after I hit her with my proposal.....nothing but crickets :lol:
               
              • FireFoley

                FireFoley Senior Member
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                Not to take away from your story about your idiot realtor buddy trying to get a steal, but today i inquired about a place in my neighborhood. It had been listed for rent for months as well as about 6 other places and this one was asking the highest price by 600 bux and of course it was stale. I had done my research and discovered that the owners have quite a few LP notices filed on some other properties, etc. So today the property re-listed as a new rental and dropped the price by 200 bux :lmao2:. So I reached out to the realtor and asked if it was negotiable just to get a feel. Was told owners just reduced the price and it was FIRM. I picked myself off the floor and then asked if the owner had any interest in selling for cash? Did not hear back. Goes to show you. It is worth what someone will give you, not what someone thinks it's worth.
                 
                • NVGator

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                  Sounds to me like you have a prejudice against Real Estate Professionals. If only you had to deal with the mass amount of disfunctional title companies and escrow officers. I’ll withhold my opinion and wish you good luck, Sir.
                   
                • bradgator2

                  bradgator2 Rioting
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                  In my limited home buying experience and other interactions on this Earth... I've never actually met a real professional "real estate professional".

                  No offense.
                   
                  • Concrete Helmet

                    Concrete Helmet Hook, Line, and Sinker
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                    Thank God for that...we keep picking up more and more clients all the time due to the incompetence....a word to the wise when it comes to choosing a Title Agency, go for one who has been in business for over 30 years and has over 200 years combined experience within its 11 employees.....not some dumbass attorney who dresses his staff in the shortest shirts....
                     
                  • Concrete Helmet

                    Concrete Helmet Hook, Line, and Sinker
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                    About 2 in 10 is realistic....since the closing agent does most of the work they have become more and more useless over the years....
                     
                  • Concrete Helmet

                    Concrete Helmet Hook, Line, and Sinker
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                    BTW put the house on Zillow(for rent) Friday night and had it rented at 9:20am Saturday Morning....Aside from the 18 inquiries from the Zillow ad was another email from the same leech(Realtor) who wanted to buy the house again. This time she wanted to put 10K down and have me hold the mortgage at a "more reasonable' rate....Most of you guys know me well enough to imagine my reply.....
                     

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