All Forum Posts by: Daniel Mills

Hi guys,

I live and work in Japan, but I currently own seven SFH rentals in the US. I bought two the traditional way and the other five are turn-key. I completely lucked out with my turn-key company in Memphis, so I sort of blindly invested with a Birmingham turn-key company. I have to admit, I didn't do as much homework as I should of, but everything seems to be OK. Now, I would like to continue building my portfolio there with a couple more houses and I would really appreciate some local market insight.

The home I own currently is in the Fultondale area (35068). I bought it for $94,900 and rent it for $975 a month. It's rented to a section 8 tenant. Most of the other properties this company sells are in the Center Point area (35215). Does anyone invest in this area? What can you tell me? If I were to post some properties would you be able to tell me what you think of the area?

Keep in mind, I'm not trying to debate turn-key versus traditional investing or SF versus multi here. I have a unique situation and this is just a part of my real estate investing plan, which includes local properties as well. 

Thanks,

Daniel

I am also considering a turn-key property through ROI. I would love to compare notes. Thanks @Greg Parker for the local insight.

@Jonna Weber - Thanks. I really wish I had bought a house in my mom's sub-division in Meridian a year or so ago. It was a new construction in the Lochsa Falls subdivision. She bought it for $190,000 and now, it seems they are selling for over $300,000. At the time I didn't have enough cash flow from my portfolio to consider something so speculative, but now I might consider something like this. I would have had to put more down to make sure I wasn't bleeding money every month though. 

@Dave Foster - OK. Unfortunately, I'm almost 100% sure that I will get nailed in Japan on the sale. It's crazy high here too. First, I have to pay cap gains at 40% for a property I've owned less than 5 years (20% for more than 5) and the depreciation recapture. Since you can depreciate the entire purchase price on properties in 4 years if they are more than 20 years old, that's going to be a lot. I will double check with an accountant here though. If I can do this, I would be so happy.

@Dave Foster, that is great news! But, my issue is not on the US side, it's in Japan. When those properties disappear from my tax return in Japan, my understanding is that I will have to pay the tax here because they do not have a 1031 exchange. Is that not the case? If not, this is life changing.

Numbers: My oldest TK property was bought through MidSouth in Memphis for $55,000. I bought it with 20% down on a 30 year mortgage at a 4.9% rate. I bought it in May of 2015 and my net profit each full year has been about $3,500 (so 2015 was about half of that and 2017 is currently at about $3,000). My other MidSouth properties have performed in a similar fashion, but there are some bad years. My other property there which returned about $3,500 last year has only given me about $800 this year because of some storm damage and turnover. However, as I stated above, this is not such a big deal because of the tax advantages.

I own 4 turn keys through MidSouth in Memphis and 1 through Alliance Wealth Builders in Birmingham (I also have a couple of rentals in Boise, which perform worse cash flow wise than these but have better capital appreciation). My oldest one is from 2015 so I don’t know if that will be enough data for you, but I am cash positive on all these properties. But, for me, a US expat in Japan, the real advantage is in taxes. In Japan, the entire purchase price of a SFH that is over 20 years old can be depreciated off your income taxes in as little as 4 years. Because of my rentals, I actually look on paper like a low income earner despite earning about $100,000 a year. This doesn’t just affect what I pay every year but also for government services like child daycare. But, as a Japanese tax payer, I can’t use 1031 exchanges, so I plan on holding these properties forever. I think quantitative data alone can’t tell the whole story here because an individual’s situation can determine whether it’s worth it or not. That being said, I am happy to share my actual numbers for the last couple of years (it will have to be a in another post, I’m on my phone).

I also will look into owner financing too, but as I live in Japan it's a bit difficult for me to find some of those deals.

Hi guys,

Thanks so much for your advice. This is giving me a lot to think about. My situation is a bit unique. For example, some of you have mentioned that I could get additional loans through my wife, but this isn't possible because she isn't a US citizen and we don't live in the US. Also, while I do plan to move into multi-family and scale like @Lane Kawaoka suggested, there are some reasons why I also plan to keep and build my single-family portfolio. The first is that i am unable to use 1031 exchanges to move into bigger properties. I am a Japanese tax payer and since they are not allowed in Japan, I would be stuck paying the taxes here. Cap gains tax here is 40% if you sell a property within five years of buying it! One of the advantages here though is that I can depreciate the entire value of property in just a few years directly from my salary. As an example, my fellow professors where I work pay about $10,000 a year just for what we call citizen's tax. My wife and I only paid $500 because of the depreciation. This depreciation allows me to be classified as a low-income earner here and effects how much I pay for things like child care and other government services. if I own multi-family, it doesn't have the same tax benefits because it's considered a business. So, I think I am looking at a couple of strategies to continue building the single-family portfolio like portfolio loans and just paying off the lower priced properties. i might also look into getting a partner who could get the loans for me. Thanks.

@Brandon Battle - thanks. That might help with my other problem, maxing out my loans. How do I do the research on this? Is there a list of these type of lenders here on BP?