All Forum Posts by: Greg Scott

I would rule out #1. HELOC interest rates fluctuate and most HELOCs have a balloon date. And, that might prevent you from moving out of your primary residence at a future point. Better to have fixed rate long term debt.

Which direction you choose to go on your refinance really depends on your risk tolerance.   

I used to put all my houses in LLCs until I heard a podcast with an insurance executive.  He noted that lawsuits against owners are fairly rare and in his 30 year career the max payout he ever saw was $1M.   That was enough for me.   I immediately obtained a $2M umbrella liability policy.  It covers not only my rentals but also things like car accidents.  It is worth the few hundred bucks each year.  I now keep all my remaining SF properties in my name or my wife's.

In contrast, I have a friend who is a serious investor who went the other way. He has every single house in its own LLC and those LLCs are owned by a master LLC. I believe he also has an umbrella policy too, so he is about as bullet proof as you can get.

Financing and paperwork is simpler the way I am doing it.  The way my friend does it lets him sleep better at night with better protection.

I would use Rent Range.  Zillow uses a simplistic data feed from Rent Range.  I recall the basic Rent Range report is just a few bucks (read less than $10) and gives you lots of statistics about the range of rents in your area for your product type and categories of tenants (e.g. Section 8 is pulled out separately)

Good luck!

Personally I started on SFR and worked my way up to MF so I am definitely more comfortable with that route.

SF is easier to understand as a newbie.   Because the prices are smaller, you can make more mistakes without burying yourself.   

MF is a different animal.  It runs differently, and, if you are taking other people's money, you had better know exactly what you are doing.

I'd recommend stepping up to some formal education.  The free stuff can get you the basics, but you often get what you pay for.  I recommend checking out Lifestyles Unlimited.   The basic membership is cheap and worth every penny.   I've been a member for 6 years and regularly fly to Texas for events.  Now they have operations here in Detroit.   I believe they started offering classes in FL too.

How long do you plan to hold the property?

If it is a short-term hold (e.g. 3 years) there is no point.  Don't refinance.   If it is a long-term hold, I would definitely consider refinancing.

The key issue isn't as much about cost of refinancing vs cash flow. It is more about the risk you have when the balloon is due. Let's say 4 years from now we have a recession and values drop 20%. Do you want to have to bring a lot of money to the table to meet the LTV requirements on the new financing?

I'm not from the SE but have property in Texas.

First of all, check with your insurance company.   In my experience there isn't much cost difference with a pool unless it has a slide.   Also, make sure you have a security gate.  I'd recommend getting more liability insurance.

From a repairs perspective, I've had 2 properties with pools.  Over 5 years, I think I spent $1500 on equipment and repairs, so it hasn't been an issue at all.    

Ongoing maintenance is a different topic.   I wouldn't let your tenant manage the pool.  If they don't care for it you will have a quagmire and need to buy new equipment.     On my properties, I included pool cleaning which costs about $125/mo and I added that to the rent.   People will see the value in having a pool without any effort on their part to keep it running.

Good luck

@Account Closed

When investing in a syndication your ability to do a 1031 exchange is limited.   

The owning entity, whether that is a person or an LLC, has to be the same on both the title for the previous property and the new target property. In other words, YOU cannot do a 1031 exchange in a syndication. You are an investor in an LLC syndication and the LLC owns the property. The LLC would have to do the 1031 exchange.

While feasible, it can be difficult to get everyone in the syndication aligned on that strategy.

Shelby:

Why not consider permanent financing on the rental property you own?   Plenty of firms can do that.

Taking out a new mortgage should give you enough to buy three more properties.  If you did, you would have much more cash flow than you have today, it would reduce your tax burden, reduce risk from your one property going vacant, reduce the likelihood you will get sued, and gives you an amazing hedge against inflation.   

Debt-free rental property saps total returns.

If it is done correctly, the taxation for a syndication should look very similar to the way that profits are taxed on a single family rental owned by one person.   The key difference is the numbers get divided up by your ownership percentage.

So, yes, many of the things you mentioned are likely or possible.

You missed a couple of key points though. Syndications are usually done to take down larger commercial / multi-family properties Those properties are valued based on NOI. Unlike single family, a good operator can quickly drive up value and is not dependent on comps. A huge advantage of those deals is that once you drive up valuation you can do a cash out refi, which is not a taxable event.

On two apartments I invested in, I got 100% of my original investment back with a cash-out-refi after about 2 years, plus cash flow.  I've not yet paid any taxes on those.

I would say the key legal concern is that you should never act like a broker.  It would be illegal for you to get a commission for selling someone else's property.  That is the job of a licensed Realtor.

On the other hand, you can make a profit off of quickly selling a property you own.  Or, you can sell a contract that gives you the right to purchase a property.

Aside from that one big one, be sure to get educated.  That will keep you out of most legal issues.

Also, consider buy & hold real estate.  Wholesaling takes a lot of ongoing effort.   Buy & hold is passive income.

@Jason Hartman   I have great respect for Jason and the work his company does.

I bought six single family properties from Jason Hartman's company, investing about $120K in total over about a 5 year period.   Most of the transactions were seamless and every property performed almost exactly as expected.   

One time  I had a problem with one of their service providers who agreed to do several repairs prior to closing but didn't.  Jason and his team help me resolve the problems.   Fast forward a few years and I'm happy to report we made thousands of dollars of cash flow.  While we did not count on it, we also made tens of thousands of dollars on appreciation.  

I've sold off all but one of those properties now.  I haven't done a tally, but my guestimate is that we did 2.5x our money in about 5 years.   

I regularly recommend Jason's organization to people interested in getting into real estate.

@Jason Hartman

@Jason Hartman