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    Home Unlabelled Real Estate Investing: $100k profit

    Real Estate Investing: $100k profit

    4 years ago

    Real Estate Investing: $100k profit

    $100k profit

    Posted: 30 Dec 2020 02:42 PM PST

    Just made 100 K profit on a 4 Plex I sold And I'm having two hotdogs and potato salad... crazy

    submitted by /u/EasymoneyD
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    Multi-Party Note Swap Exchange

    Posted: 30 Dec 2020 07:40 PM PST

    You can blame this post on /u/LordAshon and /u/JoshuaLyman for baiting me elsewhere on the sub. Truth be told I haven't written up any deals lately and it has been a goal to write up three or four of them from the past year. This may be my favorite.

    Recently I had the opportunity to structure an agreement between multiple parties through the use of notes resulting in an improved position for all concerned. I hope you will find the particulars of the transactions interesting and consider what you may have chosen to do in a similar situation. Please enjoy the ride!

    A friend and fellow investor reached out to me several months ago with a concern. He and a partner had borrowed $41,000 secured by a second position mortgage upon one of their investment properties with the funds having been provided courtesy of the brother of the partner, via a Self Directed IRA. A sibling is not a disqualified party according to Self Directed IRA rules so this aspect of the transaction passed muster. However a concern arose that the loan could be construed as receiving benefits that would run afoul of IRS Regulation and therefore the question became was there a solution to move the debt elsewhere. The original note was executed under the terms below.

    ​

    Initial Note Value Rate Term Payment (Quarterly)
    $41,000 8% Interest Only Three Years $820.00

    When originally contacted I had no desire to acquire a new note. However, as it has been beaten into my very soul by the many great investors who have influenced me, I always seek to be cognizant of opportunity. I had recently audited some of my outstanding debts and realized that I had several with absurd loan constants. For any reader who is not familiar with loan constants the quick and dirty version is as follows:

    Annual Debt Service / Total Loan Amount = k (expressed as a percentage)

    The constant itself allows for a comparison and/or determination of which debts are the most inefficient, or perhaps harmful, to your financial well being and therefore to be prioritized in regards to being restructured or paid off.

    With the desire to eliminate several high constant debts firmly in mind I began to consider ways in which I could use the note offered to me in order to do so. The first order of business was to enter into a mutually acceptable agreement with the Holder to acquire his $41,000 note. Since the Holder's initial note had been in a second position I felt confident that a similar position on another property and/or properties, in particular with a small sweetener, would be amenable to him as a replacement investment. With that in mind I proposed the following swap. In exchange for the $41,000 note currently held by the Holder I would give three, $15,000 notes totaling $45,000 under the following terms.

    ​

    Initial Note Value Rate Term Payment (Monthly/Yearly)
    $15,000 x 3 4% Interest Only Ten Years $50 x3 & $1,500 x 3

    The Holder accepted my offer? Why? He liked what I offered more than what he had!

    The first benefit that the Holder would realize in this exchange was an increase of the total note balance in the amount of $45,000 compared to his present position of $41,000. The interest rate of the current note compared to the present note was higher at 8% vs 4% but I agreed to reduce the principal balance of each note by $1,500 per year until paid in full. Furthermore three, smaller notes offer certain potential that a larger, single note may not. including the availability of additional capital to invest on a yearly basis in the present than provided for by his current note.

    ​

    Present Yearly Return of $41,000 Note Potential Yearly Income of $1,500 Note x3
    $3,280 $6,300

    As previously explained, a note for note trade did not provide a solution to my challenge which was the desire to eliminate high constant debt. Therefore my acceptance of the note swap was contingent upon finding a third party, a catalyst, that would purchase the $41,000 note from me for cash. I turned to my friends and as fortune would have it a friend agreed to purchase the $41,000 note for $35,000 provided that the Borrower was willing to modify the note to maturity to be one year as opposed to three. The Maker of the note, agreed as alleviating their concern regarding the propriety of the loan was more important than a truncated payoff date.

