All Forum Posts by: Benjamin O'Brien

@Hema Dasarathy

When we reached 10 properties we focused on paying off one before getting another mortgage. We have done this 4 times and so have 4 homes free and clear and 10 mortgages. As others have noted, your returns on a paid off home are less. We have also noticed that the interest rates are climbing. Properties still cashflow, but margins are tightening. If we didn't take the time to pay down properties and got more creative with financing we may have been able to secure more homes at lower interest rates. We are now working on paying off house number 5. While this may not make sense for some, we are comfortable with it and will probably continue this as long as homes cashflow. Also, we are paying off the higher interest rate homes. Best of luck.

I think 'Beware' is fair.

Below is a recent update from a crowdfunding sight on an investment I made with them that stopped paying in 2016. As in all investments, risks exist. If you don't have the money to lose, crowdfunding may leave a sour taste in your mouth. I still invest with other crowdfunding sites, but all have loans that have fallen into default even with variations on the due diligence and information they provide.

"SFR Package II 1/16/2019

01/16/2019

The sale has closed. The portfolio of homes secured by this loan was coupled with additional homes that were part of the same court action. Allocation of the purchase price was determined by the buyer. Reconciliation of the sale price and expenses and a calculation of losses will take as much as an additional week. It is clear at this point that the investment returned less than $0.10 on the dollar. The reasons for the poor results are several.

The borrower's original plan was to do minor repairs and clean up and to re-market the properties to local investors interested in purchasing individual or smaller groups of these homes. Only a few homes were sold, however, under this plan. The balance of the properties was not well maintained and so deteriorated physically. The property values decreased accordingly. Additionally, tax liens accrued and some of the houses were foreclosed upon by the taxing authority. Due to the number of potential liens on the property, cleaning up the title so that the properties could be sold was a lengthy, costly and time-consuming process. As a result of the sale, the net proceeds are expected to be less than $100,000. The loan has a personal guarantee and we are continuing to assess a potential continuation of our suit against the borrower. As a reminder, RealtyShares already has a judgment in California against the borrower, but we will need to have it perfected in Florida. In order to potentially fund the further pursuit of this judgment against the borrower, RealtyShares will not be immediately distributing the remaining proceeds of the sale to investors but will be temporarily holding that money while assessing the benefits of using those funds to continue to pursue that additional claim. RealtyShares will update you with a reconciliation of the sale proceeds and with our findings on the chances of collecting on the guarantee judgment after we complete an asset search. The net sales proceeds will be promptly distributed if we determine that further litigation is unlikely to be of material benefit."

I have not had much success in getting the Turnkey companies I have used to pay any of the closing fees. I have had them pay the appraisal fee once. It does not hurt to try. I have had more success in getting them to come down in the asking price. It may be dependent on the Turnkey company as well. The more established companies dont seem to have much flexibility. They are sure they can sell their property for what they are asking and so do not seem to be motivated to flex.

@Drew Eldridge I am investing out of state. 12 are in Memphis, TN.

I'm a psychiatrist. I have 14 SFR. I have been investing in real estate for about 6 years.

@Basit Siddiqi

This is a single member LLC (no partners). All of my properties are in Tennessee . I do my own books and send in the QuickBooks file. I buy and hold and so have not sold any houses since I started acquiring 5 yrs ago. I was hoping to receive suggestions as to how lower my tax burden, but it costs $500 and hour to talk with him so since talking to him 2 years ago I haven't spoken to him again. I didn't feel like I got much direction during our first hour long discussion as he wanted to go over the entity structure and out future plans, which took the entire hour.

Thank you for providing some insight, When you break it down to the per house price it isn't as painful!

I am thinking about going the other way, from a CPA firm who claims to specialize in real estate to TurboTax or the like. I spent $3800 on my LLC tax return this year and $1200 on my personal. This years LLC tax return is more than double last years and I was told that is because I own more properties (14 now).

Are you worried your not getting enough deductions? My federal and state tax returns do not cover the costs of my tax prep....so I am wondering the same thing.

Maybe my tax prep costs are normal and expected. I guess it is hard to know when you only see one set of returns.

I have 11 homes in Memphis which I have owned going on 6 yrs. Of the 7 I have financed, I have never had an issue with the property taxes being paid late or not paid. Also, I have all of these homes quit claimed into LLCs and not had an issue regarding this to date.

Hi Isi Nau,

Thank you for sharing. I understand that the $600,000 you have made is in equity, which is awesome. What are your thoughts on turning your equity into income, or just on generating passive income in general for those who live in Hawaii?

My interest comes from the perspective of someone who lives in Hawaii and who has had 2 strokes which has made me very aware that at anytime my ability to provide for my family may be compromised. If I cant go to work there is no income. So this is why I am interested in what your thoughts are for those who live in Hawaii in regards to securing passive income.

Thanks!

Thank you for sharing. This is more common than we would like to think. My similar, but not the same experience follows.....(this was 7 yrs ago now)

I live in Hawaii. My first investment deal was with a company called One6Companies out of Chicago. The owner was a man going by the name of Bret Miller. It was advertised as a turnkey company. Mr Miller had posted videos of him talking to investment groups and for other large reputable companies in the Chicago area. We even called the president of one of these companies for a reference. We were assured that Brett Miller was reputable and had a long and reputable history in Chicago Real Estate. We called 4 different references, including one from the mortgage department of a well known Bank. We called 2 people who supposedly purchased homes from his company who were very happy.

Eventually we entered our first deal with the company. We received the contract, wired $14,000 in earnest money to an escrow company and started ordering things like our inspection.

We learnt through the home inspector that the people living in the home were the owners and were not selling their home. This guy was selling a home he didnt own and wasnt under contract to sell. We found out the pictures he sent of the outside were the actual home, but the inside pictures were not of the same home.

Mr Miller became harder and harder to contact and before we knew it his phone had been disconnected. We sued, filed state and federal complaints in regards to wire fraud, spent $5,000 on trying to litigate and recover our earnest money. Within months the One6Companies website closed, as did the supposed escrow company.

We were sick for 2 years. It took us a while to jump back in and it was hard to jump back in. We still have a ways to go to be living off of our passive income, but we have 14 Rentals now and another under contract (none of our rentals are in Chicago....). 

Dont let this experience consume you. These kinds of thieves take more than money, they erode our ability to trust and make us question ourselves.  Sounds like you are learning a valuable lesson, a lesson only experience can provide. I hate these lessons and the thieves that teach them, but one day you will be able to identify potential problems in partners or in a potential deal because of this thief and this experience will end up saving you much more than it has cost you. But it hurts. Its criminal.