All Forum Posts by: Cole Hagen

Hi,

So a little bit of background before I ask my question: I am 24 years old and bought my first home last year and am currently house hacking it. My goal was to purchase 3 more single family homes this year and I have roughly 100k of equity in my current residence, have qualified for either a conventional home loan up to 100k and a HELOC up to 60k.

I was originally planning to buy a single homes as they come available but recently have been talking to a local investor who owns roughly 100 properties who is beginning to off load as they are all paid off and he is nearing retirement. He has mentioned a few times about selling me a package deal with either 5 or 10 houses at a time on a schedule that will benefit him from a tax perspective. In return, I would get a slight 10-20% discount on the properties based on current market appraisal rates. 

I have a few finance options available for a deal like this and wanted to get other's opinions before jumping in. 

Option 1: Apply for a commercial loan for a group of properties and pay the down payment and rehab costs with my 60k heloc (Ideally a $200k package with $40k down and $20k in reserves for upfront maintenance.

Option 2: The investor has mentioned the option of seller financing on a 3-5 year balloon payment (contract for deed) with 20% down in which I would then re-finance in 3-5 years per the terms to roll into a conventional or commercial mortgage.  Again, I would pay the down payment with my HELOC.

Any information on the positives and negatives on either of these scenarios would be greatly appreciated! If anyone wants to play devils advocate and warn me why I should reconsider a deal like this please let me hear it! Thanks and happy easter. 

@Kevin S. I completely understand that and apologize if I was unclear. I full intend to claim it but wanted to make a general stereotypical statement that when someone makes a relatively small amount of cash on the side, they don't claim it. In my case, I believe that it would actually be beneficial for me to do so.  

I am more interested in learning about the best way to collect and report rental income and also learn any key things I need to do in order to make sure that it will count toward my yearly income so that I can qualify for additional loans in the future. 

On top of this, I would like to hear advice on doing everything I can to accurately maximize my tax, repair, & closing cost deductions. 

Hello,

Earlier this year I purchased my first home with the intent to house hack it. I have only had one room mate over the past 6 months as I have been finishing the basement in order to add two more. My question revolves around how to claim this rental income on my taxes and strategies to do so. 

The obvious thought is to not claim any as it is my first property and there will be only around $4k in revenue this year anyway but my thought is that I can potentially claim and increase my taxable income which will raise my Debt/Equity ratio in order to purchase another SFH or small MFH next year. I also believe that I can depreciate my interest, taxes this year, and the $30k in repairs that I put in this property this year (please correct me if I am wrong).

I am currently collecting rent via Venmo as it is convenient for both me and my roommate and I also believe that this could be used to show proof of income (again, correct me if I am wrong). 

My main goal is to maximize my ability to purchase another property (3 is my goal) for next year using the BRRR method. I will have around $30k in savings and I can find properties anywhere from $50-150k in my area.

Anyway, I would appreciate anyone else's thoughts or feedback over this topic. 

Hi, I recently had a direct mail success for my first home. It will be a live-in situation that I am going to rehab over the first few months of living there. I have a contract on the house and am working on achieving financing through my local credit union (conventional loan, Freddy Mac). The appraisal value will easily meet and exceed what I am paying for the property but according to my appraiser, the house may be considered a C6 property (unsafe) due to a variety of factors including a deteriorating deck, missing electrical outlets, the water, AC and Heat have been turned off on the home since no one has lived there the past year. I knew all of this going into this which is the reason I was able to secure the home for such a discount but I was wondering if anyone had any tips on how to get around this. The seller wants to sell the house AS IS which I completely understand and have all of the tools, skills, and resources to fix these issues but according to my lender, the loan would be "subject to repair" meaning that the seller needs to at a minimum fix the safety issues (which they do not want to do). Please let me know if anyone has any advice for getting around this situation. 

Account Closed I have heard of this ladder but do not know anything about it. I knew that I had heard it either on a podcast, book, or somewhere. Glad you mentioned it again, I need to do a bit more research on this topic to figure out exactly how to use it for my situation and advantage.

@Pete Fiannaca This is what I have had in the back of my mind every since I began learning about REI. I am going to give a very basic example below and I would like to hear your and everyone else opinions with any flaws or hiccups that I may run into.

1. Say that by maxing the 401k and receiving a 7% return,  I accumulate around 500k in 8-10 yers depending on the market.  

2. 3 Bed 2 Bath houses in my area can easily be attained for $100k and rent for $900-1000

3. Could I simply withdraw 100k per year after taking the 10% penalty plus 28% tax rate (currently) and buy the SFH with cash? Say I want to make 96k/year cash flow or 8000/mo. Could I hypothetically do this 8 times, own 8 $100k, and cashflor $8000/mo much faster than waiting for my 401k to accumulate to a value that produces 96k/year?

*I obviously understand that a property that cashflows 1000/year has other expenses (taxes, cap x, repairs etc.) but for this example I am excluding these for the simplicity.

@DJ Cummins That is exciting to hear, those numbers are great. I would imagine that the tenants in our area would be pretty good to work with as well. I would imagine that the Bethalto area would have lots of opportunity as everytime I get on the everyday websites (CL, Zillow, Realtor), there are plenty of 100k or under 3BR houses in Bethalto. Much more realistic barrier to entry. 

I was originally planning on buying a house to house hack in Holiday Shores (mainly because I love it out here) but the barrier to entry on the lake is 200k minimum. Now this has me questing trying to buy 2-3 cheaper homes in Bethalto in the next year or two and live in one/house hack and rent the other until I could qualify the rent as income and move back to the lake.

@DJ Cummins I live in Holiday Shores and want to invest in the metro area. I am still in the education/raising capital stage but am getting close to pulling the trigger. I drive through bethalto everyday and always ask myself if it would be a good market or not. Prices are much cheaper than Edwardsville including our brutal property taxes. Do you see steady demand in tenants in bethalto? That has been my only concern.

@DJ Cummins I live in Holiday Shores and want to invest in the metro area. I am still in the education/raising capital stage but am getting close to pulling the trigger. I drive through bethalto everyday and always ask myself if it would be a good market or not. Prices are much cheaper than Edwardsville including our brutal property taxes. Do you see steady demand in tenants in bethalto? That has been my only concern.

@James Fowler Its exciting to hear about other people's success in our area. I am familiar with all of the areas that you mentioned and you bring up some great points. I am obviously in the early stages of my career but do have definite goals in mind and I think that the metro area can satisfy them. Edwardsville is my back yard so I feel very comfortable investing here but like O'fallon, prices are high and deals are hard to come by although the rents are typically high and the influx of students keeps demand steady. Do you attend local REI in ofallon? I have briefly looked for one in the metro area but have not had too much success.