All Forum Posts by: Dennis O'Loughlin

We recently purchased a 6 unit complex that was full and had "good paying tenants."  Unfortunately we have discovered that the guests of a couple of tenants were not being upstanding citizens and got themselves in trouble with the law.  

One of the tenants we have already started eviction proceedings against due to non payment of rent and the other one we are giving 30 day notice to because they had someone living with them that was not listed on their lease and this person was involved with some shady things so since it was a lease violation, she gets a 30 move out notice.   

We want to put up signs and get cameras set up around our perimeter and inside the common areas for added piece of mind for us and the remaining tenants.  Our question is, has anyone had issues like this?  What type of system did y'all have installed?  Any thoughts on which way to go because we don't need the break in alarm but we definitely want video cameras to try and encourage the people doing rotten things to stay away.  

Quote from @Nicholas L.:

@Dennis O'Loughlin

the bottom line is that it's not cash - there are strings attached.

i personally would never, ever sign up for something like that.  my equity in my primary and my rentals is my strongest asset.

YMMV.  i'd seek professional advice.

Hi Nicholas,

I see your point and I understand how since you do flips and rehabs that cash would be an absolute necessity for you.  Since we are long term owners and not doing flipping, cash is not as much of an immediate concern for us since the purchases we make require less upfront cash due to minimal rehab necessity.  I appreciate you contributing to our thought process.  Have a super weekend. 

Quote from @Nicholas L.:

@Dennis O'Loughlin

sorry if I am not understanding but... it sounds like most of these options are just using debt to take out more debt.  you're not really 'paying off a loan' on a property if you're using a different loan to do it. and if you use debt as a down payment on a property, and finance the rest with another loan - that's a very expensive way to buy something. and you most likely will lose money.

only you can decide what's best for you

let me know if i am missing something

 It's not actually a loan.  It's an equity sharing group where you receive a percentage of your equity in cash up front with no monthly payments.  At the end of the term, 30 years, you either repay the total plus a percentage of the amount of increase in equity since inception or if you sell the house then you repay them the original amount plus a percentage when the house sells.  

You're not actually accruing any more debt you're just paying a fee at a later date for the right to take out equity directly without any monthly payment.  

We have found a creative way to access some equity to make our equity work harder for us so it's almost like the beginning of a BRRR strategy. However...it's not quite. There are several options and we'd like to thoughts on the best idea.

We are going to be taking out some equity, no not a heloc, so that we can do some remodeling on our personal residence kitchen.  This remodel with obviously help our home value so that is good.  We were going to then take some of that money and take a chunk out of a higher interest rate credit card.  Here comes the confusing part.

With the remaining equity we have several options. 1). We could take the money and apply some of it towards our personal residence to reduce the time required on the loan but there would still be a sizable amount of loan so it really wouldn't make a huge difference in terms of the length of the loan...not a great idea. 2). We could get a new car and do something fun with the money but that would just be wasting the equity we have built up...bad idea. Here are the best 2 options and not sure which is best. 3). Take the remaining money and pay off the loan on a SFR rental we currently own. This would increase our company's net worth, reduce our debt, and increase our income. We could then refi that property and use it to start a BRRR. We might not be able to BRRR a multi family property (which is what we are trying to buy more of.) 4). We use the remaining money to put a down payment on a multi-family property which would also increase our company's net worth and income. However, it would also increase our debt.

Has anyone else run into this dilemma? The purchase of the multi family instead of the BRRR seems like a better idea since we are not guaranteed to find a multi family to BRRR with the amount of money we have to use.

My wife and I are partners in our Real Estate LLC. We live in the Pacific NW and want to go to a couple of seminars in LA next month. If our kids go with us and we drive to LA on a Sunday, all of our direct car related expenses are tax deductible even though the kids are in the car including 1/2 of the meals for my wife and I. On Monday we have a conference that is a few hours long so we go to that and expenses we have for us on that day are deductible but not the ones for our kids.

If we then have another meeting that we are pre signed up  and have paid for which is on Wednesday, the expenses that my wife and I incur on Tuesday are deductible because it is considered a work day since it falls in between 2 separate days of meetings that are directly related to our business.  The things we do the day that falls in between (Tuesday) are tax deductible for my wife and I (1/2 of eating expenses, going to the movies or a baseball game etc.)

