All Forum Posts by: Jack B.

Let's say I take the money out and reinvest in another mortgaged property as a rental. I can now deduct the portion of interest expense related to the Cash out refinance as an expense for the NEW property (rather than the old) on schedule E?

Let's say I take the money and I buy a paid in cash rental property. Since I reinvested the money into a rental, can I still deduct the interest related to the cash out refinance on the original rental or no? From what I've read it sounds like a no?

The reason I'm considering doing this is to tap the equity to buy paid off cash flow properties, while leaving the equity properties to keep growing over time, taping the equity from them and my job to buy a hand full of cash flow properties every few years.

Equity investing has been great, but only because of leverage and the market being with me. It doesn't replace my salary, whereas cash flow properties purchased by the firstfull every few years would.

Specifically looking for Renton area. I didn't see anything in the city code, but may have missed it. There was no outright ban or limit to number of people, just a mention of the definition of family being any number of related individuals, or up to 4 unrelated individuals. But no mention of no more than 4 unrelated individuals living in a house.

The reason I ask is because the house has a MIL apartment that is completely seperate, and if I could rent out the rooms in the main house, I'd be able to move into the MIL and rent out the rooms, pay for all expenses including my own living expenses! Nice thing about this method is also that I can keep the entire three car garage that is below the MIL for myself, since room rentals don't typically include the garage like a house rental would.

I learned of the idea from Phil Pustejovsky, who mentioned it as a way to turn a house into a cash flowing machine. Rooms in my area rent for $700 a month and I have 5, including a huge master bedroom with huge walk in closet and private bath....This one home purchase can catapult me into retirement (I was already FI but am still working and investing while the getting is good). But if I can only rent out some of the rooms because of any limitations on unrelated occupants living together, well, then I will have a reduced cash flow.

If I rent out the MIL AND the rooms separately, I would have 2K a month cash flow after all expenses! Plus a $600 a month principle payment!!

One of my rentals is in Tacoma. I've had good luck with CMG finance in Federal Way but will be considering AIM Loan in the future. They are highly recommended by others. You can always focus on FSBO listings, as it's difficult to get int without a realtor when the sellers are using a listing agent. It's kind of one of those things where you need them to unlock the door to get you in. Luckily the seller pays your realtors high commissions...

I think I found a solution that meets my needs, though will have to try it. I could move into the apartment, rent out the spare rooms in the house, and keep the garage which is below the apartment for myself. I actually make more money by the room, and this way I get to keep the garage since they are only renting rooms from me. Only issue I'm looking into is max number of unrelated individuals in Renton, haven't found code for it yet, but most cities seem to allow only a max of 4 unrelated individuals to a house.

Cool thing with this method is I'm still close to Seattle, and have all my living expenses other than food and cell phone paid for via the rents. :-)

Actually I plan to just pay the $500 fee that gets me the sign, an MLS listing, flyers, virtual tour, lock box, contract help, etc. Everything but a realtor. It just sucks to pay 3% buyers agent commission for an antiquated and an inflated commission model, and the 6% when two agents are involved is ridiculous, 6% of the price of the house can be 20-30% of the equity.

The same 6% commission of an era long gone, though houses have skyrocketed in value. For what? To unlock a door and fill out the same cookie cutter contract with a new address for each offer? Each of the 6 realtors I've worked with had nothing more than a high school diploma. It is in fact the lowest barrier to entry licensed profession in the country, not a ton of PhD's or MBA's working as realtors for a reason. 

A few hours of training and one exam and bam, you can get paid 30K for unlocking the door to a house and filling out a cookie cutter contract. Sorry, not exactly a highly skilled profession that justifies that kind of pay, regardless of what realtors want to believe about their profession. Other professions require a tremendous amount of education and skill to make big money. It's one step above being a property manager, who once again takes a 10% cut off the top, which is almost half of your monthly profit, with little risk or skin in the game.  

