All Forum Posts by: Alecia Loveless

@Brandon Morgan I’ve worked with both friends and family over the years.

The two deals with friends both ended poorly with friendships ruined and tens of thousands in legal fees and court costs.

In the family deals we have agreed that family always comes first and in the event of conflict we will just sell the deals.

I would strongly recommend you have an exit strategy or multiple exit strategies in your partnership agreements.

I would do more deals with the family members as opposed to others. If I were to look for other funding I’d look for an investor with a set return. If I had to give up equity I would make sure it was a minority stake and I retained the majority. I would also make sure I controlled the checkbook or that we both had to sign the financials.

@Ross Derouen Inquire as to how the billing process will work.

There may be different fees for consulting vs fees for preparing taxes.

I worked with the franchise owner of a H&R Block for about 25 years while he owned the franchise and this company bills tax returns by the addition. So two W-2s, two charges. 4 interest income additions, 4 charges. Etc. so by the time my taxes were completed I had about 18 charges which gets expensive fast. The consultation during this time was free though.

Now the same guy sold the franchise and has his own company and it’s more of an hourly rate which is working out better for both of us. Consultation is still free but is now more difficult to obtain because he doesn’t work full time.

@Aaron Zimmerman I've house hacked for close to 30 years. I've rented rooms, rented ADUs, lived in the ADU and rented the house, and now I live in 1/2 of a duplex.

In all that time I’ve only really had one disrespectful set of tenants who were significantly different from the mainstream both culturally and in terms of their religion. (In this instance the culture and religion were very intertwined which is why I mention it). Other locals with similar experience had mentioned that this scenario might not be the best fit and it turned out to be correct. In this situation the tenants attended gatherings late into the night and would regularly return to their room extremely noisily at 4am. It was an ongoing issue that ultimately resulted in various sets of tenants yelling at each other in the middle of the night. But it was the only weird situation in 30 years of hacking.

It is super important to thoroughly vet house hack applicants. And you need to be sure they are a good fit with your lifestyle. I’m not suggesting anyone discriminate against anyone but if there’s red flags initially it’s most likely going to get worse once you’re living together.

@Sherman Cummings I have the only duplex in my neighborhood. When I purchased it I simply based my offer on the numbers that made it work using the BP Calculator.

I use the BP Calculator to analyze all my deals. It’s simple and it works. The only thing it’s difficult for is if you have multiple loans on the property. For this I’ve taken the payment amount of the second loan and included it as an additional monthly expense. You won’t get the metrics like the pay down or the returns on the second note this way but you can get the accurate cash flow.

@Aidan Birmingham Hi Aidan. Be sure to include one of more exit strategies in your LLC documents. This may not seem important now but I've had two partnerships turn sour and if we'd have had an exit strategy on either it would have saved tens of thousands of dollars on legal fees and court costs.

Having an exit strategy can also just simplify the process in case one of you has a life event and needs to exit the deal.

@Scott Cash Hopefully you have an exit clause in your LLC documents that lays out what will happen if one or more members wants to exit the deal.

If it were me I would only leverage enough to buy out the member leaving you with a 50/50 partnership. If there’s no exit clause I’d take this opportunity to add one.

Then I’d use the cash flow to leverage future deals. I know this is a slower process than you might like but $3.3M in debt is a lot for most people. I think if you leverage 70% of it you’re going to seriously cut into your cash flow and personally if I was going to have $7M in debt I’d prefer it to be spread over several projects built slowly.

@Steve L There’s certain expenses that are just part of the process. Inspections are one of them. I’ve had deals under contract where I’ve done building inspections, septic inspections, and had a lawyer look at the easements and then terminated the deal.

If you don’t have a certain amount of funds set aside for these situations as well as your portion of closing costs and some extra reserves for once you close then you’re likely not financially ready to be buying things.

@Sami Gren I would not recommend accepting rent through a random App that you did not set up yourself.

That being said I do accept rent from all the major electronic services. My philosophy is the first time a tenant claws back a payment I will evict them. So far it hasn’t been a problem.

It’s also a red flag to me that they only want to pay $800 of the $1200. You definitely need to ask where the other $400 comes from.

And I have tenants that make multiple small payments every month because after they’ve moved in they’ve had their finances screwed up from what they were when I screened them. And I can tell you that as the months go by and you’re receiving multiple payments it starts to get confusing as to what payment goes with which month and if they’re even ever paying the full amount. Maybe this won’t be a problem if you’ve got just 1 unit but I’ve now got 4 tenants paying $200-$400 multiple times per month and it gets confusing.

@Charlie Krzysiak Hi Charlie, I don't like condos or anything in an HOA because of the potential for fees and assessments AND you have to have approval before you can do anything.

I'd recommend finding an affordable rental somewhere and saving more money for a downpayment on a SFH that you can house hack.

Call me fiercely independent but I don’t want other people arbitrarily telling me what I can and can’t do with my hard earned property.

One of the most important lessons in real estate is that you never fall in love with the deal. It clouds your better judgment and leads to bad decisions.

What you need to do is sit down and make a list of your 3 month, 6 month, 1 year, 3 year, 5 year, 10 year goals. And then work backwards to achieve them.

If you're just graduating and don't really even have a job lined up then I think it would be foolish to rush into the purchase of a property right now. Currently you have a STR lease and can effectively move anywhere the job market takes you.

I’m not sure where you’re from or how long you’ve lived in Texas but I highly recommend moving out of state and out of your comfort zone while you’re young enough to easily be able to do so. It will help round you into a more complete individual as you continue to develop and mature.

Moving to NYC from Dallas when I was 20 was the best decision I ever made.

Until you’re more established I would recommend waiting and saving to make a purchase.

@Matthew Mclean I use an accountant my spouse uses TurboTax.

If you just have one rental you can probably get by with generic tax filing software. It should give you prompts to put in mortgage interest, repairs, big CapEx, and other things.

You will likely miss some deductions using the commercial tax software but it’s the cheaper option and starting out a couple hundred dollars in deductions missed likely isn’t that big of a deal.

If you decide to go the accountant/CPA route be sure to ask up front how much it will cost.

I’ve used H&R Block for 30

Years. I had the owner of my local branch doing mine. Block charges for every form you have to input. So 2 W-2s, two charges. 3 P&Ls from different properties, 3 charges. 4 inputs for interest bearing accounts, 4 charges.

This adds up very fast. My guy used to lower my charges because he was the owner and thought all my inputs were ridiculous. Now he has sold the company and is more of a flat rate charge based loosely on how long it takes him to prepare the return.

So just ask how you’ll be charged.