New Investor with questions

Susan Blanco · 2017-01-26T23:14:54-08:00

I’m new and finally making the move to become more active in RE.My husband and I own three homes-all rented. We bought the last 2 in 2007 just before the collapse but have managed to hold onto them. The same renters have been there for the last 8 years but always pay late. However, they always end up paying, take care of the home and we have no problems other than late payments. During the financial crisis we lost our jobs and made a drastic decision to go overseas for work. We now have lived in Dubai, UAE for 6 years. We have paid off all our debt and are three months away from paying off our home in Utah.We really want to change our careers to real estate and go forward with buying more single family and 3-4 plexes and then scale up. I would love to network and start/grow this business. However, if we leave our jobs and go back to the USA we won’t have the income levels required to save and get loans.My questions: 1.How can we do this from overseas / long distance? Network locally (Utah-Orem/Provo/Utah county SLC county areas), buy, fix and refi, find a mentor who we can work, work with contractors, wholesalers etc. Is there a whatsapp group/facebook group etc we could join in Utah to make contacts through networking? We come back every summer and I would love to network and maybe buy a property or two each summer and throughout the year if we can figure out how to do it. If needed, my husband could travel to the US every few months to make it happen.2.I also would like to get my RE license but would need to join a brokerage. Is this correct? Would this work if I am still overseas? I can study online and take the test this summer.3.Should we use the 150-200k equity we have in our own home now? (we just have to pay off one more loan-a 50k HELOC to have 220k equity)4.We have about 50K equity in each of the rentals. Should we use this as a deposit for another rental and is it wise to leverage so much?5.We were following Dave Ramsey’s ideas of paying everything off. Now I am having second thoughts about paying off the rentals. It would take us 2 years to pay off one home. Each home that takes 2 years to pay off will give us $1200 a month in cash flow. Do we pay off the rentals or save for deposits for other properties?Sorry this is so long but we need some advice about how best to achieve these goals without giving up our current jobs until we can replace our income. We have a large family (5 children) so need to replace our income first with rental income/flips. Our plan is to return in the next 2-5 years.

Sam Levin

Realtor · Provo, UT · Member since 2016 · 119 posts · 73 votes

9y

Hi Susan. First of all congratulations on acquiring and holding on to the 3 rental houses. I will try to address your questions in order.

First to you question about your late paying but well behaved tenants. I have tenants in my own investment properties. If I had a tenant who pays their rent, albeit late, but takes good care of the property I probably wouldn't rock the boat too much. I'd certainly rather have that than a problematic tenant or one who causes damage. Maybe there's a way to help them manage the lateness by accepting smaller amounts bi-weekly or even weekly.

1. Buying US real estate from overseas can be tricky if you are not paying cash. Have you been filing US tax returns while in Dubai. If so you are good for domestic loan programs.

If you haven't been paying us taxes there are some programs designed for foreign national investors you can use that require 35% down instead of the 25% down required by most domestic programs. Please let me know if you want information about the international lenders.

There are definitely income tax implications here, and you want to make sure to avoid or minimize any double taxation on your gains that you could incur by involving two countries. Fortunately real estate comes with many tax advantages, especially pre-con/new-con real estate that is placed directly into a revenue generating endeavor. There's a 50% "bonus depreciation" available from the IRS on new build that many seasoned investors and their CPAs don't know about or fully understand. There may also be a considerable amount of additional tax advantage laying dormant in your current investment property portfolio. You will definitely want to look into a cost segregation study of same.

2. I don't know for sure if you can maintain an RE license from overseas but it seems likely that you could. You should run that question by the NAR. There's a little more to it than just taking the classes and joining a brokerage, but for some investors it's the right move. It's worth mentioning that I pay over $15,000 per year maintaining my license, my membership in Realtor boards, MLS dues, etc.

3. If I had $200k in equity in one of my properties I would definitely use the 90/10 refi program at MACU to cash out the $180k down payment on a FIG fourplex townhome. I would do this tomorrow, as I know that the value (income, tax benefits, appreciation) generated by the addition Income property far outweighs the cost of the additional financing. If you compare what you save by keeping the equity in place vs what you gain by leveraging it the long term difference is staggering.

4. Yes. As long as there are renters standing by to pay it off for you, and the line of available renters here in Utah seems to be getting longer every day in spite of the feverish pace of building, then yes. Unfortunately with that equity distributed in several little pieces your transactional cost to use it goes up. Do the math.

5. The beauty of investing is that your money is making you money with you having to earn it directly. Properly used leverage, especially when it's invested in something like high quality rental property, is essentially a cash producing machine. I'll take as many of those as I can get :)

1 Reply

Susan Blanco

OP

Orem, UT · Member since 2016 · 2 posts · 2 votes

9y

Hi Sam,

Thanks for you detailed answers. Yes we have filed taxes every year. I was assuming that we would need a 20% down for an investment property. There is no tax (income or otherwise) where we live so we don't have to worry about double taxation. It is just the US taxes and deductions we need to be concerned about.