    Present Position

    Initial Note Value Rate Term Payment Quarterly
    $41,000 8% Interest Only Three Years $820.00

    Potential Position

    Note Purchase Price (Discounted) Rate Term Payment (Quarterly)
    $35,000 8% Interest Only One Year $820.00

    ​

    If you have made it this far and I have been vaguely competent in explaining the moving parts it should make sense as to why each party liked their potential (final) position better than their present (initial) position and said, "Yes". To rehash:

    Party Initial Position Final Position Final Position
    Borrower Concern for Lender Concern Allayed Relationships
    Lender $41,000 Note $15,000 Note x3 Availability of Capital
    Note Buyer $35,000 Cash $41,000 Note 18% Yield

    ​

    You may have noticed that one party to this transaction was left out...yours truly! So why did I do this deal and what benefits did I receive?

    Initial Position:

    Debt High Constant Debt Balance Monthly Payment Total
    Personal Note ($22,000) ($1,000)
    Vehicle Loan (4,000) ($300)
    ($1,300)

    ​

    Final Position

    Debt New Debt Balance Monthly Payment Total
    Second Mortgage x3 ($45,000) ($525)
    Expense Escaped 0 $1,000
    Expense Escaped 0 $300
    Option + Master Lease 0 $275
    Option + Master Lease 0 $325
    Cash Remaining 0 $1,375

    ​

    The table above attempts to convey how I used the $35,000 in cash from the Note Buyer.

    • $22,000 was used to pay off a high constant loan that cost me $1,000 per month.
    • $4,000 was used to pay off a high constant vehicle loan that cost me $300 per month.
    • $5,000 was used to acquire an Option (with Seller Financing when executed) + Master Lease on a $180,000 property which creates a positive cash flow of $275 per month.
    • $4,000 + $1,000 in Personal Cash was used to acquire an Option (with Seller Financing when executed) + Master Lease on a $320,000 property which creates a positive cash flow of $325 per month.
    • As I did not intentionally structure this agreement in order to create a tax loss there may be the opportunity for me to realize a loss of $10,000. I have to consider how and why I may wish to pursue that particular avenue.

    The net result for me, accounting for the new $525 per month outflow (including the yearly principal reduction of the $15,000 notes), is an increase of $1,375 per month of positive cash flow.

    I hope this gives everyone food for thought and how you can use what other people have to recognize and create opportunities for the benefit of multiple parties. As always if you have a question or believe you see an error in my calculations please let me know. I don't have an ego about this as sharing the concept for others to learn from is most important to me.

    submitted by /u/GringoGrande
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    Looking at a new-build 4-plex as a first-time investor/home-buyer.

    Posted: 30 Dec 2020 09:58 AM PST

    I would like to purchase a 4-plex as an owner occupant for my first home. I am looking into the property below (as a potential opportunity to buy or simply to learn how this works). Other multifamily properties in the area are well overpriced, so if this is not an option, then I'm going to start small with a 4 bed single family and wait for a deal/keep learning.

    What I need help with:

    • Loan information. I have reached out to my bank and the listing agent. This property does not qualify for an FHA loan. I do however qualify for a 5% down conventional loan. Does anyone have experience with this?

    • The listing agent mentioned that a contract is needed (in case the project goes bankrupt). What risk does this entail? I know nothing about this, and google hasn't been entirely helpful.

    • The listing agent states that they have no intention to actually build the 4-plex. This is listed as an opportunity to buy into the legwork they have already one (foundation, permits, build plans, etc).

    • Cost: The cost of this property is pretty ambiguous. It's listed for 700k but the total costs mentioned in the description are closer to 1m. Would you happen to have an idea of the cash required to do this?

    Questions:

    • Is this feasible for me (27yo, 55k loans, 41k savings, 50k~ in retirement, 75k base income) ?

    • How do I go about finding a builder to take this project? And what exactly does this entail?

