All Forum Posts by: Ben Kirchner

@Joe Splitrock I focused on the equity number and simplified it.  I'm not paying all cash, nor do I plan on owning all these properties in 10 years.  However, I will own one valued at around $300k, and I will have the 20% down payment on the other 19 properties, at the very least.

As far as the monthly cash flow, even if future homes are providing less of a return than my current rentals, it would be providing a monthly cash flow of over my freedom number.  However, as some have mentioned now, dealing with the headache of 20 single family homes is not something I wish to take on, whether I'm managing it, or I have  a property management company potentially sending me maintenance bills  every month.

@Thomas S. I hear you that options 1-5 are not completely passive.  However, I believe they would be much less time consuming than trying to manage 20 single family homes.  Are you suggesting taking tha t1 million and putting it in the market on a low risk investment?  

 @Omar Khan Good point on easing into the commercial real estate. Admittedly, this is an area I'm not too familiar with. I've been having success with my SFR rentals of around a 25return, on each, so far, with not a high dollar initial investment needed. With commercial, I'd assume the initial investment would be far higher, and not sure the appreciation of 20 SFR vs. commercial.

I will say at this point, that commercial real estate ultimately sounds most appealing to me, with perhaps hard money lending being 2nd most. However, I would say they are the two of the five options I know least about, so who knows how that changes as I shed more light on it. My thoughts on commercial real estate is you have business owners, who take care of the guts of your building, and are signing 5 to 10 ear leases, and it is ideal to both the landlord and the business to stay there long term. Sounds a lot more passive than 20 SFR.

Another thing I should mention, in 10 years, my goal is to have financial freedom.  With financial freedom, I'm not sure my desires will be kicking back on a beach everyday.  I would just like the ability to, if I chose to do so :)  I'm sure there are many people on this board who have financial freedom, but continue to "work" simply because they enjoy focusing their energy on something they like.  So something that is not 100% passive, I could certainly live with.  

I think a discussion like this really gets the wheels turning with a lot of people.  Thanks for the input from those who have chimed in.

Full disclosure, this is not my current situation, but in the 10 year plan, and I'm actively taking steps toward it.

So my wife and I have been basically setting aside much of our savings, and acquiring a couple single family residences each year.  Even estimating on the low end, with little to no appreciation, we should have about 1 Million dollars in equity spread over 20 single family homes.  My question is - what then?  Realizing many things could change in the next 10 years, I'm always wondering about the future.  

I've thought of our options after reaching this point. Perhaps someone can shine some light on these options, or open up new ideas on what to do in this situation, or rethink our "acquire 2 SFH per year" strategy. But since right now that is what we are doing, 10 years down the road, I see options as this:

1. Become a hard money lender.  ~15% interest on 1 million certainly surpasses our "freedom number"

2. Sell the SFHs and invest in commercial real estate - worry about one building instead of 20 scattered about.

3. Sell SFHs and buy one big multi-family unit, for same reasons as above.

4. Continue investing in SFH. We're currently self managing these homes, but would turn it over to a management company as we grew our portfolio.

5. Focus on flipping a few houses a year without the need to borrow money.

Or perhaps a path a never thought of...  Ideally, I would like to have a passive income stream that allowed me to travel frequently.  

Thank you for any input.

Thanks @Basit Siddiqi. How does the tax write off for travel work?  If my wife has a house in Brasil, that is in her, and her 4 siblings names (my name is not on it).  Say we are renting the house, and my wife and I travel to the house in Brasil once per year, and spend $5000 a year, for round trip airfaire, hotels, and rental car.  How woul this effect our tax return, is 100% tax deductable?  Are MY travel expenses deductable even if my name isn't on the house?

Thanks for input.

Does anyone have property in a country they do not live in?  This interests me for several reasons.

1. My wife is from Brasil.  She currently has land in her name, and will ultimately own a house there (shared with her siblings) in years to come.  I really know nothing about the rental market in Sao Paulo, Brasil, so I'd have to do my research.  However, my wife will be faced with the option of selling the house, or renting it out down the road.  Keeping it as a rental has it's perks, listed in #2.

2. If we owned property in Brasil, I believe we could travel to visit family there and have a tax write off with it, as long as part of our trip was to tend to business matters in regards to the house.  How would these tax write offs work?

