All Forum Posts by: Dan M.

What some people do is create a corporation then pay themselves salary from the proceeds of the rental income. I like the idea of just doing a DSCR loan though like Michael suggested.

Some other things to consider:

Will the seller of the second property take a short term note for the balance of the purchase price after you eliminate the debt on it? I don't know what the first lien debt amount is, but maybe you can come up with that money and get seller financing even if its only short term while you do the conversion and work. Then they make a little more money and it makes your life easier.

Also if you have a 401k loan if there is enough there you could use that and pay yourself back. 

Why not just use the money from the index funds?

Hello Rosca . Yes you will buy your first house! I would recommend jumping onto realtor.com or zillow or trulia and looking at properties where you plan to buy. If you use the filters you can look for a house at a certain size, or a certain price, or certain bedrooms or a combination of all 3. 

Unless your planning to buy something outright I would talk to a couple banks and introduce yourself and let them know your planning to buy soon. They can talk to you about fees and closing costs so you know what your getting into.

Also an experienced realtor can be invaluable to help answer your questions about the process and show you houses you like and have interest purchasing. 

Ask 10 people and youll get at least 3 different answers. It all depends on what the individual would do with their risk tolerance. Each property is also different. You could buy a 1 million apartment building outright and make 65,000 or 30,000 depending how it performs and what market its in. You could put it down on a 4 million dollar property and make 120,000 or zero or negative. Every deal is different. 

Personally if I had 1 million just laying around Id probably put some of it into real estate, pay down some existing debts, some of it in treasury bills, and some of it in an index fund. 

 It gets added in like Cody mentioned because things break down and you need the cash now to fix them. Look at it this way though by having the depreciation gives you more money per year at tax time, so if you invest it and make any sort of return on it then your ahead of the game when you sell and pay it back if you opt not to 1031. If your also very strategic and cost segregate / take bonus depreciation where available you can eliminate higher level tax income where applicable. 

 I don't know the cost of things in your area but you would get the proceeds of the sale tax free from federal income tax from the primary residence exclusion. I'm guessing you owe around 150-100k so you would have 225k to play around with.  I know that 3% rate is great but look at the bigger picture. If you rented it out, youd make 800 a month, or 9600 a year ( lets assume paydown of loan pays taxes and capex/repairs insurance etc, maybe its more or less you know the numbers not me ) So if you have 225k of equity and make 9600 a year your return on equity is only 4.2% , maybe less. Could you make more than that buying an investment property with 25% down ( roughly 100k down if im not mistaken ) , put a downpayment on your hobby farm, and throw the rest into 3 month treasury bills /whatever ? Just an idea. 

What if you sold your house , bought the hobby farm ( making it your new primary), and used the proceeds for an investment property? 

A couple of things: Will the bank, credit union, or hard money lender loan the lower amount? Most banks wont loan less than 50,75, or 100k as its not worth their time to do so. 

Why is the vacancy only 4% ? Is that realistic?

Have you secured property management at 7% or is that a made up number? 

On the surface, as far as a brrr goes, the numbers make sense to get your cash back. I would really look at your expenses again and make sure your not upside down at the end of it. Or worse, the bank trying to refinance your money at a cheaper rate says no, because you dont meet the income requirements and your stuck in a hard money loan or lose the house and your downpayment. 

I didn't go too in depth but if its losing cash flow its generally not a good investment. If you want to gamble on appreciation just go to the casino and put it all on red or black at the roulette table. 

Hello Enrique! Congrats on getting your license! I would suggest for your first acquisition to "house hack" and buy a primary residence that you can get preferred financing on and also make some income on. Even if you end up paying for some of the mortgage, it will help you eliminate or lower your largest expense: housing. Then you have some traction.

Real estate is a rich mans game. There's plenty of low money no money things you can do like wholesale, FHA financing, 100% financing loans but all of those end up being expensive in the end. My advise to you is to save as much money as possible and eliminate whatever expenses you can to save up for downpayments. The larger downpayment you can put down the lower your payment will be and ultimately will save you thousands or hundreds of thousands of dollars in interest. Find the strength to say not to unnecessary expense to yourself, friends, significant other for a few years to start building your wealth. A couple of painful years will allow you to live the life of your dreams in the future.

To get a loan you will need to establish a good credit score. This varies by the lender. Contact a couple of banks and mention your intent to purchase and they can help you. You will need a stable w-2 job for 3 years if you plan to use a bank. Using a bank is the cheapest option and highly recommended. You can contact other lenders, and do things like DSCR , but they will be more expensive in the short and the long run.

You don't necessisarly need any lines of credit. Cash talks. Save as much as you can. Once you have equity in your first home you can then start to play around with things like HELOC and cash out refinance.

I highly recommend again , to get started, to househack your way. Its the cheapest viable lower risk lower cost option.