    • Are there any other details that need to be ironed out for a project like this? Again, newbie investor here.

    Thanks for your input, in advance.

    submitted by /u/2020tryhard
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    Getting Cold Feet in Alaska

    Posted: 30 Dec 2020 10:18 PM PST

    Hi All! I've been working on a deal local to me in Alaska for a few months. It's an 8-plex with 4 1/1's, 2 2/1's, 1 studio, and a 4/2 unit. Gross rents are $9880 with an $800,000 purchase price. The loan is a 30-yr, 80% LTV, and 5% rate. I estimated about 170k in closing costs but am getting sticker shock when I see it's going to be 184k to close.

    I guess I'm just looking for somebody to give me a sanity check and say whether or not this is a good deal. I've invested heavily in the stock market throughout my life (I'm 30) but haven't ever taken a dip into the real estate game. Please let me know your thoughts!

    submitted by /u/CPorion
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    HOME INSPECTION TOMORROW ������

    Posted: 30 Dec 2020 10:43 PM PST

    Hi guys!!! I'm having my home inspection tomorrow and slightly freaking out. I read great reviews about this one person that I chose. Is there any tips/tricks that you guys can offer??! Also imagine the home inspector misses something, can I sue the company for that?

    submitted by /u/dreaming10
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    Buyer wants to close in 5 months?

    Posted: 30 Dec 2020 08:47 PM PST

    I put one of my Fourplexes up for sale a couple weeks ago and the buyer wants to house-hack. Unfortunately the earliest lease agreement is up in June so the buyer is asking me to close in June and saying they can sign contracts and do inspections ASAP and obtain financing by February.

    ​

    I'm a bit confused by the situation. Will a bank even lock someone in that far out? Last time I tried getting a rate the earliest a lender would even do it was 60 days out.

    ​

    Apparently this person is also only putting down 10% which I've not heard of. How can someone put down 10% on an investment property?

    submitted by /u/rb1754
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    What To Do With Extra Cashflow from Refi?

    Posted: 30 Dec 2020 07:28 PM PST

    My new rate is about 1.5% lower, I'm raising the rent a bit- should have an extra $250-300/mo from this property.

    I have an emergency fund in place with a little less than 1 yr of mortgage payments.

    Do I save the extra 250-300/mo and put it towards improvements/repairs?

    I kinda want to put it towards a little car payment. Is that "lifestyle creep" and going to keep me small as an investor?

    submitted by /u/wc1048
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    Refinance: How many points is too many?

    Posted: 30 Dec 2020 07:12 PM PST

    I have the ability to cash out refinance a rental property for exactly 1% lower interest rate, decreasing my P&I by almost $200/monthly. I would also come away with about $35k in cash.

    However, this would come at the cost of over 4 percentage points, & about $18k in closing costs (HCOL city) meaning I wouldn't break even for 8 years.

    Seems expensive for a refinance. Is this many points and closing costs unreasonable?

    submitted by /u/Xitre
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    Property Management Software

    Posted: 30 Dec 2020 10:55 PM PST

    A bit off the beaten track here, but I've been working on PM software for a while now. We initially targeted the office renting market and have had good success there are now are launching our "flex" system which can manage multiple types of properties (from malls to marinas to residential).

    Our target clients are more or less people who have over 10-50 units. I myself would not use the software for less than 5 units. Most of our clients manage over 100s of units, and we have not spent a dime on marketing yet.

    So for people who are in that market and either have a SW or need one. What features and ideas do you lack in your existing SW, and what would be the killer that would make you move?

    Thanks for you time!

    submitted by /u/nhass
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    Sell company vested stock options & rsus or heloc for down payment?