Because we are still living overseas, I think we would still have to do a lot of it passively. Yes, I would be interested in discussing more details with you especially about the FIG opportunities, lenders, title agents etc. We have bought and sold before but don't have particular agents or title offices we use. We do plan to hold onto our three homes for our retirement. Our plan is to buy more rentals for cash flow. Then once we are in a better position back home, to do some flips for income.

Regarding the MACU refi- is it a HELOC. In other words could we get the line of credit, use it, pay it back and use it again? Or would it be a one time loan to use for a down payment? That would be perfect to help us get into more properties. This would determine our strategy.

We have never had trouble getting renters but need to develop a better system for property management. So far we have been lucky. Family and a close friend have taken care of any problems and we have a few contacts we can message to go fix things.

Where are the FIG opportunities and is there a website I can look at?

Thanks

1 Reply

Mark Nolan

Professional · Carlsbad, CA · Member since 2012 · 12k+ posts · 1k+ votes

9y

@Susan Blanco

Welcome to Bigger Pockets. You are at the right place to learn about real estate investing.

0 Reply

Joe Au

Investor · Draper, UT · Member since 2016 · 120 posts · 57 votes

9y

MACU 90/10 might be their portfolio loan. 10% down and 90% financed and it's not a line of credit. Also, non-owner occupied HELOC is not very common.

0 Reply

Sam Newell

Real Estate Agent · Lehi, UT · Member since 2016 · 136 posts · 91 votes

9y

Susan Blanco the local REIA would be a good resource for you, there's a Salt Lake and a Utah County one. Also, the Utah Apartment Association is a fantastic resource. I would align yourself with a great title company who will take care of you as well as a lender who knows the ins and outs of investing. I've been selling for 6 years and Lane Aldrich at First Colony Mortgage has been the best loan officer for investments that I've worked with. Provo Land Title as well as United West Title are both great. Sam Levin is great, we work together. We sell over $100M in investment properties a year at our brokerage, we have a lot of experienced investors/agents. I know any of us would be happy to assist you and show you the ropes as well as find some good deals for you. Good luck!

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Jason E. Smith

Contrarian Investor · Greensboro, NC · Member since 2016 · 219 posts · 174 votes

9y

Makes me think of the real estate guys radio show, live where you want to live and invest where you want to invest. Best of luck Susan!

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David Thompson

Investor · Austin, TX · Member since 2013 · 933 posts · 1k+ votes

9y

Susan,

I understand wages in Dubai are very high. Would you know if you and your husband meet accredited investor status? You love real estate, understand what it can do. You've made a financial decision to move to a place where you can make great income, save, pay off debt. Now, if you qualify as accredited investor from an income standpoint and you want to invest in U.S. real estate from abroad, I can think of a way through partnering as a limited partner where you bring investment capital, your funds are pooled w/other investors and then professionally managed into whatever REI niche the general partner is an expert in. We like multi-family apartments (specifically B class value add) where we can find older 1980s properties for instance, renovate them, bring in professional property management to bring in even greater operating efficiencies to increase the NOI. We later will refinance and finally sell the property.

The general partner in this space typically will target a 10%/yr cash of cash return paid out quarterly and a 20% IRR over the 3-5 years hold period. If you would like further education on this strategy more than happy to talk to you about it, just PM me. Being overseas and having property here that you are active with can understandably be more risky and time consuming, but this strategy takes that concern away.

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Rebecca Belnap

Rental Property Investor · Lehi, UT · Member since 2015 · 195 posts · 133 votes

9y

1. Most things can be done online. KSL is where I find most of my contractors, and I think a good property management company would be essential, but it really can be done. For networking online I mostly just chat with people here in bigger pockets. When you are in town, there are a lot of local REIA groups that would be happy to welcome you.

2. Yes, you can do the license online except the final tests which are done live. I like Praedo for the classes, but there are a lot of online options. You do need a broker and since you will probably only do your own deals when you are out of county, you need one that charges only when you have a transaction. I have a recommendation for one who only has a small transaction fee plus errors and omitions insurance, but if I list it here they might block the post.

3. Only you can decide what you are comfortable with. I would and I am. The key is making sure that the properties you buy are worth the risk. If you stick with properties that can be held as rentals if there is a downturn you should be able to ride out any downturns.

4. Make sure they still can cash flow. I know that America First has a non-owner occupied loan that works like a HELOC but for investment properties. You can borrow up to 80% of the equity in the home then pay it back when it sells so you are always ready for a flip.

5. I like Dave Ramsey for Debt payoffs and debt reduction for personal expenses. When it comes to investments, he tends to slow down investors. It's important to look at the reason for the loan and to make sure that even in a bad economy the loan will make more income for you than not doing the loan. Using a credit card for a vacation is bad, it does not provide income. Using a tax deductible loan to increase your monthly cash flows by $1500 is okay if you have the reserves to do it safely. Do listen to him about having 6 months of reserves. That's 6 months of PITI on all properties in some form. This could be cash in the bank if you are conservative or in your 401k if you think you would borrow from it in an emergency. Just what makes you able to sleep at night. If it is causing too much stress, slow down and fix the problems until you feel in control again.

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