All Forum Posts by: Henry J.

De'Anton Gipson It's hard for people to provide general guidance not knowing the specifics. For example, if you put down 20% vs 50% down, your cash flow will be different. Also, different price point building can be different, not to mention each market/submarket is different. I don't know Nashville market, but if the condo is $2MM and you put down 75% to net out $300/month cash flow, on the surface it's $300/month cash flow but it is not be the best return you can get for $1.5MM investment. The absolute $ value isn't meaningful unless you consider your property class / ROI / IRR / etc. Happy investing! Henry

@Josh Smalley

Welcome to BP!  Although I've been on BP couple of years but I don't have enough RE experience to contribute much on for forums.  I'm just sharing my learning and experience here.

I bought a few out of state properties (and some of which are turnkey) in the last 5 years.  I can't say that they are truly passive like buying stocks or mutual funds because you will have repairs, tenant turnover/placement, and other issues which a great property manager should take care for you.  You will also need to track your rental related expenses / income for tax reporting purpose.  Depending on where you purchase the property, you may also need to deal with unreasonable property tax assessment and find ways to get reassessment done in time to lower your property tax.  

That said, like @James Wachob said, the key is to have a great team that you vet and trust to handle your properties while you're thousand of miles away.

Other than buying rentals, there are other options to invest in RE like what @Larry Fried wrote in his blog, or invest in REIT (Vanguard mutual fund or other ETF's), private money (loan people and receive interest like a bank), notes or note funds, crowdfunding sites, JV apartment deals and other alternatives that I don't know about. Know what you are looking for, what you can't handle, why you want to invest, and compare some of these options to understand the pros / cons (liquidity, control, fees, to name a few) before you decide.

Good luck figuring it out.

Henry

Hi Rodney Saucier Before you spend the $ to get LLC set up, talk to a mortgage company to figure out your options. Also find an accountant and lawyer to understand the extra filing / yearly filing for the protection. Talk to someone at your local market who has done it to understand their why, and make a decision to move forward. Some people spend more time and $ for the extra protection than time working on the deals. Good luck. Henry

Hi, Rodney Saucier When you said partner, did you mean your significant other, or friends or family? Also, do you plan on using Fannie Mae / Freddie Mac 30 yrs fixed rate loans? Remember if you purchase a property under your name, and later transfer it to LLC, it might trigger the "due on sale" clause of your loan term. Search on BP and there are people who said they've never seen it happening, so if you are one of those gambling type... If you are investing with a friend, a LLC maybe better so that you separate out your business related expenses and track them. If you are investing with your significant other then maybe LLC isn't needed. Just buy higher umbrella insurance to cover your risk. We live in CA so LLC will get additional franchise tax fee. If we have an LLC for each property we would be paying a lot to lawyer and CPA fees just keep all those LLC's current... cheaper for us to buy umbrella insurance. Now, if you don't want your info available online (some county / state you can search property owner by name), then you will need to have LLC set up to hide your info. I'm sure people can still find out owners of LLC but it's extra work. Just sharing what I've learned. Pls consult a CPA and a lawyer for detail pros & cons to make that decision. Remember to understand all the costs related to keeping an LLC current, and all the extra tax service fees. Good luck. Henry

Elizabeth Wilson pls let me know when you're in town. I'm always good meeting other investors to learn. I do have a day job and a family so it's always a challenge to find time. Henry

@Elizabeth Wilson

I just checked the link with chrome and it worked fine.  It maybe your computer?  Try it on your phone and see if it pulls up?

Good luck.

Henry

Hi @Ken Wang,

Yes, positive cash flow after all expenses is taxable at about 20% + 3.8% medicare surtax (I thought it was Affordable Care Act tax).  Expenses should include - your PM fees, property tax, insurance, mileage to see the property, and mortgage interest if you have a mortgage so you should exclude those before you come up with your cash flow amount.

If you are netting out with positive cash flow after all expenses, then I don't think there is a difference between low or high income family.  However, if you have passive activity loss / paper loss on the tax form, and your household income is less than $100K, you can use the passive activity loss against your earned income, up to $25K.  You can write off 50% if your household income is between $100K-$150K.  There are other ways around it like material/significant participation in RE will let you use those passive activity loss against your other income.

Please talk to your CPA about your specific cases so he/she can help you better.  I found a link online from turbotax on this topic, which may explain a little more details.  Note I'm not a CPA, I'm just interested in this topic and sharing what I've learned.

https://turbotax.intuit.com/tax-tools/tax-tips/Ren...

Good luck figuring it out.

Henry

Daniel Engstrom Hi Daniel, I'm not an expert so just info from what I would do... If your multi is 6 units it will be valued based on your annual NOI and local CAP rate. Found an old BP info here. Not sure if you want to go through brokers since it's not a big unit. You might want to go through your local RE to get a feel what's out there. Just a thought. https://www.biggerpockets.com/renewsblog/2008/03/03/determining-the-value-of-an-apartment-building-investment-using-cap-rates/ Good luck figuring it out. Henry

Rico See I was given 4% of purchase price but not sure how accurate it is. Depending on your lender so $ may vary. $100k purchase with 25% down - Origination charges -$1200 Appraisal- $500 Title + title insurance -1600 Recording fee + taxes -$600 Insurance - $?? Escrow - $?? Inspection/ pest inspection - $400 I'm sure others will chime in with lower prices but that's what I remember. Good luck. Henry

@Santiago Mejia

I enjoy midtown area when I visited but I wasn't able to get any deals there. From the numbers you posted, it looks like it will be a fine house hack though you will have negative cash flow until you move out. If you can get 3.75%/30yr/no PMI, that's a great deal by itself already. Double check the location since I've heard Memphis is street by street / block by block kind of city, and double check your property tax and see if they will raise it when you move out.

Good luck.

Henry