All Forum Posts by: Gene Jung

Hi,

Assume there is no cost for mortgage requesting for my lender. Assume my marginal income tax bracket is very high, and mortgage rate is 5.25%. If I have lump-sum free cash, should I just apply it to my mortgage to recast so that my monthly goes lower? Or should I just put them into stock market? If mortgage rate were < 3.5%, then there is no need for recasting...but 5.25 seems like a border line. To beat 5.25% mortgage rate....the corresponding, offsetting stock market return would be at least double that...

Hi experts, I have a question about net passive income from rental properties.

Say I have passive loss (say -X) from investment property A, but have passive positive (say +X) from investment property B.

For tax purposes, can I pool A&B together to net them to 0 on the whole passive rental properties income? If so, is there something that I need to file to IRS?

Thanks!

Quote from @Steven Zagaris:

Quote from @Sahil Rajput:

Hello BP community. 

I am a newbie to real estate investing and located in the bay area. I am looking for my first deal around Freno, CA area (want to start local). I have spoken to few realtors. 3/2 SFHs are priced around 400k and rents are around 2.5k. I am looking at numbers and cant seem to have any cashflow unless I do a ~75% down payment. Is this the reality or I am missing something? For those who say we can still find cash flowing deals in Fresno, what are those strategies?

 Its the peak of the Real Estate market and rents are dropping. How is this surprising? 

I love your honesty. Matches what I am seeing/feeling as a newbie investor.

Quote from @Christopher Grobaker:

IMO a little silly to buy 500k all cash when you could spread it out and get cashflow + appreciation + principal paydown. Even with rates where they're at lenders require you to have a certain ratio on the payment of rent vs mortgage. If the ratio is right...then why bother with the rest. Just do a small downpayment and cashflow...rates might take a while to come back down and if they do than you can take advantage of it when they do. In the meantime you'll be acquiring a hard asset for a fraction of the cost that's giving you returns. 

 with such a high mortgage rate, it is very hard to find cash flowing investment even at 40percent down. everyone makes it sound so easy to find something with cashflow, but its not.

Given the current rental property mortgage rate is well above 7.2, and it looks like it is not going to go down any time soon...i expect it will take 3 years to go down by 2 pp...

Is it still dumb to buy a 500k investment property full cash and plan to cashout refi in 2,3 yrs?  still recommend getting some 50% mortgage? thx experts

I have been browsing many areas on Zillow to get a sense of sales vs rental. Yes, sales supply is limited in many places, but even for sales, some places seem have more listings and offering price going down (e.g. San Antonio).

However, a bigger problem is rental demand. There seems to be so much rental supply, and they are not getting rented easily. As a homeowner in OC, I have enjoyed appreciation in the past few years, but look at how there are so many rental listings:

Isn't this a hint for what's coming next? There are so many investment property owners who are only to see weak rental demand...

Quote from @Melanie P.:

Quote from @Gene Jung:

Quote from @Melanie P.:

Quote from @Gene Jung:

Quote from @Melanie P.:

DO NOT listen to the advice in this thread from syndicators to invest in syndication deals. These are investment promoters and the investments they market are highly speculative, difficult to evaluate and there is a high likelihood that you could lose your entire investment. Be very careful about sending money to anyone who claims to be an expert in one of these forums or who has a website that seems to talk a lot about the "easy investor life" without much discussion of the very serious risks involved in the investment. 

As to your money, I would say to stand by. There will be opportunity in the next year or two as real estate prices adjust to meet economic reality.

Thanks for the caution. Yes, I would rather just put it in SPY than real estate syndication. Well, I want to experience owning a rental property before the time you mentioned comes. Yes there will be a good time to leverage/buy tons in the next couple years. I want to have some first-hand experience first.

 What part of California are you in?

Southern California/Orange county where the home price appreciation has been crazy. I do have my primary residence, so cannot complain, but it is absurd and needs correction.

There are triplex and larger listings on the MLS right now in Orange, Fountain Valley, Santa Ana, Stanton ETC... think INLAND and NORTH county that you could get into for $500,000 down. With your large down payment they will still be mostly break even, but over time you'll benefit from the crazy appreciation that has been happening consistently in California for a century and the rents WILL eventually catch up.

Plus you'll get the experience you need and better returns that flow from managing it yourself.

Thanks for the recommendations. Oh wow...Fountain Valley...what a niche pocket

Quote from @Melanie P.:

Quote from @Gene Jung:

Quote from @Melanie P.:

DO NOT listen to the advice in this thread from syndicators to invest in syndication deals. These are investment promoters and the investments they market are highly speculative, difficult to evaluate and there is a high likelihood that you could lose your entire investment. Be very careful about sending money to anyone who claims to be an expert in one of these forums or who has a website that seems to talk a lot about the "easy investor life" without much discussion of the very serious risks involved in the investment. 

As to your money, I would say to stand by. There will be opportunity in the next year or two as real estate prices adjust to meet economic reality.

Thanks for the caution. Yes, I would rather just put it in SPY than real estate syndication. Well, I want to experience owning a rental property before the time you mentioned comes. Yes there will be a good time to leverage/buy tons in the next couple years. I want to have some first-hand experience first.

 What part of California are you in?

Southern California/Orange county where the home price appreciation has been crazy. I do have my primary residence, so cannot complain, but it is absurd and needs correction.

Quote from @Melanie P.:

DO NOT listen to the advice in this thread from syndicators to invest in syndication deals. These are investment promoters and the investments they market are highly speculative, difficult to evaluate and there is a high likelihood that you could lose your entire investment. Be very careful about sending money to anyone who claims to be an expert in one of these forums or who has a website that seems to talk a lot about the "easy investor life" without much discussion of the very serious risks involved in the investment. 

As to your money, I would say to stand by. There will be opportunity in the next year or two as real estate prices adjust to meet economic reality.

Thanks for the caution. Yes, I would rather just put it in SPY than real estate syndication. Well, I want to experience owning a rental property before the time you mentioned comes. Yes there will be a good time to leverage/buy tons in the next couple years. I want to have some first-hand experience first.

Thanks for your reply. To add more information,

1. I live in California, so it will probably have to be out-of-state rental property.

2. I will hire a property manager.

3. I would go with A or B class areas.

4. Non-negative cashflow is enough. Appreciation is good enough if it can be better than inflation. I do think we are getting into a 10 year period where growth is slow, inflation is sticky, and asset appreciation won't be as much as what we saw in the past 5-10 years. But still...dollar is trash. Fed really should increase the funding rate for real.

5. Exit strategy: I will just hold onto it 10+ years. Maybe 1031 exchange later. No need to sell.