All Forum Posts by: Doug Utberg

Originally posted by @Justin Campisi:

@Doug Utberg

Thanks, these are good tips.

I hear about those tax advantages all the time, where would you recommend I find more info on that?

Your accountant should be able to inform you about the applicable tax rules.

If you're the D-I-Y type, I recommend endless reading and researching about tax rules and interpretations.  (My personal strategy)

If you 'house hack' and rent out rooms from your primary residence, you should be able to claim 75% of the income to hit ratios for future financing.

Overall, you may want to consider house hacking a new place every 2 years or so.  (Up to $250k of capital gains taxes are eliminated for a home that you live in for 2 of the past 5 years)

A consideration - Why not move title of the property to a trust, then shift beneficial interest in the trust to your LLC?

The Garn - St. Germain Depository Institutions act of 1982 forbids banks from triggering the due on sale clause for transfers to an inter vivos trust.  (Link below)

https://en.wikipedia.org/wiki/...

If you didn't own the property, would you be willing to buy it for $200k as a rental?

If so, keep it and deploy it as a rental.

If not, sell it and use the cash for a rental that makes more sense as an investment option.

Hybrid Alternative: Rent it out on a lease-option to collect an up-front option fee and (hopefully) avoid the need to pay realtor commissions.

Don't ever pull the trigger on a deal because you're afraid of losing out.  There will be other deals.

With that said, if the cash flow numbers are solid and you have a long investment timeframe there is no reason not to pull the trigger.  (A few thousand of purchase price is immaterial over the long-term if the deal is solid)

Of course, your bug will be the cash flow performance of the property.  Vacancy and tenant turn costs are what kill income properties. 

What are the vacancy and maintenance assumptions built into the pro-forma?

I would offer a hybrid suggestion - 

Make a deal with the tenants to leave the property.

It's very clear that their time in the property is going to end.  (These tenants are spoiled children ... the only deal you should make with them is a deal to go away)  They can either leave voluntarily for a modest monetary incentive (which should be less than the total cost to evict) or go through an eviction.

In the end, a contract doesn't mean anything unless you bring in lawyers to enforce it.  That enforcement cost is frequently very high.  It's more important to get the bad tenants out quickly than to prove you're right.  If they'll make a deal to leave, make a deal.  Otherwise, get the eviction going.

Ryan - That's a really good question.  I have generally found that with lower-end properties the security deposit becomes a highly important part of the equation.

A 'hybrid' option may be to create a deposit adder for each of the criteria that the tenant does not meet.  (Ex. $500 for only 2.5x rent and $1k for an eviction)

You may still screen out a lot of folks this way, but the folks you keep will have more skin in the game.

We are looking for a sourcing partner for Short-Term Rentals in the San Antonio Area.

Our network has a broad base of clients who are looking for out of state real estate investments.

We are seeking a local partner who can source properties that will be offered to our customer base.

Please message me so we can arrange a time to talk on the phone and lock down the details.

Sincere Thanks,

-Doug

We are looking for a sourcing partner for Short-Term Rentals in Florida.

Our network has a broad base of clients who are looking for out of state real estate investments.

We are seeking a local partner who can source properties that will be offered to our customer base.

Please message me so we can arrange a time to talk on the phone and lock down the details.

Sincere Thanks,

-Doug

Generally speaking, I think it's a better call to follow the quantifiable metrics.

If one of the tenants makes a fair housing claim and you can clearly show there was another applicant who was objectively superior, the claim will end abruptly.