All Forum Posts by: Kevin Davenport

You're definitely on the right track. I would set a goal of how much it will take to replace your monthly income and work backwards to find out how many rentals you might need. This will help you look long term and help with short term decision making. I agree with Viktor, ask a real estate CPA what your tax might be because my guess is it will be very small or $0 since it's your primary residence.

I've always purchased single family homes as investments because there are more good deals to choose from, easier to sell because a homeowner or investor could purchase, less tenant management due to other neighboring tenants and you can sell them 1 by 1 if you need instead of all the units.

What kind of rental market are you in? What is the average price of a 3br, 1-2ba in your area and what might it rent for?

I would use up your 4 conventional secondary market type loans but look to local community type banks for loans 5+. You might not get the 30 year fixed rate loans but they will be your best partner as you buy more properties.

If you're comparing living in your house to living in 1 of the 4 apartments, compare what your net rental income might be with each option. It could be that you make more per month staying where you are. You could then look into getting a home equity line of credit on your house to use as short term cash to purchase and repair.

My strategy has always been to use short term cash like a credit line to purchase a house that's at least 30% below market value minus repair costs. Then, go to a local bank and get a loan for 70-75% of the appraisal after I get it fixed up and rented. That way I get all my own cash back out of the deal and can go purchase another house the say way. My goal is to not have any cash in a property and have it cash flow 35%+ of the rent.

I only buy rentals to hold long term and even if I'm looking at a turn key property, I would only pay 70-70% of retail value. But that's just my strategy.

Hi Kenneth, Jeff is right, most people don't even plan for the next day. The only thing I would add are action steps to your plan. What will you do each day to try and find deals? How many new investors will you talk to each day? Try to align your actions with your goals. I actually bough my first rental property when I was 20 and have been buying ever since. See this post http://www.biggerpockets.com/forums/12/topics/106303-establishing-a-plan-at-the-beginning

I'm a real estate investor and programmer and I'm actually working on adding the feature you described to my property advertising/management site right now. Anyone can use it if you're interested.

I agree, duplexes and multi unit buildings are harder to find and a good enough discount. I like single family houses because you can sell them to other investors or homeowners. Most multi unit builds have to be sold to other investors. You might be able to find 2 decent houses priced well enough below market to buy one multi family.

I would find another bank. Call local/regional banks and ask if they keep their loans in house as portfolio loans or sell them. Also ask if they require seasoning or that you own if for so many months before they will base their loan amount off the appraisal. It might take some searching but will be a great reward when you find one.

Your strategy should be to fix up the house and get it in move in condition, get it rented and then go to the bank and apply for a refinance loan. When you find the right bank, they will do an appraisal and loan you up to 70-80% of that. That will let you pay off your credit line and buy another property. Rinse and repeat with the next one.

Hi Christian, you're definitely on the right track. Wholesaling, which is what I seem to hear a lot of sales pitches on, is great but real wealth and monthly cash flow is the place to get as soon as you can. I started about 9 years ago by buying one single family home and renting it out. I got my system down and was able to start with a very small amount of cash and buy 1-2 new houses a month. My younger sister is wanting to create some extra monthly income from real estate and I've been working on writing out my steps and advice for her to follow. Send me a message if you want me to send it to you or if you have questions.

I wouldn't worry at all about starting an LLC right now. All it will do is create extra expenses and difficulty for you in getting started. You can always start an LLC later and easily transfer them into it then.

I think it's just a matter of personal preference on buying a personal residence or investment property first. I would just be looking for single family homes that for sale at a large discount and if you like it move in and if it's not quite what you're looking for use it as an investment. Depending on your current rent, buying a personal residence could cut down on some expenses.

I had a tenant that was late on rent so I stopped by their house one weekend and found that they had moved and the house was empty. When I got inside, I found that they had "upgraded" the property by making a "master suite". The problem was that they turned my 3/2 house into a 2/2 house by removing some walls between 2 bedrooms and left it partially unfinished.

No you don't need an LLC for 1 or even several properties.

Make sure you take depreciation and any other expenses. I use TurboTax and it does a great job of covering all deductions.

I like having a separate checking account but if you keep good records that should be fine.

Should be. Keeping a mortgage on the property also provides some liability protection because attorneys will see that you don't have a lot of equity.

I would start with Turbo Tax and then go to an accountant just to review if you feel unsure of what you did. It's a lot cheaper and will help you learn more that just farming it all out to a CPA.

I deduct property taxes, insurance, interest and basically any other expense listed on Schedule E.

One idea with tenants and liability is just to be good landlord. Fix any maintenance issues in a timely manner and be personable.