If you have to ask about whether its cool to take your friends house or not, you're kind of a dick. Some things go beyond the numbers, and yeah your math checks out. But really, if he's your friend and he defaults you're going to go for the jugular and make him homeless because technically you're correct? In my eyes either help him out for 8% (the win-win) and secretly not plan to take his house if he's in some trouble (which he likely is) and know this going in that it's likely going to be somewhat of a headache.. or just don't go down this road. Taking your friends house because it's a part of the contract you made with someone not-so-bright is just bad for the soul.

Put your money elsewhere (ethereum! or another real estate deal) if that's how you're going to play it

A great argument for the position of "Never mix finances and friends".

Ya I don't want to take his house. The problem is he's trying to find another place to live, but can't buy until he sells this place. I'd be all for buying it if he was moving, but you just never know when exactly he'll find a deal that can go through, and he won't be able to touch a deal until his place is sold.

Anyway, I went and took a look at it because I hadn't seen it in a while and told him what the deal was.

Sidenote: He used to work for me, I fired him and was still the best man in his wedding years later. Maybe taking his house wouldn't end the relationship :-)

I'm having a hard time picturing how this would ever happen in a world outside of Hollywood.

I'm also struggling with the condo without an association part. This is in the United States, correct? If so then it's a virtual guarantee that whatever state this is in requires that all condos have an owner's association with by-laws. Perhaps the association is in financial difficulty, or perhaps it is defunct or otherwise inactive?

As for the first part, it did happen, we were young (15 years ago) though so it wasn't like he had a family to support or anything. When you tell me your hands hurt and you cant work the ****ing mower as a grown man and I'd been working that mower since I was 12, your ****ing gone. Obv there was other stuff leading up to it. Guess it was kind of like brothers fighting, would take a lot more to break us off.

The association part I'm guessing went defunct or whatever. There's a few different groups of condos in the immediate area. Like literally next door and across the street. Small groups of like 6-10 each. They are all nicer then his group of maybe 6. 3 of those in his group have been purchased and redone by investors. His is the **** hole out of all of them right now.

I honestly don't think he can ever be approved of anything so I've kind of written this whole deal off.

Hello everyone, anyone here invest in the Cleveland area? If so, please PM me.

I started looking into REI about seven months ago. I had no desire to try to find something in Maryland due to the tenant friendly laws so went about looking in other markets. Finally settled on the Providence RI, market since we're planning on moving up that way soon. Providence offers decent cap rates comparatively speaking in the Northeast. There's also a ton of multifamily properties which is what I was looking to get in to. I had a 6 unit under contract but we didn't like the inspection results. We wanted additional money back at closing from the seller to fix some of the stuff and he wouldn't do it. So now I'm back to looking...


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The answer depends on your personal situation, what PMI is going to be & the assumed rate of return you'd get with the money if you didn't put it down on the mortgage.

When I bought my house I decided to put 10% down, but I can't remember if I payed the full PMI amount at closing or added it to my monthly payment.

I've read this thread a couple times and am finally in a position to purchase a couple of homes with my brother. They are two duplexes we plan on putting bids in on tomorrow. We should hit at least 25% ROI and potentially closer to 35%. Neither place needs much if any work, the one house is actually in extremely good shape with one side that has been rented from a family for 20 years.

Just wanted to post and thank everybody who has contributed to this thread, it's been a great help!

When you say 25% or 35% ROI what do you mean? When are you getting this return?

I guess that return is based on projections. I factored in typical expenses listed in this thread (vacancy, repairs, management, taxes, etc) and then took that and the mortgage off of our rent then divided that number by our total initial investment (down payment, closing costs). Theoretically, it could be worse, but over the course of the next 30 years the projected expenses are pretty close to the 45% listed in this thread and if we hit that number we hit 25%+

So I'm about to do a rehab project with a partner (he is an experienced contractor and I am not.) The main thrust of the agreement is that we finance the purchase with debt, I put up the money for the rehab, he does the work at cost and we split the profit after the lenders get their money and I recoup expenses (plus interest.)

My question is this: I have the cash to cover the complete cost of the house plus construction. We don't need the debt if we don't want it. Is there a good reason to take on the debt? Right now that money is basically sitting in cash. This is a relatively short term project (90 days) and this cash isn't much of my net worth so liquidity issues aren't really at play. Should I just put the money up and get a bit extra interest?

I am thinking about getting into flipping in Seattle (actually, Renton, most likely). My thought is to do a single flip first, and then evaluate whether to continue, and possibly keep one or more properties as rentals later. Advice welcome.

The Plan.

300kish for a 3/1 or 3/2 SFH (900 to 1400 sqft). It should need lots of work.

I have 140k cash for the project for a down payment and repairs/other costs. Hard money lender quotes 2% origination plus 1% per month, 6 month balloon payment, with 20% down required. (I suspect I should try to get a bank loan at better rates.) I am looking at auctions, hence the hard money lender, but also open to random houses for sale.

Looking for a mostly cosmetic fixer. I have done painting, dry wall, carpet, tile, full bathroom gut, including installing the cabinet, though we hired a plumber, other handiman work myself. Plan is to do the work myself, about 2 months holding, though better if 1 month.

