All Forum Posts by: Account Closed

Thanks for the info guys. I will have lived in my home for 2 years this upcoming November. It makes sense what you're saying. Sounds like my strategy should be to simply sell my home, or take out a HELOC and use that to purchase some rentals.

I'm curious to know if I can do a 1031 exchange with my primary residence to purchase a portfolio of rental properties that are already cash flowing.  My primary residence is worth about $265,000 based on an (exterior only) appraisal I had done recently.  Two comparable homes in my neighborhood sold for about $280,000 however, so that could push mine up to that bracket.  I do have a 30 year fixed conventional mortgage on my house, and have approximately $193,000 left to pay on it.  I don't know if my mortgage will have any effect on a 1031 exchange or not.

My question revolves around how I can do the 1031 exchange.  I understand how it works - I basically trade my property for the value of another at equal or greater value.  But instead of selling my residence and getting just the cash out that I put in originally as the down payment, could I trade the full value of the property ($265k) and use it as a downpayment for a portfolio of cash flowing rentals that I otherwise wouldn't have the cash for?

If there is an REI expert or real estate attorney on BP that can not only answer this, but help me take the next steps to performing this type of transaction, that would be immensely helpful. I've already been getting leads for small portfolios in the range of 5 to 20 houses so I'm very interested if this will work.

Many thanks to whomever can answer this for me!

Yes, financing to a new buyer is a great option as well.  You are the lender so you can foreclose on the property if the buyer can't pay the note, and then re-sell it to someone new if that ever occurs.  You also get the monthly interest payments on top of your total sales price so instead of selling a rehab for $100k, you could get $110k or more depending on the rate you work out with the buyer.  It's also a great advertising strategy because buyers love seller financing due the easy transactional process most of the time.  You control the contract so you can make it 1 page, or 50.  It's just a much more customizable process.  There are loan servicers out there as well that can handle the payment collections and tax forms for both the seller and buyer as well so you can put this on auto pilot.

Owner financing is not anymore dangerous compared to other conventional lending options available.  Owner financing is actually much better because you can determine the rate and other terms directly with the owner.  You don't have a bank holding all the cards in the deck.  Banks don't typically negotiate either.  It's either all or nothing with them.  I private/owner financed all 3 of my investment properties last year and it was the best option for me because all the banks required much higher down payments, higher terms and too many restrictions.  They were a barrier for me rather than a door opener to my opportunities.  To answer your question more fully, yes you could set yourself up for higher returns in the long run.

 Aside from what everyone else is saying about inspections, etc., my concerns center around the following:

• You're purchasing a triplex at $130k which is good - not a bad deal.
• Each unit (if it's in good condition) could and should rent out for $700 to $800 per month to be worth it.  $540 per month is way too low and I wonder if the area itself is not a hot one to live in.  Cash flow of $700 per month on a triplex is not good IMHO.  Most of your rent roll is going down the tube in expenses it seems.
• I'm also concerned you want to manage the property yourself being this is your first property. For insurance purposes and general piece of mind, I always use a PM for rental properties. I don't even think about managing them myself. I only recommend managing them yourself when you've become accustomed and experienced in the REI world. There has to be some PM out there who will manage this place. Keep checking around.

@Anthony Craiu No, to my knowledge there is no CarFax for homes.  If you want to find the history of a home, go to the county's website and look at the tax records.  You have to do this individually for each home and each county has their own platform and GUI laid on top of it.  You can try to look at the tax records from the county website to ensure the home is free and clear.  Sometimes (if there is a lender) the lender's info will appear on the record.

No, private lenders do not work with FHA loans. FHA loans are government created and government backed. Only FDIC insured banks who operate under the Federal Reserve bank will offer these types of loans. A private lender can be your parents, grandparents, friend, colleague...literally anyone who has money and wishes to lend it out to someone. They are not bound by lending guidelines imposed by the government. You and the private lender are free to structure the loan any way you like. You should also get a loan servicer in place if you want accurate bookkeeping and tax records kept on behalf of the lender and buyer. Just Google search "Loan Servicer" and you'll get plenty of results to work with. Always be sure to call them up and interview them too to ensure they know what they're talking about...

You only need an attorney if you are structuring a creative investment deal such as seller financing or private financing.  If you are just trying to do a retail transaction, a regular real estate agent will do.  Agents are not attorney's however and most agents aren't as familiar with investment strategies as an attorney would be.

If you need someone affordable to look over any legal docs in a transaction, try using LegalShield.  I haven't used them, but I've heard good things about them.  You can also try cold calling an attorney in your area and asking him/her what she would charge to review your documents and make edits for you.  It's all about building relationships.  You never know what kind of relationship you'll be able to create between an attorney, CPA, etc. until you actually call them up and let them know your situation.

I am currently in the process of getting my license as well in the state of Georgia.  I did my 75 hour pre-licensing course online because I am a self starter and because of the flexibility with my schedule.  Just go to your state run real estate commission and find out the schools they authorize under Florida and see if those schools offer online courses.  They all pretty much teach the same content.

 What "Free and clear" refers to is the title to the property.  It basically says the property is paid off and there is no mortgage attached to it.  Private financing is not as tricky as you might think.  You're basically negotiating your own rate and down payment with the individual or private firm instead of having a government run bank tell you this is the rate you get.  Yes, you can be taken advantage of with private financing or any kind of financing from a big bank for that matter.  I might argue the big banks will screw you more because they see you as a number whereas a private lender has more skin in the game and wants your future business.  It's all about who you choose to associate with - do you due diligence always.

I'm not aware of any laws/regulations in place to protect you in case a private lender scams you.  What I highly recommend is working with a private lender that has an NMLS# (meaning they're registered with their state) or has a very good reputation with the community it serves.  You will be able to tell this by searching the BP forums and asking people who they've used.  Check out the vendor forum category to get an idea of who to use and who not to.

You can and should also consult with your personal real estate attorney.  Basically have your attorney vet any financial documents a private lender proposes to you.  He/she will be your ally when setting up something like this.

@Anthony Craiu Welcome to the community.  You sound incredibly knowledgable as it is and seem to have thought out your plan in detail.  I do agree that buying an owner occupied property as your first investment is a great way to start, especially with a duplex.  This is a strategy most investors begin with and helps to elevate them to the next level.  I'm no expert compared to some, but in Ohio most of the properties there cash flow rather than appreciate in value.  I think you should focus on finding a good multi-family that is affordable and has great cash flow rather than hoping for appreciation on the property.  I don't think it's wise to break even on cash flow in the hopes that you'll have some increased equity down the road.  Maybe in bigger economic markets you could, but not in Ohio.

I also think you might want to consider seller financing if you can find a property that's free and clear or private financing even. FHA is great for first time buyers but can have its caveats especially when it comes to PMI and other hidden fees/costs incurred just to get the loan. I'm not discounting FHA altogether, just encouraging you to keep your options open. Some of the best deals in history have occurred without banks involved.

It depends on which REIA you go to. My local REIA has sub groups / meetups that I argue are more valuable than the general meetings where yes there is someone there to make a sales pitch. I find the REIAs are valuable though in finding vendors, networking with other legit investors who might be able to do a JV, or offer free advice for a deal you're working on. Again REIA's aren't really a scam. It just depends on the leadership of each one and who they invite to come speak at the general meetings that plays a big a part in how they market their group.