All Forum Posts by: Bill B.

SFR= single family residential. (Not multi family)

I pay 8% but repairs are cheaper than if I paid myself as they get discounts and handle for free. Placing a tenant is $300 on $2,000+ rent, so less than 1 weeks rent, certainly not a month’s rent. 

You say you’ve owned them 20 years so values should be at least 4x, hopefully 6-8x what you paid, that’s your gain, you don’t get rich from cashflow. I’m up about 4x in the last 10 years. After you account for the fact that I only put 20% down, that means I have a 20X tax deferred return in 10 years, that’s where the wealth is built. It’s basically an unlimited 401k. 

Even the first one is about a 10% return if the numbers area real and inclusive.  I’d ask about the cost of getting the well water lots converted to city water. Are they all on sewer?

I don’t know anything about MHP. But I do know how to do a little. Math. The 2nd park brings in about 5% less net income but costs less than 75% as much. So you can’t even consider perk 1 until after you own park #2m if you “have” to pay full price for park #2 you want a 25% price discount on park #1. 
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I don’t see any management expenses so you have to figure that out if you don’t plan to live there. If you can’t raise rents I don’t think it will make you rich but if you don’t overpay I don’t think it can bankrupt you. Assuming you can get off well water and septic is already city. Do property taxes reset upon sale? What will they be? (Check the county website for formula)

I don’t think you can make money if you buy there today. If it’s even slightly possible reach out to a local expert like @Collin Hays. But I believe you’ll be told not only will it not cashflow today and It will probably be worth less next year than you pay today. 80% or more of your competition will have been doing it for more than two years, paid 25% less than you, and have a lower interest rate. That’s a large hurdle to overcome when things get competitive and rental rates start dropping. 

I don't have a dog in the fight and I'm not rooting against you. I'm just saying be careful. You have a low margin plan that could have lower net returns than a bank CD. You forgot to put your location in your profile or people might be able to suggest better STR markets for your location.

$1,250-$1,500/mo minimum. Make it worthwhile. 

If your reason for buying is cost seg and depreciation and you don’t care if you lose money month after month in the smokies that’s fine.

BUT. If you are "letting the tax tail wag the dog". Why wouldn't you buy a condo in a STR market?

You get the zero land basis you’re looking for while removing the weather, the maintenance, the high utility bills, the landscaping, snow removal, exterior repairs, etc etc. 

You don’t seem to care if you pick a good market so why pick a hard one?

Ps. Remember. You aren’t creating tax deductions, you’re simply pulling them forward. That means either you keep the property for years and years with lower deductions than you would have gotten without the cost seg. Or you sell in 3-5 years and have to pay back all the depreciation. Meaning you’ve paid for the study and lost money for years for no reason. You have to be careful. While getting a deduction sooner than later is USUALLY better. Getting too many in one year is often worth less than spreading them out. (You don’t want to deduct your income to zero if it means losing future deductions.) Good luck either way. 

One more free hint Matt. 

You can make one post with all your comments to save time @Matt Hilliard

So you can thank @user1 for their help

Tell @user2 that they had a good idea

Then tell @user3 you’ll reach out to them

While telling @user4 their comment doesn’t really help. :-)

I don’t think you want to try the fund sites. Their plan is to sell in 3-5-7 years and capture the gains so they can cash in. Then you’ll be forced to start over. 

Try a different market or property type? Are you using a PM? I only have a dozen properties but I spend less than an hour a month and half of that is accounting because I like doing it. I might have 4-5 repairs per year. (1 every couple years per property.) But 2-3 of them are under $250 and I never even hear about them other than the fact they are fixed. Most tenants stay 5-10 years so there’s almost zero vacancy. 

I bought SFR under 20 years old in a market with no damaging weather, stucco siding, and tile roofs for basically zero exterior maintenance. Then I picked a solid PM. I think that's key to being a landlord long term. I've only got 25 years in so far. But I find it more boring than tiresome. There's nothing to do.

I can’t sell them, my life wouldn’t become any easier. I’d just be giving up my freedom and a boatload of tax deductions. 

Sometimes the base value of the land is high. There are properties that would appraise HIGHER if they were torn down pre-appraisal. I’ve seen Million dollar homes purchased and bulldozed day one, IN MN. Not Hawaii, LA or NYC. These properties literally would have sold for more if the seller had torn down the property before listing it. 

Most appraisers are not inspectors. They aren’t going to test any appliances, HVAC, electrical or plumbing. They measure beds/baths, square feet, construction type and age. Then compare to neighbors within a mile or two. 

Please don’t forget. ANY property that was a rental first, before it was your primary residence will NEVER be 100% tax free unless you die and leave it to someone else. Obviously that means all 1031 exchnages. There is some advantage but not as much as you’re hoping. 

So you have a rental property with $100k in appreciation and do a 1031 in to a new RENTAL (can’t be your primary right away.). You rent it out for 3 years, move in for 2 years to satisfy your 5 year requirement and your 2 of 5 year requirement. 

Assume it goes up another $50k so you have $150k gain AFTER  all selling costs. You get get 40% of that gain (2 out of 5 years) tax free($60k) but you still owe taxes on the other $90k PLUS all the depreciation recapture. (Assuming you didn’t pay that when you converted it to non-rental.

Your advantage is making some of the rental appreciation tax free. The downside is you making some of the primary home appreciation taxable. So the more the property appreciates after you make it the primary the worse you do vs just buying it as a primary  

The only 100% win is 1031 all your rentals in to one massive property. A few years later make it your primary. Live there until you die. Of course you get the same tax savings by just owning the rentals when you die. 

Ps. In your 20 year owned don’t bother to 1031. After you lived there only 2/22nd’s of the gain would be tax free. (9%). Probably not worth it unless the gain is well over $1M and you absolutely don’t want to do a 1031. They are truly an unbeatable gift to real estate investors. 

Rates are at 10 month lows how long ago did you lock in? Find out what your lenders current rates are and how low they would have to go for a cash free refi. Ask how far away from removing PMI you are and how much you would save when you get under that amount. You can hope the appraisal comes back the same and you get under 80% or kick in additional downpayment. (You would earn your current interest rate plus the PMI savings on that amount, combine that's more than you're likely to earn risk free in any other investment.)

If you’re not worried about the cashflow but instead your true income. You could look at a 15 year mortgage. This will lower your cashflow even further but also reduce your interest expense a couple thousand per year. (1/2 percent times $400k). This is real money even if it’s not cash flow. 

Is you think you might sell in the next 5 years make sure to stay 2 years so you have 3 years to sell tax free. Either way you’re certainly better off than if you were still paying rent.