All Forum Posts by: Will Barnard

Good post Ned. In addition, if a seller is having to pay agent fees, that is all the less that they can come down on their price. In the case of FSBO, you may run into a seller who has an over-inflated idea of the value as Ned mentioned and on the flip side, you may find one who has dramatically under-estimated the value, hence a bargain.

RE tax laws are some of the most complicated. Why go at it alone regardless of how many years you have done it. As your business grows, so does the tax complications and thus a RE CPA should always be on your team, year 1, year 2, year 20 and so on. As I have said before, trying to reduce expenses by not using a CPA may indeed increase your expenses/tax exposure rather than reduce it.

Although I do not always agree with Mike's 50% expenses rule, he is close here and may even be under what your expenses will be. When you only get $350 per door in gross income, expense percentages are inheritantly higher than larger rent values to expense ratios. You may find that your expenses on a property like this are in the 60% range rather than 50%. As Mike said, although this deal on the estimations is entirley bad, it certainly is not a good one and after plugging in the actual numbers (what can be verified and not estimated), you may find it to be a poor one.

I also agree that you should not elect to take less than $100 per door in positive cash flow as you will need to aquire more prop. to meet your cash flow goals (assuming you are in the cash flwo/landlord business). If you are speculating, then that would require an entirely different analysis.

Ohio, why not hold the investments for at least a year, then sell and do a 1031, if the tax deferance strategy is an important factor in your style of investing. Utilizing tax deferred/tax free accounts like IRAs is another way. Also, there are many tax advantages and paper deductions to reduce/eliminate taxes on RE, so consulting a competent and experienced RE CPA is a must in this business.
There are other ways to defer/avoid taxes on cap gains other than 1031 as well. 1031 exchanges are not as simple as they are made to sound. There are very specific timelines and guidelines you must follow.

Where you should invest in the US depends on your goals and strategies. As you mentioned, CA has proven to be a good place for appreciation over the years, but is in a depressed state and will remain that way for at least another 18 months. If you were to invest in CA, expect the value to drop more, creating a longer span before you can sell for a profit. In addition, investing in CA would be a speculation play, not a cash flow one. Even if you can buy at 50% of value, you would be lucky to just cover your expenses.

On the other hand, as Cummins stated, Texas is a completely different environment. Houston and even more so, the Dallas/Fort Worth Metroplex, have undervalued RE, job growth, and population growth. You can also buy with a very small cash investment and cash flow the property. While you most likely will never see 20% + appreciation rates in Texas, you also will not see that kind of drop either.

It all comes down to your investment style - cash flow (+long term future appreciation) or speculation which ultimately will require you to carry a negative cash flow until the time of sell/market recovery.

As far as Realtors go, finding an experienced and competent one will be a task. Make sure they deal with investors on a regular basis, make sure they invest themselves (practice what they preach), and always get multiple professional opinions on the advice they give you.

You ma not have to quit your job because some 401k plan administrators allow you to roll-over to other accounts like IRAs. Check with yours to see if that option is available to you. Most 401k plan admin. do not have this option but it is certainly worth checking out.

As Jon said, diversifying in other tax advantaged investments such as RE or a ROTH, etc may be the way to go, particularly with the poor rate of retun you have been receiving.
Good luck.

Sounds good Scott.
We will look forward to reading the response you receive and post here.
Thnkas for your efforts and time.

Rental demand in the areas I invest in is also high and vacancies at all time lows. Buy now and sell when all the sheep finally start buying.

Mike, Can you elaborate on this statement? I am not sure why you would not be able to enforce a lease on your low income rentals and therefore choose to go month to month. Are there not laws in Ohio that protect a landlord and enable him/her to enforce rental leases? Why would low end housing not be enforceable and the higher end sfr's be enforceable?

Other than that, I think it is fair to say that we all require a 3-1 ratio on income, screen for past criminal and credit histories and use the criteria Mike and the others suggested.

Perfect answer jrundy!

I am of the opinion that reverse mortgages are banks "new" way to steal money and assets from the uninformed, particularly, the elderly. They charge massive amounts of fees and the homeowner has nothing left to pass down to their children/grandchildren/etc.
There may be some instances where a program such as this would be beneficial, but I feel, from an investor's standpoint, that it should be a last resort. Let's inform our parents/grandparents/elderly/etc. and offer them more viable choices. Granted, investing is not for everyone, but it is certainly a better choice financially to take equity from the home and invest in cash producing assets to generate the income needed. Then, when they pass, they have assets to hand down and do not run the risk of outliving their home equity and being placed in the streets by the lender who sold them the reverse mortage.