All Forum Posts by: Eric Struben

I have a question. I have the opportunity to build a brand new duplex at a good price ($300,000 would like appraise for over $400,000, and would bring in around $1,000 per door), but my cash flow on the property would not be fantastic and maybe just break even. The upsides I see are leverage, and could even sell the property if I ended up digging a hole. Also to be known is this property would be built in Homer, Alaska and I have great PM's that would look over the property. I was looking at some properties more around where I live (Portland, OR) but was having a hard time finding properties that would cash flow nicely, and that were in good enough condition. I found one that I was able to get the seller to agree to a price that honored the 1% rule - but ended up backing out because it was pretty run down. It had long term tenants - but not a place I would necessarily feel good about renting to someone. I also do not have time at this point in my life to rehab a place - otherwise that would probably be the way to go.

The million dollar question... Do I build new for a discounted price, or keep looking for a place around me that will likely not be in the best condition (my price tag is near/under $300k).

@Marcus Auerbach You are correct, I am not worried about filling fees. I would like the protection an LLC has to offer, but you bring up a good point as to whether I could even get a loan through the LLC (especially with no assets currently). I have also head that there are tax incentives to getting your properties under an LLC, is that true? I would obviously like to pay the least amount of taxes as possible.

Thanks @Ali Boone, @Max Gradowitz @Marcus Auerbach, and @Steve Haight. Sounds like I could go either route and be alright. I am in Oregon so the filing fee for an LLC is only $100 which is not terrible.

I am wondering now if anyone can answer a questions about financing or if I should start another post...

Would it be smart to use a HELOC for my down payment then a second mortgage to finance the rest of an investment property? This would be assuming that I do not have enough saved up for a down payment.

Another scenario would be for a cheaper place... Would it be smarter to use a HELOC to buy an investment property than using a second mortgage if my main attraction is cash flow? I understand it can be a bit dicy with varying interest.

I am new to real estate investing and would like to buy and hold rentals. I am wondering if it is best to set up and LLC, get a business accounts and business credit cards before actually buying a property? I want to keep my personal finances and rental property finances as separate as possible so I am thinking yes. Any advice or experience with this is awesome! Thanks!

Thanks @Dan Weber good advice.

@Ali Boone Thanks for the response! You are correct, I am looking to cash out refi for an investment property and would absolutely not want to be spending more than I am putting in. In what case would you consider it okay to be minimal or negative? And is there like a minimum you usually try to cash flow? Say $100 minimum per month per door.

Hey all,

I read a more general post to this question and maybe there are even more out there but I am wondering as a first time investor in a rental property, how much (maybe percent?) should I try to cash flow. The other post pretty much stated, do not get a place if it does not cash flow.

Here's a hypethetical scenario..

I can get a cash out refi on my primary residence for around $120k in my pocket (330 total, pay off house at 210 left on mortgage) that would change my mortgage from $1000/month to $1900/month. I am going in on a place with my mother and we will be paying cash, then I will use the refi to pay her back. We have seen a triplex for $500,000, that rents out at $4,000/month gross, so lets say $3,000/mo net. With my $120k I would be getting around 25% of the rent, which would be $750/mo in my pocket. That leaves me with a negative cash flow of $150... Even if the property rented out at 1% ($4,000/mo net) I would be at a positive $100/mo.

Is this just a bad time to try to cash out refi? Or is this something that I have to get over with my first deal? Or am I just an idiot and thinking of this incorrectly...

Anything helps!