Down payment would be $60k, leaving $80k for finance and repair and sales costs. I think the repair will be more like $20k in materials, plus my sweat mostly. That leaves me a massive margin for error.

Will hope to make at least $50k net. Will do comps to get reselling price, of course.

A bank or correspondent lender will definitely give you a better rate and closing costs, but they will likely get a charge back if you pay it off in less than 6 months. Doesn't really matter to you, but you would have to find a different lender next time because they probably won't work with you again.

Thanks. The hard money lender is because in an auction you have to pay 100% on the day off, no escrow period (or a one day escrow?). Anyway, that is why I think I need a hard money lender. I asked BofA if they do auction loans. They said no, but I'm going to do more research to see if I can get lower costs.

Yeah you're definitely going to need private money to buy a house at an auction unless you have significant equity in your home and can use a line of credit. With the charge back scenario I was more referring to the part about other random houses for sale. Most of the private money guys I've talked to typically structure them with 20-30% down, 8-10% interest, 1-2% origination and a balloon payment in 5 years. The guys that do it for a living or work with brokers are going to charge you more whereas someone that just has a lot of cash and wants to diversify with note investing may be cheaper.

Looking into what financing options are open to me on a home with an unfilled pool. It needs about $10k worth of work. Apparently it's a health hazard and can't be financed conventionally. The home has been on the market for about a year, and I asked why the seller didn't just fix/fill it himself, and was told he was cash poor.

The listing agent (I don't have a realtor yet) mentioned an "escrow hold back" but I called Chase and they said that was a niche type of loan that they don't do. I then spoke with a lender recommended by the agent, and the guy told me you can have the pool covered and basically just get a friendly appraiser in (lol) or else do an escrow holdback. But the caveat was that the most they'd do on an escrow holdback was $5k, and so I'd have to slip the other $5k (or whatever the exact amount ended up being) to the contractor on the side (lol). Neither of these options are all that appealing to me on a very large purchase!

The option I don't really want to do, but am exploring...is to buy it with cash, and then do an 80% cash out. That'd be done with perhaps a temporary loan (<2 months) from relatives. I'm not sure if there are tax implications there? I think I have to pay interest over a certain amount?

Anyone encountered anything like this with something needing a repair and being unfinancable as-is? Is cash/cash out the only viable option?

There are a lot of variables when it comes to an escrow holdback. All lenders treat them differently, and big banks are very hesitant to do them but lol at chase telling you it's a niche product. What state is the property located in?

Nevada

The issue with getting any lender, private or hard money, to finance anything at auction is the lack ability to get title insurance (in Texas but I doubt it's different in Washington). This is in addition to the difficulties with doing normal due diligence like seeing the inside of the property.

Thanks. I talked with the real estate agent (who specializes in auctions). They work on checking title themselves, but I'm sure it's not complete. Any other thoughts on this appreciated. I am suspecting that a lot of the value (to the auction buyer) comes from not having that insurance.

Come to think of it, those are prolly the three biggest unknowns, giving the biggest contributions to the discount: (1) no title insurance; (2) funding must be 100% day-of; and (3) no inspection.

I think I'm fine with bearing those risks in exchange for the reward. Again, comments welcome.

As far as the taxes goes, I think it depends on if this is a home / second home or if it's a rental.

If it's a rental, you can deduct 100% of any interest that you would pay when you do the 80% cash out, subject to passive activity rules.

If it's a secondary residence, I believe the 80% cash out would mean that your debt would technically be classified as home equity debt as opposed to home acquisition debt. The distinction is that if your debt is classified as home acquisition debt, you can deduct the interest on up to 1 million of a loan balance. If it's home equity debt, you can only deduct interest on $100,000 of debt.

One other option that you could consider (if your relatives are open to it) is have your relatives finance the loan themselves (i.e., your relatives would be the holders of your mortgage, and you'd make your monthly mortgage payments to them). You can still deduct the interest from this arrangement as long as its documented properly.

I'm planning on converting my primary residence to a rental property.

I bought it for 233k. Zillow has it worth $362k (realistically, probably closer to 325k). I owe $158k, and have an interest rate of 2.75% through mid-2020. Don't need the equity for my new home.

My plan would be to rent this for the foreseeable future. I don't need the money, and the home is in a nice area with good schools, so it should be fairly easy as an annual rental with good families coming in (assuming it is priced correctly). I'm expecting a mid single digit return on my equity, accounting for **** breaking/non-rental, but wouldn't be surprised by closer to 10%.

It looks like I have two options here on avoiding paying any capital gains: (1) I immediately sell it to an S-Corp or (2) sell it to an S-Corp (or sell it completely) within the next 3 years (which would allow me to qualify for the 2-in-5 years exclusion). Am I correct in that? And would it not be more advantageous for me to delay selling it to an S-Corp due to my 2.75% interest rate?

Why would you owe capital gains if you aren't selling?

If I convert my primary residence to a rental, my exempted capital gains convert to taxable capital gains after 3 years and 1 day have passed (afaik)