All Forum Posts by: Jack B.

 Actually the 200% rule doesn't confuse me, as you will note in my OP I already knew the 200% rule, and I also know the 45 day/180 day rules, etc. My question was whether I had to exchange property that has a mortgage for a property that also has a mortgage and the same for paid off property and a mix and match scenario. 

You wouldn't in reality have to buy with a mortgage if you already have one. I can sell a mortgaged property here in Seattle and buy another house paid in full also here, within a 20 minute drive. In my situation, I'm actually considering exchanging for property in the Tampa Bay/Lakeland Florida area, where just one of my houses here would buy 3 four plexes there.

The confusing thing is I read that you can't trade a mortgaged property for a paid in full property, that it had to have a mortgage as well, on at least one of the blogs about 10-31 exchanges some time ago and wanted to see if anyone else has any other credible information. Do you have a source for your info that specifically states that you can trade a mortgaged property for a paid in full one and vice versa? I've read a few FAQ's on some of the broker sites and they have conflicting info. The only thing anyone seems to agree on is the 3 property/200%/95% rules...But that's just the usual info already readily available on every site on this stuff. Few people seem to know the detailed rules or have any credible sources discussing this scenario. I'll see if I can find one of the places I read this.

So you're saying I can sell a mortgaged property but I must buy mortgaged properties with the proceeds? Yet for #3 you say I can mix and match? 

So can I:

1) Sell a paid off rental property and 10-31 exchange it for two mortgaged properties so long as their aggregate value does not exceed 200% of the relinquished property?

2) Sell a mortgaged rental property and 10-31 exchange it for one or more paid off properties so long as the aggregate value does not exceed 200% of the relinquished property?

3) Sell a mortgaged rental property and 10-31 exchange it for a mix of paid off and mortgaged properties so long as the aggregate value does not exceed 200% of the relinquished property?

 Negative, no portfolio lender yet. Open to recommendations or I can ask my conventional broker... :-)

Yeah, the right deal is a good point. It's been ridiculously difficult finding cash flowing properties the last few years in the Seattle area. I have found a few deals here and there, but may have to go back to buying foreclosures and short sales.

Perhaps I need to just flip the houses with the lowest possible transaction costs. I would avoid a lot of capex as well this way. I figure if I use the MLS4Owners instead of hiring a listing agent, and negotiate that the sellers pay the buyers agent commission (why should I have to pay for their hand holding needs?) it is after all a sellers market here with very low inventory.

I have use for the money in that I'd like to expand my rental portfolio. I already own four houses though only three have mortgages, so I should qualify for relatively easy financing with my one more house at least with the same lender. I will say my last house that I just rented out won't show on my tax return for a year though it is cash flow positive even if they only count 70% of the rental income. Maybe I need to talk to my broker and see whether my DTI ratio will support another house right now. I may only qualify for a smaller house in Tacoma for 175K rather than a 400K+ in Seattle.

I have on average about 130K in equity sitting in each of my properties, some a little more. Many of them are only 2-3 years old to me (as in I've only had them a few years) and much of the equity is from appreciation. I'm looking at a 70% LTV to cash out refinance and reinvest the proceeds but is it worth it yet?

What I'd get in terms of cash would be:

Property 1: 20K (held 1.5 years so far).

Property 2: 91K (held 6 years so far, paid cash so it's paid off).

Property 3: 48K (held 3.5 years so far).

Property 4: 50K (just bought, would add closets to some rooms and cash out refi 80% LTV.

I have 100K in the bank to invest and save about 70K a year. My method to date has been buying a house about every 1.5 years. It is a bit slow, I'll admit, but seeing returns in real estate I'm thinking of accelerating returns by using the cash out refi to buy more property. If I cash out now I'll have about 300K to invest. 

OR would a HELOC be better in the short term? Would I still need to keep 80% LTV? Or do they loan on all of the equity? Perhaps I'd be better off letting it season for another year...and just use cash on hand now to buy one more house then a couple more next year.

 You state that buy and hold rental investors also lost their shirt? Can you name any that had cash flow positive properties and lost their shirt, as in let them get foreclosed on losing everything?

The person I bought my last house from is a REI. She owns millions in real estate, and all cash flow positive, she didn't lose her shirt.

Point, is, as I noted in my OP, cash flow positive properties don't put you in a bad spot even in a down turn. Big difference between a buy and hold investor that is losing money every month and the property is losing value and all of a sudden they lose their job vs. the REI that has tons of cash flow and doesn't need to sell, the properties maintain themselves with renters. Of course, they must have reserves, but this again ties into the lesson. Don't buy things you can't afford.

Bump for the weekend crew.

http://www.businessinsider.com/josh-altman-learned...

The Altman brothers bought properties they couldn't afford but were making big money on, rolling the proceeds into bigger and bigger properties...until the market tanked in 2007 and they got stuck with a house they couldn't sell and couldn't afford.

Super glad that although I invest in an equity market, I bought properties I could afford with 20% down and are all very much cash flow positive.