On Wednesday, the other meeting day, those expenses are deductible for my wife and I because of the meeting.  The drive home on Thursday has the same deductions just like driving there because we are driving home from work related things.  We can show that these meetings (conferences) are directly related to our business betterment.  

As long as we keep detailed records and receipts for this and can show that these meetings are for our business then we can deduct our expenses in the normal way even though our kids are with us right?  

Quote from @Robin Simon:

Quote from @Nicholas L.:

@Dennis O'Loughlin

on your second question - what do you mean "obviously you can't DSCR it"?

i have done several BRRRRs and have a mix of conventional and DSCR loans. you can definitely refinance a BRRRR into a DSCR loan.

on your first question - can you elaborate what you're asking?

This as well - what do you mean on "obviously can't DSCR it" - to the contrary, DSCR Loans have become the main option for BRRRR Refinances ever since the GSEs upped the seasoning requirements for cash-out refis last April

I was under the impression that DSCR could only be done at initial purchase...not when trying to take out equity.

Quote from @Nicholas L.:

@Dennis O'Loughlin

on your second question - what do you mean "obviously you can't DSCR it"?

i have done several BRRRRs and have a mix of conventional and DSCR loans. you can definitely refinance a BRRRR into a DSCR loan.

on your first question - can you elaborate what you're asking?

Hi Nicholas,

When thinking about taxes and deductions for your real estate business, according to the last IRS info I saw, you cannot deduct improvements or upgrades. However, you can deduct or depreciate things needed to keep the property in rentable condition. When you BRRR a property, since you can get ones that are in really rough shape and need to be rehabbed, can you deduct and depreciate those expenses off your taxes or do you just eat the expense?

2nd question...so even though you're not doing an initial purchase and trying to take out the equity in the property, does a dscr really make the most sense or does something like a heloc do better?  

2 questions about BRRR. When you use the BRRR method, since you are not doing upgrades but rather repairs, you can either deduct or depreciate all the work you do or hire out right?

Second question. After you Rent and are ready to refinance, how do you work it so it doesn't go against your 10 maximum personal loans you are allowed to have? Obviously you can't DSCR it so what do you do?

We need some good advice please.  We have a sfr we paid cash for and is worth more than when we bought it.  We have a great house we'd love to get but we cannot quite get the down and closing costs right now.  If we were to finance the cash house and then use it as the down for the other house we would then have a mortgage on 2.  Doing so, with preliminary numbers, would reduce our monthly income by a $150 or so since we would have a mortgage on the cash house plus the new house.  Obviously this doesn't make a lot of sense from a cash flow basis but if we were to refinance it later on at a lower rate, after we do some upgrades, that could significantly help us but the reduction in cash flow is concerning.

If we take the equity out and truly Brrr it, then we are doing better because we avoid the lower value mortgage but can finance at a higher level after reno.  Since we have never faced this situation before we are not sure how to handle this.  Any suggestions or thoughts would be much appreciated.  

We totally get the premise behind the Brrr method but at the same time, if you can utilize the same cash principle to buy a bigger, better rental house that will appreciate well over time due to location, wouldn't it also make sense to consider using the cash house equity for this bigger location house to be refinanced later at a lower rate and take the equity out of the better location house then and use the equity later?  I understand that isn't the way the Brrr method works but it's a thought we've had.  The better location house is something that could be used as a short term rental too and or we have considered just keeping it for ourselves at a later date.  

Thanks.  

Quote from @Chris Watkins:

Quote from @Dennis O'Loughlin:

Quote from @Chris Watkins:

Quote from @Dennis O'Loughlin:

Quote from @William Hutch:

Where are you located? I have lots of ground up experience as an architect in NYC. 

 A little further West...Oregon.  

Where are you in Oregon? There are several investor meet-ups across the state where you can meet someone with the experience and willingness to help foster your development idea (or at least connect you to someone who can).

 The Salem area.

 Salem has a great investors group:

https://www.facebook.com/groups/salemre/?ref=share&mibex...

You can also reach out to @Lawrence Potts and he can connect you to folks in the area.

 Great!  Thank you so much for the info.