First Investment Property

[Mhinto]

Since this is the first time, you might wanna rethink your plan. You also might think about making it your personal residence for the next two years. Then it should fall under the Federal rules exempting it from those taxes. It would give you more time to do your repairs and hopefully take some pressure off of you. I know investors who move every 2 years. They do one house after another. Or you can convert it to a vacation rental.

The way it sits, it needs TLC to anything with it. Next summer, I'd bleach those stairs and refinish them. They could be a real asset to the house. And it needs curb appeal. Most of that is elbow grease and making the exterior low mantenance. You might think about a version of a natural yard that will blend into the setting. On the interior, I'd go with a hard floor rather than carpeting. It last longer and it's easier to keep nice. There are a lot of improvements that you can make that won't cost a lot of dollars.

Thanks for the advice!

So after asking around it seems that living in the place for 2 years is the only way to avoid the capital gains taxes. Unfortunately that’s not something I can do at the moment but I definitely like the idea.

I’m thinking that after the first property is sold I’ll use that money to pay off the mortgage of my primary residence. After I do that I can find a home to live in for 2 years to avoid taxes. I don’t want to be paying multiple mortgages. I still plan to flip some homes without living in them though. I’d like to do more than 1 home every 2 years. The taxes are high but I guess that’s what it takes to play this game.

Here’s a brief description of my plan for moving forward. Sell flip #1 and pay off my mortgage on primary residence (66k). Finish flip #2 and use profit for a down payment on something I can renovate and use as a full time rental. Flip another home and pay off rental home #1. That would get me somewhere around $800 of income a month per rental. Repeat the process until I can live off rental income. Along the way I’ll renovate a home and live in it for 2 years to avoid capital gains taxes while having other homes renovated. I want to hit this pretty hard.

Thoughts?

 

[Sethamus]

It really depends on your long term goals and comparing what choice gets you their faster.

Depending on your timeline to turn a flip around you can do a lot to make this look good if you have time and basic skills. Faster turn around means less holding cost and more profit, do not get stuck doing stuff out of your skill range or very time consuming to save a few hundred dollars. Also, talk to your realtor about your market and when is the best season to sell or is the next 2-4 months look to be the best with the current market. That will give you a better timeline.

Vacation rental needs the same facelift, but a focus on creating "moments" to make someone rent. That outdoor deck to the lake would be a huge focus for me and views to the lake from the inside. I personally would keep that Golden tee and make a little game corner (board games, darts-with HUGE cork board behind it so less dmg, and the golden tee). That would be a highlight few vacation rentals would have.

Next summer, I'd bleach those stairs and refinish them

Bleaching? Do people in the North not use pressure washers to clean their decks and fences?

 

[Mhinto]

It really depends on your long term goals and comparing what choice gets you their faster.

Depending on your timeline to turn a flip around you can do a lot to make this look good if you have time and basic skills. Faster turn around means less holding cost and more profit, do not get stuck doing stuff out of your skill range or very time consuming to save a few hundred dollars. Also, talk to your realtor about your market and when is the best season to sell or is the next 2-4 months look to be the best with the current market. That will give you a better timeline.

Vacation rental needs the same facelift, but a focus on creating "moments" to make someone rent. That outdoor deck to the lake would be a huge focus for me and views to the lake from the inside. I personally would keep that Golden tee and make a little game corner (board games, darts-with HUGE cork board behind it so less dmg, and the golden tee). That would be a highlight few vacation rentals would have.


Bleaching? Do people in the North not use pressure washers to clean their decks and fences?

My long term goal is to quit my current job and use real estate investing as my primary source of income.

I’ve decided to move away from vacation rentals for now. I want to have some cash set back for emergencies so that I can keep my head above water if I have a few bad months and unexpected expenses.

For now, the plan is to flip homes until I have enough cash set back to pay for a long term rental home in full.

The first flip took 9 months. That’s much longer than I want but I am the bottleneck. I’d rather sub more work out to contractors than do the work myself. Contractors are expensive but I am slow. Weekends and evenings after working a full time job doesn’t allow much time to get anything done. I think I am better making up the money I lose on contractors with a higher quantity of flips.

 

[Mhinto]

Yes, we do pressure wash. That's only step #1. But, when the wood has become discolored, there are techniques to make the wood look good again -- unless it has dry rot. And from your pictures, I couldn't tell IF it is treated lumber. I just saw how weathered it looks, which is a BIG red flag. In our climate. Lumber completely rots in a matter of three or four years if it is not cared for properly.

FYI There are two types of treated lumber. There is the type that is used for any time there is contact with dirt. Then the other is less treated lumber if it has no ground contact. A staircase like that can cost thousands -- just for the wood. We just finished building a handicapped ramp for a tenant who is supposed to move in this week. Yes, it costs thousand just for the lumber. With the virus, treated lumber is in short supply right now. And so are most building supplies.

I actually demolished the steps, hauled them off and built a road that allows you to drive to the water. I’ll definitely keep the advice in mind for the next one though!

 

[Kid]

With the virus, treated lumber is in short supply right now

Off topic: Can treated lumber be imported from overseas? If it would it might be a opportunity for some.

 

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[WJK]

Off topic: Can treated lumber be imported from overseas? If it would it might be a opportunity for some.

My understanding is that some of it comes from Canada. It is soaked and injected with chemicals that toxic. The tailings cannot be safely burned. We paint our cuts with a product that is similar to the chemicals in that lumber. A lot of toxic processes are done overseas due to our laws here. Tanning hides, processing ore from our mines, and many other things are done where the EPA and the labor laws are more lax.

