All Forum Posts by: Dale Line

Thanks Alex and Dave!

Yes - QI is state agnostic. Because of the unique aspects of the NYC marketplace (co-ops, attorneys, managing agents, board packages, longer closing timelines, etc. etc.) it's good to find people who have experience with transactions in that market. And it sounds like Dave does! I'll pass your name along Dave. Thanks again, Dale

Hey guys,

Have some clients who would like to use a 1031 Exchange Intermediary with experience in the NYC market. Toss out some names!

Thanks, Dale

Overall, as real estate investors and marketers, I believe this is good stuff. For years, economists have been telling us there are 2 problems in the housing industry 1. not enough supply (especially for first time buyers) and 2. potential buyers are struggling to build down payments thus leaving them as renters long after they should be able to purchase homes.

Will this cause prices to increase? Probably. Anytime there's more money that occurs. But the overall benefits to the economy for homeownership vs. renters, in my opinion, is worth the trade-off. 

Not so sure about the rent collusion part of the argument. I'd say that says more about lack of supply than price fixing. But that said, I also wouldn't be surprised if it is occurring in some small/insular markets. 

As a couple of other folks commenting suggested, I totally support the point that these efforts should be focused on smaller homes for first time (or senior) needs. There have been some great studies pointing out how new home building has doubled in size from the previous post-WWII US housing boom. My parents owned a 1200 sqft (cool) ranch with 3 beds/2baths when I was a tyke. Great house! We need to build more of those again. 

Quote from @Jaekwan Lee:

Quote from @Dale Line:

It absolutely can be. House Hacking is generally the one situation when purchasing an investment property can be done without positive cash flow. The rationale being you are reducing your personal housing costs as the rented unit will be covering some of the costs. 

I did it with my first home purchase on a 2-family. Ended up living in my unit for about 25% of the price I was getting in market rent for the other unit, even though it didn't have positive cash flow.

Couple things to consider:

1. Make sure you are, in fact, spending less on a monthly basis than if you were buying/renting an equivalent personal property. It may not make sense for your personal finances if over invest and end up with a house hack option that costs more money than somewhere you could live on your own.

2. Run some estimates now on potential future earnings if, at some point, you didn't live in the house and instead it was used as 100% rental. It should have positive cash flow in that future scenario. 
 

Your case made sense because it is just 25% of the price for your unit. The properties I see the price near my area is around or above 100% of unit price (half the mortgage + @) so I don't see a reason to start with duplex. 

Yes - the economics are different and living in a 2-family isn't for everyone. Something to keep in mind is that if you were living in 1/2 of a rental property 50% of the building maintenance will be tax-deductible (this is because 50% of the building will be investment property). Living in a single family home that you will eventually turn in a rental won't give you that same benefit while you're living there. Sounds like you're doing a great job crunching the numbers. Keep us posted on what you do! 

It absolutely can be. House Hacking is generally the one situation when purchasing an investment property can be done without positive cash flow. The rationale being you are reducing your personal housing costs as the rented unit will be covering some of the costs. 

I did it with my first home purchase on a 2-family. Ended up living in my unit for about 25% of the price I was getting in market rent for the other unit, even though it didn't have positive cash flow.

Couple things to consider:

1. Make sure you are, in fact, spending less on a monthly basis than if you were buying/renting an equivalent personal property. It may not make sense for your personal finances if over invest and end up with a house hack option that costs more money than somewhere you could live on your own.

2. Run some estimates now on potential future earnings if, at some point, you didn't live in the house and instead it was used as 100% rental. It should have positive cash flow in that future scenario. 
 

Quote from @Nicholas L.:

@Dale Line

not in a million years.

the whole point of investing in RE is to build equity over time.  

 Thanks! Totally agree with your point re: goal of investing. Looking to understand more about the nuts/bolts of what these folks are pitching. John Bucci did a good job of explaining what the product is. 

Quote from @John Bucci:

Quote from @Dale Line:

Just saw an article in Housing Wire today on HomeTap. Article says it's a growing product. Would love to get the Bigger Pockets take on it. Good option for getting money for further investing?

Seems like a bad deal to me. They take a percentage of the overall sales price of the home, not just the appreciation gained. So if your house goes from 600k-900k in 5 years you'd have to pay them 180k (20%) on the sale. Not to mention if your house doesn't appreciate, you still pay 20% of the sales price which will eat up a chunk of the equity you've paid down. So you could pay out 120k on a 50k loan if your house stays at 600k in 5 years.

Also, if you pay it off in less than 2 years, they make 20% interest on the money loaned. I'd rather get a HELOC or refinance... unless I'm missing something.
 

 Very helpful explanation on what the product is. First time I've come across it and it sounds like they're going to be making a big push on it. 

Just saw an article in Housing Wire today on HomeTap. Article says it's a growing product. Would love to get the Bigger Pockets take on it. Good option for getting money for further investing?

Thanks Dave. Good stuff! If I'm able to do a 1031 immediately at the closing of the sale, that would be the best of all worlds. Is the theory that because I own a 50% stake in a property as a silent partner (other than paying some bills), the property is considered an investment for me? 

As part of an inheritance, I am a 50% owner of a lake home in Minnesota. At some point in the near future, the other owner (who uses the property full time) is going to want to sell. My plan has always been to use my proceeds to buy an investment property once the time comes to sell. The property is worth about $300,000. Because of the inheritance, when I sell, I will owe a chunk of my $150,000 proceeds to the IRS. 

It dawned on me this morning that this may be a good candidate for a 1031 (which I've done on a previous transaction). My thought is I could buy out the other owner and then hold the property for a couple of years and convert it into an investment (as a seasonal vacation rental - which there's a decent market for in the area). Note - the other owner is not interested in holding an investment property. Then after a few years as 100% owner of the investment property, I sell as a 1031 exchange to and trade from this property to a property in my target market (southern CA). 

Let me know your thoughts/things I should consider. Thanks, Dale