    Posted: 30 Dec 2020 10:05 PM PST

    I work at a publicly traded company. I have a mixture of rsus and stock options that have vested. Is there a way to use these to purchase my next investment property with out having to pay as much taxes after selling them?

    submitted by /u/a_day_with_dave
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    Help Finding Townhome Appreciation

    Posted: 30 Dec 2020 09:42 PM PST

    Hi everyone,

    I am trying to find appreciation rates for townhomes vs single family homes in a given country, in particular Contra Costa Country in California. Does anyone have any resources I could use to get this information? Thanks.

    submitted by /u/adam0000345
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    Merced investment

    Posted: 30 Dec 2020 09:25 PM PST

    Currently looking at 300k-400k worth properties outside of Bay Area. Any suggestions where might be a good place? Couple of them pointed me to Merced?

    Or would a better ROI be to put in Texas/ATL/NC?

    submitted by /u/madmaxx123
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    Stupid Question about Investment Mortgage

    Posted: 30 Dec 2020 09:13 PM PST

    If I have a low down-payment conventional mortgage that I have yet to reach 20% in as my primary residence. Can I purchase an investment property with 25% down or do I have to get rid of the PMI/Surpass 20% equity in my low down-payment loan first?

    Basically if I have 10% equity in my primary residence and im still paying PMI with a conventional mortgage, can I buy an investment property with 25% down?

    submitted by /u/LILOS_NECK_GAME
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    Can someone take a look at the link I have posted and tell me why this house in Toronto is so cheap compared to others in the area? (750K)

    Posted: 30 Dec 2020 12:56 PM PST

    Multiple Partners

    Posted: 30 Dec 2020 02:26 PM PST

    We created an LLC with the intent to invest. Each partners will have 50K contributions.

    We asked the lender and typically they don't lend to LLC. So we're going to apply for mortgage as individuals. How does this work with the LLC structure? Do we all put our name on the mortgage to ensure that every body as skin in the game? How do we get the property into the LLC's name, at this point, I don't think it's possible if the lender won't lend it to the LLC.

    Anybody give me some insights would be appreciated. THank you

    submitted by /u/time_keeper_1
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    How should I proceed when I need investors to get loan terms and loan terms to get investors?

    Posted: 30 Dec 2020 07:56 PM PST

    I have some money and a business idea that involves buying a piece of property, but I need to raise more money from one or more investors to make the purchase happen. I might need to double the money I'm putting in, or I might need 10x as much. Investors seem to want to know what that target figure is. But to determine that target figure I need loan terms from a bank or other lender. And to get loan terms they insist that I already have [more of] the capital, and that means finding investors.

    Is this chicken/egg scenario usual? Is there an obvious solution that I'm missing?

    submitted by /u/sparr
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    Can I Justify Buying an SUV/Truck as a Landlord?

    Posted: 30 Dec 2020 07:40 PM PST

    I have a sedan. Love it. BUT... I had some water intrusion at a unit recently and had to move a wheelbarrow and shovels, in the rain. Dug a trench- resolved the water issue.

    Moving everything in a sedan was a huge pain and it's left me feeling a little insecure about being able to take care of business in those emergency situations. I'd say 95% of the time I'm looking to hire out work, so I'm by no means mr. Fix it and won't be using the truck bed or hauling capabilities of an suv all the time.

    I think it would be cheaper upfront to buy a knock around truck or suv, but I don't want to be maintaining two older vehicles I don't think (sedan is an '08). My gut says one "nice" 15-20k truck/suv would be more efficient than a 7k sedan and a 5k truck/suv. What do you think?

    Do you ever feel like you wish you had a truck or suv if you don't have one? If you do have one, does it make landlording any easier?

    submitted by /u/wc1048
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    Help with first property?

    Posted: 30 Dec 2020 07:20 PM PST

    I'm currently looking at a 2 unit property I want to purchase that is selling for below market value in an area I believe will increase in value in the coming years. One thing I noticed is that the ceilings are relatively short (about 7ft), but the units are completely renovated and look great. I know that I'll have to lower rent a bit due to this, but is this a deal breaker or am I overthinking this?

    submitted by /u/SwissMade21
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    Anyone invest in real estate via a DST? How was/is your experience?

