All Forum Posts by: Derek Luttrell

To put actual numbers on things, I bought my first investment property at 5.25% interest in Feb 2018, and am currently under contract on my 5th property which is now at 5.875% interest seven months later. Both have 20% down payments. 

Just yesterday I told a friend that I put an offer what could be property #5 for me, and he said "better hope the market doesn't crash soon." I responded with "Why?" and he didn't know what to say next. 

It's people's favorite thing to say when they hear you invest in real estate, and they all seem to be from the future and claim we are "due" for another recession. Honestly, what does being "due" for a recession even mean? No one seems to understand that your rate is fixed until the property is paid off, and stays constant no matter what the market is up to at any given time. 

I am comforted by the strong demand in the areas that I invest in, and the fact that I would need to take about a 50% hit to my rents in order to break even on all expenses. And yes, reserves are paramount in this game, but I would argue that, when staring down the barrel of a recession, the stock market is much more risky than buy and hold REI.

I closed on 8/10/18 at 5.5% for a SFR conventional loan with 20% down. If rates have gone up over half a percent in the past 30 days, that's a bummer, but I wouldn't be surprised.

@Russell Brazil that's a nice perspective. If I close in October, payments don't start until December, so even if I have to go vacant until March, it's the the price I pay to lock in a performing asset for the next decade+. 

@Peter M. good point as well. I can't control whether or not tenants need a place to move to at any point in the year, so it makes sense to treat all seasons the same. If anything, include 3 months of vacancy in my acquisition costs, and reflect that in my offer. 

Hi All, 

I am ready and looking for what will be my 5th property, but I am unsure of how wary I should be of the winter months. Right now, the leases on my properties start in April, June, August and September, and if I went under contract on anything else in 2018, the lease would start in Nov, Dec or Jan. 

I invest in a strong rental market with high demand, but I have not been around long enough to experience firsthand what happens to the market once the snow starts falling (Indiana). It's a Catch-22 of sellers becoming more desperate to unload their listings, but investors risking extended vacancies until Spring. Do you guys avoid acquisitions in Q4, or maybe the opposite, do you press harder on the gas in Q4 for a better buying opportunity? 

@Aaron K. thanks for the input. You're right, if I'm going to purchase something regardless, it is a plus to have the chance to spend the first 4 years of ownership making back 50% of my down payment through cash flow. 

Hi All,

My goal is to have 10 properties at age 30 (I am 26 with 4 properties so far). Once that happens, I plan to move to my favorite lake town in Indiana, where my longtime girlfriend's parents currently own a lake house that they renovated completely by themselves. Her parents will soon retire and live on the lake full time, so living in that town as well would offer free child care, which would be huge. I don't have any kids now, but I'd imagine I will start right around age 30. Kids or not, we would just love to live at the lake, because it's our favorite place to be.

My question is, has anyone ever bought a property now for the sake of living in it yourself later, even if it wasn't the greatest deal as a rental? Here are the details:

Asking: $125,000 (again, this is an Indiana lake town, population under 10,000. Not directly on the lake, but a bike ride away from her parents' lake house).

3 bed/2 bath with finished basement

20% down

PITI: $675

Potential Rent: $1,100

I wouldn't ever really do a deal with these numbers solely as a SFR, but is there value in securing inventory now to have it for yourself down the line? Having a property in the place I want to move to in a few years is also organic motivation to keep chasing the dream, I think.

@Ashish Acharya that is helpful, thank you. My AGI is above $100k, but I'm not too concerned with taxes while working my W2 job. My main concern is preparing for a life of living off of rental income, which hopefully is within the next 7-10 years. I want to make sure I'm allocating enough of the profits to taxes.

@Account Closed say how landlords are among the most advantageously taxed individuals, so I'm looking forward to seeing that firsthand when I file next year. I may just have to "learn as I go," because it's difficult to picture right now.  

@Carl Fischer do you live off of your rental income completely, or do you pay about 40% because that is your personal tax rate from some other job? If rental profits are taxed at your personal income tax bracket, but you don't have a job outside of your rental income, how do those people get taxed?

@Caleb Heimsoth great suggestion on the book. The more FIRE blogs I read, the more I realize that the majority of them are well-versed in tax tricks that allow them to minimize their tax burden to next to nothing. 

Hi All,

I am under contract on my 3rd acquisition in 2018, so I have yet to actually file a tax return with rental income on it. Is there a general rule of thumb for how much you actually pay in rental income tax after all the deductions? Say your property shows a $5,000 annual profit on paper, once you consider the write-offs like depreciation, mortgage interest, property tax, etc, what kind of tax bill should you expect?

Especially curious because I aspire to one day live off of rental income, so I'd like to get an idea of how much of the profits you actually take home at the end of the year.