 

[Lucky Lu]

Made it through inspections and appraisals. Closing date is scheduled for the first week of December .

Congratulations! Keep us posted. I wish you success brother.

 

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[Dianne Cohen]

Thanks for the advice!

So after asking around it seems that living in the place for 2 years is the only way to avoid the capital gains taxes. Unfortunately that’s not something I can do at the moment but I definitely like the idea.

I’m thinking that after the first property is sold I’ll use that money to pay off the mortgage of my primary residence. After I do that I can find a home to live in for 2 years to avoid taxes. I don’t want to be paying multiple mortgages. I still plan to flip some homes without living in them though. I’d like to do more than 1 home every 2 years. The taxes are high but I guess that’s what it takes to play this game.

Here’s a brief description of my plan for moving forward. Sell flip #1 and pay off my mortgage on primary residence (66k). Finish flip #2 and use profit for a down payment on something I can renovate and use as a full time rental. Flip another home and pay off rental home #1. That would get me somewhere around $800 of income a month per rental. Repeat the process until I can live off rental income. Along the way I’ll renovate a home and live in it for 2 years to avoid capital gains taxes while having other homes renovated. I want to hit this pretty hard.

Thoughts?

Great plan! I tell young clients to do almost exactly what you are doing. I wish I could be on this ride with you. Have fun!

 

[Mhinto]

The second property is very close to being done. Last week the roof decided to start leaking so a new roof is being put on. Hopefully it will be ready to go on the market after that. Contractor said he’d be there in 2 weeks.

I’ve started sending letters out to distressed looking homes on the hit list. Hopefully I’ll be buying another soon!

Thanks for the support everyone!

 

[Lucky Lu]

Thanks! The property is located in rural Kentucky on a small lake. That’s as transparent as I want to be on the location. I gave 120k for it and am approved for 40k to do the remodel. I can’t imagine using that much for the renovation but it’s there if I need it. I gave no money down but used the equity in my home to cover the down payment.

I’m planning to put it on the market at 230k and selling for about 200-210k. I have several comparable property evaluations to support those price points.

Great job. I hope your success exceeds your expectations.

 

[Bennett]

Second property looks solid! Have you considered washing the deck and outside wood with TSP and lightly pressure washing it? I did this on a flip property I bought a while back and it totally restored the wood to look great before restaining / sealing it.

 

[traction2]

First property will be going on the market tonight. I need to go over all my expenses to be for sure but I think I’ll have about $160,000 in it. Comps put the sale price at $350,000 so it’s getting listed for $349,500. I know. Seems crazy. Thanks COVID . Things around here have been going fast.
View attachment 34707View attachment 34708

Wow congrats that's some gain.
Where have you been sourcing these properties?

 

[traction2]

It’s not sold yet so we’ll see. The market for lake homes in this area is crazy right now.

Both properties have came from postcards sent to distressed looking homes. Grass was tall, they needed work etc. I make a note of every rough looking property I see.

Freaking awesome man.
I always wonder though, once you pitch the owners, why don't they seek comp values or get with an agent to get market value?

 

[Fox]

Amazing thread! Hope the sale goes well and well done on taking some big action.

 

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[Kid]

My understanding is that some of it comes from Canada. It is soaked and injected with chemicals that toxic. The tailings cannot be safely burned. We paint our cuts with a product that is similar to the chemicals in that lumber. A lot of toxic processes are done overseas due to our laws here. Tanning hides, processing ore from our mines, and many other things are done where the EPA and the labor laws are more lax.

Didn't know that its that bad.
Thanks for answer.

 

[Sethamus]

You still kept the golden tee I hope haha

 

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[Mhinto]

You still kept the golden tee I hope haha

I really wanted to lol! Unfortunately it wasn’t working and I was told it could be very expensive to fix. The dump has it now.
I did salvage a Christmas tree and a lawnmower though!

 

[Mhinto]

Nine months is a REALLY long time to "flip" anything. I always assume that things are gonna go wrong with every project. The longer the construction time, the more of a chance that things go south. (Can you say fire, vandals, earthquakes, hard freezes, exploding gas pipes, arson by a past tenant's mad baby mamma, etc...)

It's a lot easier to lose money than to make money. I have always lived by the odds. I spend a lot of time and thought on upping my odds of winning.

An old friend of mine in OK did a flip recently. He was the "money man". He sent me pics. I told him that his sticking point was going to be the nasty looking swimming pool. And it was. His "partner", who was over seeing the work, left that problem until last to solve. Everything else was done ($75,000 worth of rehab) and my friend couldn't close the buyer's escrow. He had to step in, get the repairs approved by the city, and then corrected. It took an extra month and lots of money. He learned a lot about swimming pool liners and equipment. He almost lost the escrow & loan comittment.

That's what I'm talking about. You must solve the problems up front before they happen. A lot of that is knowledge and experience with being out there doing deals. Yes, I've had deals go sideways. Yes, I still have disasters at times. Make sure you have the funds on-hand and the guts to roll with those moments. Over the last 44 years, I have seen a lot of people come and go in the real estate business. Most of them cannot hang in there when the going gets tough. They don't know how and when to pivot in the business. It takes a lot of grit to keep getting up each morning and keep trying...

Speed is something I definitely plan to work on. That was my first and it was definitely a learning experience. Flip #2 is projected to be ready for the market toward the end of November. If we hit that deadline it will be completed in 4 months from start to finish. Granted, it doesn’t need as much work on it and I’m not the one doing it all.

 

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