All Forum Posts by: Account Closed

As an out of state investor, I never waive inspection. I cannot see the house myself before the offer is made so the risk is too much for me to take. I can waive financing contingency even if I use financing because I am sure of the approval and also have cash if I need to do the deal that way.

The key to out of state investing is understanding the market you are investing in and having a team you can trust in that market. I cant stress the team part enough. I would not invest in any market without going there a couple of times at least, choosing the right team (sellers, agents, property managers, title co etc). Also drive around neighborhoods, get a feel for what you are buying. You dont need to see every home you purchase but you should have seen similar homes so you know what you are getting into. The good news is that once you do this work up front, you can leverage the knowledge and team to build a portfolio in that market. Then when you want to go to another market you do it again, but it will be quicker because you know what to look for.

All the above makes sense if you intend to build a portfolio. If you are only going to own 1 or 2 properties its best to stick to your local area.

I use SD IRA services inc. based in Austin. I have invested in some Private placement hard money funds through that SD IRA. Great service from them so far.

Matthew Cariello

If you can get 8.5% compounded return from the stock market for 15 years you would be better than 99% of professional fund managers. In that case you should be doing that for a living rather than real estate! Diversification is fine but if you are in the RE business as a profession, your money may do better if you invest in what you know rather than hand it to Wall Street.

Why does it have to be one or another? I would suggest start with SFR with conventional mortgages. Thats the best leverage for your money you can get. 75%-80% leverage at low interest rates. Use all the cash flow to pay off those notes as fast as you can. Fannie Mae will limit you to 10 loans so there is a limit on this strategy. After that you can either find a portfolio lender and buy more SFRs or pay cash. By SFR I include duplex-fourplex since the financing is the same. Or you can move to larger commercial properties with your excess cash as a down payment. When SFRs are paid off, you can buy more with conventional loans and if you use cash flow from the first 10 plus the next ten, you can pay off the notes even faster. You can then sell some of the SFRs and 1031 them into a larger complex if you want to.

The key to success is smart leveraging of your capital.

Welcome to another Bay Area investor! As Braulio C. says, living in a high cost area like the BA makes rental investing really not feasible. Look to out of state for decent deals. Its harder work to get started but once you have people and systems in place, the returns are far superior.

Joel Owens

I would look at the OP's experience more positively. Many pay "gurus" thousands to learn less than he learned and he made a small profit doing it! And the learning will pay off in spades in future deals. I'd say a first deal that has issues is more valuable than one that goes smoothly. You learn a lot more from the problems. The sooner you encounter problems, the faster you learn and more profitable future deals are. So its a great first deal!

My insurance company Geico just told me they cannot provide umbrella coverage for me because I now have more than 4 rentals (I am up to 6). Is this a common restriction or just Geico? Also can I get only umbrella coverage from another insurer while leaving all the other policies with Geico?

I advise abundant caution. Raw land development is not for the inexperienced. I know from bad experience. Years ago before knowing anything about REI, I foolishly invested in a LLP developing condos on a lot. All the numbers made great sense on paper. But 3 years later the project was still mired in permits at the city. Finally LPs sued the GPs, and we got a settlement with most of the cash back. But it was a bitter experience. There are literally a zillion things that can and do go wrong before you can move an ounce of dirt. Unless you are really experienced or have a partner that is, I would stay away.

You could try to flip the land but there are holding costs and no rental income so its an expensive proposition.

I know people like LLCs for liability protection however having discussed with a couple of attorneys I cannot get a clear answer on how much if any extra protection you get over a good insurance policy. On the down side, you cannot get a conforming loan as an LLC and you have to transfer the title later. This may or may not be okay with your bank. Secondly, it creates a lot more paperwork and expense to track. For just a few properties it may not be worth it.

Regarding SDIRA, its not the optimum way to buy a house. Again, complicated paperwork, complex rules (you cannot do any work on it yourself, cannot ever occupy it, all expenses must be paid from IRA etc) and your net tax benefit is small if you consider depreciation, mortgage interest etc that you can take outside the IRA. An SDIRA is a good place to put high yielding passive investments like trust deeds etc. Also not sure how easy to get a conforming loan that way either.

For my investments so far, I buy in my own name put $300K liability insurance on each home and have a $1M umbrella policy. My attorney seems to think thats a reasonable protection. I may rethink the LLC option if I learn something new.