All Forum Posts by: Andy Winningham

@Ryan Huggins, @Bill Exeter, @Marcia Maynard, @Christopher Phillips

Thanks everyone for weighing in! I appreciate the counsel!

@Marcia Maynard

Thanks for weighing in. That's also a good point. Part of the purpose of my question is to avoid mis-classifying the house. Still looking for answers as to which classification is more favorable and which classification(s) fit the situation I've described. 

@Christopher Phillips

Thanks for the response. Those are good things to consider, which I hadn't even thought of yet, about market rents and market purchase price. 

I guess I'm still not sure about the basic question of--should he try to get this property classified as a second home? Or would he be better of just classifying it as a rental?

Hello. Question for the community. I'm a financial planner in Dallas, TX and I've got a client who is considering the following decision and I'd love to hear some wisdom about how to advise him to proceed. 

Situation. He and his wife are likely going to buy her parents' home in El Paso, TX next year and continue to rent it out to them. He says that real estate investor friends of his have advised him that he can get this home classified as a second home rather than as a rental property and that that treatment is preferable to it being classified as a rental. I have two questions...

1). Is he right? Can he classify this as a second home? Her parents would be paying them rent like any other tenant. I imagine he and his wife would stay there whenever they visited her family, which is probably a few weeks each year. 

2). Is that even a good idea? All things considered, is it even better for them to have it classified as a second home? Or would a rental property be more favorable? 

Hey BP Community,

First, I've searched around other forums for some specific answers to my questions and didn't find any. Forgive me if these have already been covered elsewhere, and if so, just direct me to where I need to look. Otherwise, I'd love to hear some wisdom here!

Situation

My wife and I are on the brink of purchasing our first rental (will either happen or not happen sometime over the next few days). The property we're looking at is in our neighborhood in Dallas, TX. For this first deal, we are planning on going in on it with my parents. My dad wants to encourage my interest in investing in real estate (wishes he would have gotten into it himself) and wants to: a). help me and my wife get started, and b). invest alongside us. The plan is for he and my mom to provide the down payment (will be around $50k), for my wife and I to manage the property, and we will split all future income 50/50. 

In the future, my wife and I are interested in buying more rentals to own solely for ourselves. Additionally, we'd be interested in continuing to go in on more properties in the future along with my Dad. 

All that said, here are my questions...

1. What names should we (or are required) to put on the loan document? And what names should we (or are required) to put on the title? And can those be different from one another? We figure that both my wife and I as well as my parents will all have to have our names on the loan documents, since they are guaranteeing the loan and providing the down payment. If possible, my Dad would like for our names only to be on the title for the house. Is that recommended? Is that even allowable? He has far more assets to protect than we do and he would like to give himself liability protection. Would doing this accomplish that goal? Would love to hear any thoughts on this. 

2. What is the ideal entity structure for us? Should we even form any kind of entity? Given our situation for this first deal (that my wife and I are partnering with my parents), I am unclear about how that works when forming an entity. But given that it's important to my Dad to have protection from liability, it seems like it would be a good idea to do so (btw, he already has a large umbrella policy). And given that we are open to the possibility of more deals in the future, it also seems like it might make sense to form an entity. Also, my parents live in CA, my wife and I live in TX. This first property is in TX and most likely future properties would also be in TX. 

Would love to hear from the wizards on this. Thanks y'all. 

Thanks for the insight @Kim Meredith Hampton! 

@Mark Allen

Thanks for posting. Would you mind sharing more about why you love Roofstock for new investors? Kinda like I said above, I'm also intrigued by it as a way for me to get into the game, but have heard enough warnings from people smarter in REI than me that it's making me hesitate.

@Mushfiq S.

Thanks for weighing in. Can you tell us what area you purchased in? Also, were you satisfied with the purchase/property after the transaction was over? Was anything different than how it was presented or what you expected? Have you seen the property yourself yet? 

@Nick Yates and @Ali Boone

Appreciate the input, you guys. Nick, I suppose I haven't yet settled on an area to invest in yet. My wife and I recently bought our first home in late summer of 2016. It's in a part of Dallas where prices are still dirt cheap compared to the rest of the city but seems to have a good likelihood to appreciate over time. New restaurants and new apartments and things like that have begun to creep up in that part of the city. So initially, I was thinking we would just buy our first rental property in the same neighborhood that we live in. After all, I realize I'm no expert at this and I know our neighborhood better than I know any other one. But as I've listened to some more talk on REI, I started to have two concerns:

a). Am I making a bet purely on some gut feeling I have that this area will appreciate substantially? Isn't that akin to speculation? 

b). Buying a second home in our neighborhood mean a majority of our wealth is concentrated in two properties in one neighborhood. Would it be more prudent to invest somewhere else?

So when I was turned onto Roofstock, I was instrigued. First, it opened up possibilities in that I didn't have to choose simply from one of the properties that came up in our neighborhood, but I could choose from any of the areas they have properties in. Second, I liked that with Roofstock there is a partner to help me with the due diligence and there is someone else who has skin in the game when I buy a place. Granted, I have far more skin in the game than they do, but they are still incentivized to provide a good service. Third, buying a property from a turnkey-like company such as Roofstock would truly be a passive investment. I know that I don't want real estate investing to become another full-time job. So if I am able to get to the point where have a little portfolio of rentals, I'd probably rather pay a property manager than do it myself. But the flip-side to that coin, is it better for me to try to manage this first one myself, if for no other reason than to get educated about how to manage a property? 

Would love to hear y'all's thoughts. 

Thanks @Ali Boone! That's all helpful stuff.