All Forum Posts by: Henry J.

David Hicks How secure is your job and do you have enough cash (or other method) to pay back your 401k loan if you lose your job? Will you be ready to pay the 10% penalty in case it's treated as early withdraw? That's the risk you need to consider, and if you are aware and prepared then go for it. The current stock market is a bit high so I'm considering that as well. Good luck. Henry

@Marie Chiang

Do you have your own spreadsheet to plug in your assumptions to see what your cash on cash return is?  If you don't have one, create one or find one online and use your own assumptions to see the result.

I plug in my assumption for this house and I would end up with negative return.  I assume yearly turnover and 1 month lease-up fee (which is extreme).  I also use 2.4% property tax rate and 5% maintenance assumption...

I didn't know about the area so I googled it up.  It looks like an expensive area north of Dallas.  I haven't driven that far north in DFW area the few times I visited so I can't comment on the area.

Thanks.

Henry

AJ Golden IMHO, that depends on what kind of income, "line of credit," insurance deductibles, and risk you can handle. I have heard people holding 4-8% of their property value as reserve, also heard 6-8 months of expense. I am risk averse so I hold at least 6 months worth of mortgage payment as reserve - if a tenant leaves for whatever reasons, at least I'm covered to a certain degree. If my AC goes or a tornado hits my rental, do I have that emergency $ to cover the replacement or deductibles? If everything was rehab and new, then I would likely build up the 6 months reserve over time. Everyone is different in their risk appetite so you will get different answers. End of the day - are you comfortable with it and do you have a plan if you have an emergency? That's what I think of reserve. Happy investing! Henry

@Johnny Khoury

If you live in CA, and the property is under your personal name, you will have to pay federal and CA income tax if you have net positive rental income.  TN doesn't have state income tax for personal income.

If you reside in CA, and your property is under a LLC or corporation, then other than TN state business income tax and renewal fee stated by Alex above, you will also need to pay the CA franchise tax fee...

https://www.biggerpockets.com/forums/109/topics/32...

Definitely open a Roth IRA. If anything, all earnings will be tax free withdraw when you turn 59.5 (or so). You can always withdraw your contribution tax free after 5(?) years. If you are looking at diversifying through stocks, you can dollar cost average into some vanguard index funds with low fees. Invest monthly or weekly. If you don't like the current market high, then stash extra into a cash reserve. If you know which stock to buy, you can try capital one investing (used to be sharebuilder). Some mutual funds have no load so you can buy through them without paying any commission. There are other low fee trading platforms out there. Compare the prices so you don't end up paying a large % in commission. You can buy gold through some gold fund. I'm not certain of the fees but look at symbol GLD or IAU. They are both gold related fund. Some people may suggest life insurance. That's a sticky topic I'm not familiar with so I will leave that can open for others to chime in. Good luck finding something that works for you. Henry

Search out James Wise of Holton Wise group. I'm sure there are others on BP in the Midwest area offering 2+ multi's.

Can't you just revise the contract selling price if both parties are in agreement?

Jamie Garcia definitely learn about the area and check out what's renting around the area. You can't predict the rent prices but you can do your calculation based on current rent. It probably won't cash flow unless you buy a great deal and you put in some work into it. Good luck. Henry

I think it's a great idea to house hack. You get to use low down and low interest rate to start, then after 2 years you can rent it out. If the house appreciates a lot in 5 years, you can sell it can get the gain tax free ($250k single / $500k married). The challenge part around LA is rent to value / cash flow. Good luck! Henry

Are you doing the reserve # for the bank, or for your emergency reserve? If for the bank, I would follow Chris's advice - so you know you have enough to get your next loan through a lender like him. If for emergency, then it's your comfort level. Some people use 4-8% of property value, some people use 6+ months of mortgage payments. Also accounts for your insurance deductibles. Also reserve should be liquid - easy to access when you need it.