All Forum Posts by: David Eiges

I'm looking to purchase a small multi-family investment property with a friend in Arizona.  We are planning to go 50/50 on the deal and take a loan out.  We'll share profit and expenses.  What is the best way to go about this?  Should be both be on the loan or should it just be one of us?  If the latter, would that create unnecessary tax implications?

It's $5,320, not $5,230.  He used the more conservative expense estimate of $2,199, not $1,612 to get the $17.

Also, depreciating is only for the "investment" part of the property.  So, if you're living in half and renting out half, only the rented half is depreciable. 

@Matt Kautz Residential Real Estate is depreciated over 27.5 years.  However, you only can depreciate the cost of the buildings ("improvements") and not the land value.  See if you can find your properties on the assessor's page: http://portal.assessor.lacounty.gov/ which will give you an idea of what the value of the Land vs. Improvements is. 

I picked $200k using the very scientific method of just roughing it...I looked at some example addresses from the Assessor's website to see what the land to improvement ratio typically is.  So, for your example, I assumed that the land at that $800k property is worth $600k and the building is worth $200k.  Totally back-of-the napkin, and I believe these numbers change when you purchase this property and it is re-appraised.

@Matt Kautz Just my 2 cents, but as far as I understand (from limited experience) and speaking with a RE Agent/Investor in Silverlake, the 2nd property scenario would be looked at as a solid deal relative to the market. Something around 0.6% rent/price (GRM ~14) would be solid, and if you can get a little better than that 0.7% (GRM ~12) that would be a deal in Silverlake right now for MLS.

Also, I don't think this is kosher for running a business analysis, but I've had to do it somewhat to justify purchasing and investment in LA...You can take into the account the tax advantages of RE ownership and the effect of purchasing on your take-home cash.  For the first couple years, you're going to have about 80% of your mortgage payment as interest and be able to depreciate the properties. 

Using Scenario 2, assuming Land = $600k, building = $200k, and you have a separate full-time job (like me):

80% X $3,104 + $200,000/(27.5 years x 12 months) = $3,089/month of tax deduction.  It depends on your individual income situation/tax brackets, but this could mean +$1,500/month of take-home cash at the end of the day.

The other thing I've learned is that in LA particularly considering the current market, a full-timer RE investor (including buy-and-hold, not just flippers) is much more likely to be doing some Rehab or finding off-market opportunities. That being said, I'm not full-time, so there's a good chance I'll be hunting off the MLS with everyone else to get started.

@Christian Mkpado Welcome, just thought I'd chime in to say that I met Glen at the Pasadena meet-up last month and, as a beginner, seeing the re-connection on BP makes the RE circle seem a little smaller.  Best of luck!

Thanks for the reply.  Yes, I'm currently renting.  Looking for properties that have good rent/value ratio but can go up to $600k.  I talked to a lender a few years ago to get an idea of what I can afford, and need to reach out to one again to get a more definitive number based on my current financials.

Right now I see myself doing BRRR, so I think equity/price of the home are going to be important factors for me in order to fulfill that last "R". I understand that rates are historically low, but I'd rather have a higher monthly payment than sacrifice equity by paying a higher amount for a property.

@Sean Durham Yes, I am looking in the Pasadena area as well as the rest of San Gabriel Valley.  Also, I think Riverside has potential for growth and cheaper properties.

Thanks all for your replies. Follow-up question: Let's say I purchase a MFR as a primary residence to secure more favorable terms, live there for a few months, then move out and rent out all the units. Is this a viable strategy or frowned upon/illegal?

I'm looking to purchase a 2-4 unit multifamily. My understanding is that for a SFR, 20% down payment and for MFR its 25% down payment.

I was having an informal conversation with a lender yesterday and he mentioned that house-hacking can provide the benefit of more favorable lending terms, but I didn't get the full details...I'm seeking insight as to whether purchasing a MFR as a personal residence (house hacking) can allow a smaller down payment (20%) or more favorable interest rates than if purchasing a MFR and renting out all units.