All Forum Posts by: Carolina S.

Thanks for your response. Yes, I', working with a 1031 agent. I'm basically looking for input in the following:

Option 1: Buy a couple of properties and split the money from the 1031 exchange for the down payments. I'm looking at a $600k price point each. Which means I will still need to finance about $400k for each property at about 9% rate (the rate is high because we'll using a commercial loan as we'll be purchasing the properties under an LLC). This gives me very little or zero cashflow on the properties. At this time, I'm not looking to invest out of state.

Option 2: Pay capital gain taxes and use it to finance my primary property renovations. I still have a mortgage on the primary of about $450K at a 3.8% rate. If I finance the renovations, I would be able to keep that rate. The renovations will increase the value of my primary from $800k to about $1.6M. However, there will be a lot of equity trapped in my primary. I know I could look to refi to get the equity out but then I would loose the 3.8%. Would it be worth paying capital gains then?

If I decide to go with option 1, I will have to borrow the money for the renovations at my primary and it may make it harder to qualify for a loan given the little or no cashflow.

 Thanks!

Hello BP community. 

I'm in the DC/ VA area and I'm under contract in one of my properties. I'm thinking of doing a 1031 exchange with it. If go that route, I would need to spend about $850k total. If don't do a 1031 exchange and decide to pay capital gains, I would have about $450k free of taxes (this accounts depreciation and other costs). So, I'm trying to decide between the two options below:

Option 1: Buy a couple of properties and split the money from the 1031 exchange for the down payments. I'm looking at a $600k price point each. Which means I will still need to finance about $400k for each property at about 9% rate (the rate is high because we'll using a commercial loan as we'll be purchasing the properties under an LLC). This gives me very little or zero cashflow on the properties. At this time, I'm not looking to invest out of state.

Option 2: Pay capital gain taxes and use it to finance my primary property renovations. I still have a mortgage on the primary of about $450K at a 3.8% rate. If I finance the renovations, I would be able to keep that rate. The renovations will increase the value of my primary from $800k to about $1.6M. However, there will be a lot of equity trapped in my primary. I know I could look to refi to get the equity out but then I would loose the 3.8%. Would it be worth paying capital gains then?

If I decide to go with option 1, I will have to borrow the money for the renovations at my primary and it may make it harder to qualify for a loan given the little or no cashflow.

I appreciate any input.

Hello BPs community, thank you in advance for any thoughts shared.

I just sold a rental property which had quite a bit of equity from appreciation and principal pay down through the years. I have it all set up for a 1031 exchange and I am now under the 45 day countdown. At the same time, I am also using this opportunity to move that capital into an LLC, and would look to extra financing to purchase a new property or properties of equal or higher value (per 1031 exchange requirements). The downer is that financing through an LLC would mean "commercial loan" which has a high interest rate of nearly 9% in today's high rate environment. I'm likely staring at negative cash flow net of that high rate, or at best breakeven.

Of course, to complicate matters (and here starts my dilemma), I am also rebuilding on my primary residence. I can rebuild it through financing it or through using the proceeds from the rental I just sold that is currently marked for 1031 exchange. If I finance the rebuild then the 1031 exchange presents some challenges (I will need to land a property that cash flows or breakeven so that I can get the loan for my rebuild, or banks will count that debt against me).

The alternative is I pay cap gains taxes and dump the capital into my rebuild project on my primary which would allow me to rebuild without any financing at all.  This will force a lot of equity into my primary especially once the rebuild is complete. This would also allow me to keep my primary at a low rate loan.  However, I would miss out on the benefits of 1031 (deferring taxes and having more capital to invest).

Which is the better route?

How are folks navigating 1031 and high financing rates vs taking capital gains hit and having pure cash on hand to redeploy elsewhere (in my case, rebuilding on my primary residence)? I’m thinking I can explore a home equity loan latter when I am ready to invest again. Thoughts?

Thank you!

Thank you @Bjorn Ahlblad!

Hello all, 

First time screening tenants and I could use a lot of help, please!

We have listed a SFH on Cozy and received an application. The credit and background check look fine so I'm moving forward with the verification of employment and rental history. Technically the wife qualifies on her own but both of them have submitted an application. The husband's income is cherry. Here are my questions:

- Can anyone be so kind to share the forms they use for verification of employment and rental history? Or do you just make one for your use? Also, since we use Cozy, at the bottom of the application there is a legend that says that the applicant has granted permission for us to contact former employers and landlords, is that enough or should I get a different authorization letter from the applicants to send along with the verification? 

- The applicants are married and one of them, the husband, owns a business. How to do you verify employment? He provided a manager's name and I contacted him but there isn't an HR department. The same person was listed as his reference. Should I request pay stubs? Is that sufficient? Do you ask for pay stubs from both of them? He's had the business for 10 years. 

- Do you also ask for copies of their DL?

- Due to COVID-19, I'm having trouble getting in touch with their current landlord and the wife's employer. How long is a reasonable time to complete processing the application? 

- Do you use any platforms to verify employment and rental history? This is very time consuming!!! I snooped their LinkedIn, and Facebook profiles, the managers profiles, their references profiles. 

- Lastly, they have a dog and I plan to charge a flat non-refundable fee. Is it better to charge a pet fee?

Thank you SO much for any input you can share!!

@Kristina Mahoney Adams Hello. I’ll be moving to Houston in the summer and would love to connect with you.

@Amber Koontz I’ll be moving to Houston in the summer and will be looking to buy some investment properties. Would love to chat and connect with you.

 Thank you for the tips!

Thank you all so much for your words of encouragement. I've diving deep in reading blogs, books, podcasts, you name it. Now I'm trying to set up my niche and strategy. 

@Solomon Morris have you attended any meet-ups in the area and found them useful? I can't seem to find one that is close to me. I'm in the DMV area.

Hello! First post and new to the website but I listen to the podcast religiously. I'm in the DC area and buying rental properties here require a lot of capital, so I'm looking to buy rental properties in Richmond and/or other states. I would love to network and learn from others.