All Forum Posts by: Carlos Lopes

Quote from @Steven Wachtel:

Honestly I think that's a great move, and I wish I would have done it. I bought a condo in Destin while I was there at Eglin, but I never lived in it and I'm still stuck with an awful rate. If you can get a primary residence rate on it and STR it when you move out, you'd probably be sitting pretty. Just keep in mind that your insurance will probably go up when you change your policy to cover STRs. Also watch out for any HOA restrictions of course, and be aware that interest rates may be a lot higher for a non-warrantable condo - although I'm not sure how that would play out if it's your primary.

Where about did you end up buying. I’m slowly noticing a lot of the beach condos I’d be looking at breaking even once I rent them out unless I put down a hefty down payment. At 40% down if I wanna make the passive income. Otherwise, I’m still trying to decide whether breaking even is still a good deal because I get to own a beach rental I can use, while still building equity. 

Looking to buy a property in Fort Walton Beach. I’m in the military, and will be moving again in about 15 months. Currently renting, but was really debating buying a beach front condo in Okaloosa island to live in for the remainder of my time here, but then hoping to rent it out once I leave. 

Does anyone have any experience buying short term rentals in that area? Any recommendations? Just currently exploring what would give me the best bang for my buck. Seems like okaloosa is very busy and lucrative during summer, but kind of a dead town in the winter. 

Quote from @Ryan B.:

@Carlos Lopes I don't think it's completely unacceptable, but it's less than ideal.

Yes you're getting the loan paid down by the tenants and hopefully the property appreciates in that time. You're also getting tax benefits from the property. Cashflow on top of that would be ideal, but I guess technically not required.

Also, over time as rents increase, the property should start to cashflow.

I think it's just not ideal because it's a matter of opportunity cost. Yes you're getting all of those benefits, but you may be getting those benefits plus strong cashflow with a different property.

If you're barely cashflowing then any repairs or vacancy would put you into the negative easily.

Gotcha makes sense. Yea cash flow is obviously the most desirable outcome, but I just felt like the loan pay down aspect of it seems to always be dismissed as if it doesn’t exist. So really it’s still a benefit, just not ideal because you could be making cash flow elsewhere with the equity of your property, assuming you have any. In that case would you sell or cash out refi to use that equity elsewhere? I guess depending on future rates, cash out refi could potentially make a break even property finally cash flow all while taking out cash to buy another? 

I feel like I’ve been posting a lot lately! 

Something I've been thinking about is the benefits of loan pay down. So I've been listening to bigger pockets a lot, and am learning that a BRRRR method is a good method for making money. But let's say you buy a property for fair value, and it just barely cash flows or you just break even. On this forum and podcast, most people make it sound like that is completely unacceptable and you should get rid of the property.

Hypothetically,  let’s say you have a property that barely cash flows and isn’t appreciating much in the long term. The property isn’t really making you passive income, but it’s also not costing you anything to own.  If you have a long term 10 plus year outlook, wouldn’t loan paydown still be a positive for keeping the rental? I mean at the end of the day if you kept the house long enough and rented, you could still walk away with a paid off home. In my mind this is the worst case scenario. 

So where I’m getting at is, if your goal to replace your W2 with passive rental income isn’t working out, at the end of the day you’d still have passive equity being built that you could withdraw some day. Isn’t this a win? Thoughts?

You guys did a great job breaking this down. I've always felt like the whole LLC thing was a bit blown out of proportion and always wondering just how often people get sued. I personally run a very tight ship when it comes to managing my property and follow the law to the T. Also, to me seems like getting an umbrella insurance is still much less of a hassle then getting an LLC. Thanks for the perspective guys!

Quote from @Chris Seveney:

@Carlos Lopes

If you manage it yourself putting it in a LLC does nothing for asset protection as you as the manager would get sued too.