    Posted: 30 Dec 2020 03:27 PM PST

    My wife and I are considering investing in a DST to diversify a bit. Curious what your experience has been like. From what I gather, DSTs make it super easy to 1031 exchange into which is a huge perk and they typically invest in Class A assets. Though, I've recently seen more offerings focused on industrial, storage facilities, etc.

    Anyone here have experiences, good or bad with DSTs? Which provider did you work through?

    submitted by /u/ospreyintokyo
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    Is there a way to add me to one of my parents mortgages?

    Posted: 30 Dec 2020 06:49 PM PST

    Scenario: California, my parents own 3 homes one paid off completely, one with ~$125k left and one with a full mortgage about $550k. Each one is worth about the same ~$750k and are going to retire soon so they want to keep two and sell one of them. I'm currently renting out one of them with roommates at above market rate to use as a savings route. They want me to buy the house that they have ~$125k left on for a discount at $600k, I could, but it would be a tight transaction for me right now.

    Question: Is there away to make a trust or something with two of the houses and add me too it then pay them by borrowing towards that?? I really want is to be able to keep all three so they can keep the rental income of the third house but I don't want to stretch myself too thin. Also, trying to preserve the prop 13 aspect of that second house for after their deaths.

    submitted by /u/spankyassests
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    What type of financing should I be looking to get?

    Posted: 30 Dec 2020 05:56 PM PST

    I have a rental in LA that was my primary residence from 2017-2020. It's currently rented through 2022 and which point I plan to sell. I have about $325k in equity tied up In that property for another 14 months (end of the current lease).

    My primary home is in Nashville and we have appx $250k in equity tied up... no plans to sell.

    I'm looking at picking up a duplex in Nashville but I don't have much cash to work with until the LA house sells...right now I have about $20k I could put down on a property.

    I make $150k/yr but currently have appx $850k in mortgages so doubtful traditional financing is an option.

    Do I wait until end of 2022 to free up cash and buy? Refinance even though we plan to sell soon? Are there any other ideas?

    submitted by /u/tawebber1
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    How do I actually start wholesaling?

    Posted: 30 Dec 2020 05:31 PM PST

    I'm 17 and want to start wholesaling when I'm 18 as a start. How can I learn about wholesaling in depth? Thanks for the help 🙌🏽

    submitted by /u/Zain-Miah
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    Do you need to be charismatic to be a successful real estate investor?

    Posted: 30 Dec 2020 05:30 PM PST

    I've noticed one commonality amongst all successful real estate investors that I've met is that they are all incredibly charming.

    ​

    I'm not the best at speaking. Imagine a stereotypical nerd, and I'm that. I do fine with interviews and speeches for some reason, but I do not excel in conversations. Perhaps it is because conversations are so variable--I don't know. That is one thing I've liked about stocks--they don't care about what you look like or how firm your handshake is. So long as you know your stuff, you'll make money.

    ​

    I've been looking to diversify my investments for the last few months, and with stocks reaching crazy valuations, Real estate has become much more interesting. Even so, I'm worried that I might not be cut out for the field. What is your opinion? Does one have to be charismatic and have a good sense of style in order to be a successful real estate agent? I don't want to waste time learning a skill I will never be amazing at if I'm already having progress in stocks.

    submitted by /u/hakimbomadadda
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    Mortgage fraud question

    Posted: 30 Dec 2020 05:22 PM PST

    Hi I'm new to this so please bear with me. I've been lurking on this subreddit with the intention of buying a second property out of state for rental purposes. I currently live in my primary residence, which is my first home.

    I have enough for a 20% down payment on the houses I'm looking at but I couldn't help but see lots of threads on here mentioning mortgage fraud if I am not living there myself for the first year. Now where my confusion comes from is that I don't know when this rule applies.. is it only for FHA loans when there is only 3.5% down? So if I am doing a conventional 20% down 30 year fixed mortgage can I just start renting right away?

    submitted by /u/IngenuityPlayful
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