3. I've thought of living abroad in the future.  There are a handful of countries that my passive income in USD from rental property would stretch quite far.  

4. On topic of stretching USD further in another country, I've thought of future options of buying housing in another country to rent out , if rental rates were favorable, obviously.

So my questions for those who own property in a country they don't live in - Do you have a property manager?  Do you manage yourself with a list of vendors near the property?  Anyone who invests in a country outside of the United States, where have you invested, and what kind of % returns are you seeing in relation to purchase price and monthly rent?

Thanks @Paul Allen.  It sounds like you're saying I would do better with my return if I were to file jointly, with my spouse.  I guess in that case, I would have questions would be with separate finances/expenses/deductions, how the return would be split between my wife and I.  There is some gray area, with the real estate deductions all being from my own expenses, me having more things taxed, and her only having her W2 employer to claim.  

My wife and I keep our financial accounts seperate, and simply share a mutual credit card that we equally contribute to for mutual expenses (mostly groceries).  I purchased 2 houses with my own finances in 2017, which are completely in my name.  Would we be best off filing separate?

My wife and I got married in 2016.  She had $0 taxable income in 2016, but now has a full year of taxable income in 2017.  I will also note that my wife and I are purchasing future investment properties together, starting 2018.  

Would I be best off filing as separate?  Any advantages for filing jointly?

Thank you

@Brandon Hall what are your thoughts on whether I should file as married separate, or married jointly?  Properties/deductions being in my name?  Also, is there a standard formula to calculate depreciation of a property?  Thanks

I've contacted a couple CPAs.  I've been quoted $500 (or more), which is more than I was expecting to pay.  Would I expect the refund I would get by doing it through a CPA as opposed to TurboTax to justify the cost?  @Brandon Hall does this seem like the cost I would expect to pay?  I know your advice was to educate myself and do my own taxes.  However, I do liek the peace of mind of not having to deal with an audit, and while certainly not above educating myself if it's going to end up saving me a lot in the long run, but I wonder if my time would be better invested elsewhere.

Also, another question I would have if I'm better off filing jointly with my wife, or separate.  In 2016, my wife had $0 income.  She now has a full year of income, but we do keep our finances separate, and the houses were both purchased with my money, and therefore only in my name.

Thanks for the help.

I've always filed my own taxes, with TurboTax. Given the simplicity of my income sources and lack of deductions, this was an easy and less expensive way to handle it. I now have 2 investment properties that I purchased in 2017. This makes taxes and deductions a little more complicated. My intention is to maximize my tax return. By hiring a tax professional, I certainly do not want to offset the net income I would be receiving by hiring a tax profession/getting bigger tax return vs. using turbo tax/getting slightly less of a return.  I've been good about tracking/documenting all income and expenses of my properties.  However, I am unsure of how to go about claiming them, as I've never done so.

Therefore, my question is - should I continue to file my own taxes?  Is knowing how to claim deductions something I could learn quickly to ensure I'm getting the most out of my tax return?  Or is this sort of thing best left to a professional?  I am in Durham, NC.  Anyone in this area who is a professional in this area, or has a recommendation for this area, I may be looking further into this.

Thank you

So I am closing on this house in a month.  The current tenants have lived there for 7 years, and were paying $750 a month.  I originally thought the $1100-1200 a month I would require for rent would have me looking for new tenants.  However, they are okay with paying $1100 on an 18 month lease.  This saves me the hassle of locating a tenant myself, or the expense of hiring a company (like I usually do) to find a tenant for me.  However, I have some questions that I'm sure experienced landlords can help with.  

I'll start by saying the tenants are hispanic.  One speaks pretty good English, but there is a bit of a language barrier that makes some things unclear when communicating.  In addition, none of the tenants have a computer, and therefore anything needed to do online becomes a problem for them.  Lastly, 2 of the 4 adults living in the house only get paid cash, and do not have a bank account.  

Am I making too many concessions?  I feel the fact they have been good tenants for 7 years (with 3rd party verification) offsets a lot of this.  My questions are what methods would be recommended for:

With them not using a computer, what methods would be recommended for application, background/credit check, income verification?

As the person buying this house on 12/1/17, I need to make the decision on if I wish to continue to allow these guys to be tenants, or give notification that I want the house vacant by closing.  By not giving notification soon, it will be on me to get the current tenants out, rather than the seller.

I appreciate all input and advice.

Ben