Keep it in your name and get an umbrella policy

Good point. Didn’t think of it that way. Sounds pretty straight forward then. My plan is to own a couple more properties by the end of the year, all of which I’m gonna manage myself. So would just sticking with a good umbrella policy and skip the LLC still be a wise choice? 

I’m new to real estate investing, so I have many questions. 

I currently only own one rental property in Florida. Only became my rental because I moved to California for work reasons so I decided to keep it. 

I'm now looking into buying more real estate, but I first want to make sure I have things setup correctly. Currently the one property, I manage it myself and don't have an LLC setup. Really all I have setup for the property is a separate checking account and have a landlord specific home insurance policy.

The questions are as follows: 

1) Should I set up an LLC for just one property? Pros and cons? If so, do I set up that LLC in California (since that's where I live now) or do I have to set it up in Florida since that's where the property is?

2) If I do setup an LLC, is transferring a property from your name to the LLC pretty straight forward? (I’m also still paying a mortgage). Will this trigger any clause on the mortgage lender side for a conventional loan? Ideally I would just transfer the property over and keep paying the mortgage as an individual. 

3) Lastly, what are people’s thoughts on umbrella insurance? I see a lot of people mentioning those. I have my regular insurance on the rental property, but should I be concerned with looking into umbrella policies for extra liability protection?

I know this is a rabbit hole, but just looking for some guidance on how to make sure I’m properly setup before I start looking into buying more properties. Thanks in advance! 

Quote from @Keira Hamilton:

I would ask yourself what your reason is for wanting to own the home you live in. People tend to have an (understandable) emotional connection to their home and often feel more autonomous when they own it. While there's validity to that, those feelings can get in the way of making the best financial decision. If I were in this position, I would just focus on the numbers. What is the rent you're currently paying in SoCal and how would it compare to a mortgage payment should you choose to buy a home? How do those payments compare to the potential rental income of another investment property? There's not really a right or wrong answer here as every investor has different goals, but I would just see what situation would result in the highest monthly NOI.

Another fair point. Currently paying $3200 for rental all utilities included. If we bought our own home we'd be looking at spending at least $5000-6000 a month for the area my wife and I are interested in. Also that wouldn't be a "forever home" type of home either. That's just your typical middle class 3 bed 2 bath 1500 sqft SFH in SoCal. So when I look at those numbers it's a tough pill to swallow. But as mentioned above though, it is an ever appreciating market. So not sure if time is on our side there either. So where my mind goes is that extra 1800-2800 in mortgage I would pay could easily go towards another rental property elsewhere. But I guess I would have to do my homework and make sure that if I were to go the more rentals route, that cash flow would outweigh the potential equity gains of a owning a home in SoCal? It's a tough choice.

Thanks for all the encouragement everyone! Seems like everyone is in agreement that it's a good move, especially considering current CA prices. Goal would be just use a conventional loan with 20% down, and save the VA loan for my own home in CA when I eventually pull the trigger. My concern is, even if I'm cash flowing on rental properties, will that significantly impact how much a lender is willing to lend if they see I'm already 3/4 of a mil in debt with other properties? Is that a non issue for a primary residence, especially while using a VA loan?

I’ve been struggling with the idea of buying a rental without my own home to live in. 

Back story. I own a rental in FL (first home we lived in), but moved to California 3 years ago. Decided to keep the FL SFH home as a rental, and I'm glad we did. The SFH currently nets about $1000/month after all expenses. Fast forward to today, we're looking to buy our own home again in Southern California, while at the same time, I'd like to keep increasing my portfolio in that same FL town our current rental is in.

I've found what seems like good deals in FL, deals I know would be profitable in the long run. Simultaneously in California for our own home search, that's been a bit tougher, especially for a price I'm willing to pay. Also should mention I have VA loans as an option.

All this said, I’d like to hear some people’s thoughts. Keep increasing rental portfolio at the risk of potentially hurting my ability to receive a loan for my own home in CA if I find a killer deal in the near future? Is finding good cash flow deals better than an asset that’s not generating any, even though it’s your own home? Thanks in advance!