As a Software Engineer I can tell you that renting property is so easy it's a joke. I post an add with pictures and description, people come ask questions, I read a few basic laws, I unlock the door, I fill out a cookie cutter lease.  Not a ton of realtors or leasing agents that are going to take a 90 hour course and take one exam and build the next Facebook...So yeah, I stand by my comments. Realtors are grossly overpaid. 

Although I've made massive equity gains from my real estate portfolio of single family homes, in just a short period of time, it seems to me that too much of the proceeds go to transaction costs when selling. I have not sold yet and there's only one house I expect to sell just to get out of the HOA, because I know it's a long term risk. But between transaction costs, taxes, etc. it seems nearly half the proceeds go to the government or the realtors. Even with a 10-31 exchange you're still paying a lot of your leveraged gains worth in fees.

Seems to me cash out refinance is the way to go, keeping more money in my pocket, and readjusting the cash flow of existing property to fit a specific income threshold over time to minimize income taxes in retirement (Right now my taxable income is in the low to mid six figures but in retirement I plan on keeping my realized investment income low so I am free of capital gains taxes).

Plus this way I can always come back to the Seattle area and move into one of my rentals if my retirement destination (Florida) doesn't work out. 

Anyways, anyone else avoid selling for this reason? If I sold my houses right now I would owe nearly 200K in taxes, fees, etc. That's a huge bite out of my gains where I took all the risk, did all the heavy lifting and everyone else still benefits as much as I do from it...The welfare mooches to the over paid realtors involved. 

Looking for people in the know (lot's of bad info on forums and blogs). 

The threat:

-Lawsuits

-Natural disasters, etc.

The portfolio and what I'm doing now:

-I have a few single family homes as rentals. 

-The rentals are located in Washington state, which is very tenant friendly.

-Most are mortgaged, one is paid off, though I'm considering paying off another with the proceeds of the sale of my one and only rental that is in an HOA (when I sell in a couple years to escape their non-sense).

-I can only put the paid off property in an LLC, but even if doing so it provides limited protection since it would be in my name and even without that charging orders can eliminate the security LLC's used to provide.

-I do have an Umbrella policy for 1 million, and all the properties and my own primary residence and car have 500K liability each as well mandatory as part of my Umbrella policy. Having been in a car accident that wasn't my fault and the other party trying to extort my insurance company anyways, with my insurance company declining to pay them anything, which then resulted them in suing me instead (though they insurance company had to pay for my representation, though they didn't tell me that, my Personal Injury Attorney Uncle did), I know first hand insurance is not 100% fool proof (though I won the case and they got nothing...This time).

-Very limited homestead protection in Washington and for a very limited amount.

-I have some money in 401K's, IRA's, etc. which are quite protected.

-I have earthquake insurance on all the properties (except my new primary residence though I'm considering getting that as well even though my rate spikes by 50% and it has a 25% deductible.

Things I've considered:

-An out of state trust such as Alaska, but they cost about 25K just to set up.

-Moving some money out of the country, but much more difficult now with asset reporting laws and the IRS strong arm tactics.

-Selling the rentals. Once you have money, it seems that making a ton more money with that money as fast as possible is not as important as protecting the money you have accumulated. Investing in an index fund or REIT may not pay off as much until much time has passed but its considerably less likely to get you involved in litigation.

-Getting mortgages for the properties so they are mortgaged to the hilt/cash out refinancing the existing mortgaged ones. 

I'm planing a trip to Florida to look at some rental property prospects to add to my portfolio that is currently entirely concentrated in Seattle. Since I don't own any rentals in Florida but am going there to look at properties, are my travel expenses still deductible? Even if I don't buy a house on this trip? I plan on looking at several houses with a realtor while there and may very well put one under contract, however; are the travel expenses deductible even if I don't buy?

Alright, I'm going to consider the apartment as an ABNB unit with the house rented OR keep the apartment leased and rent out the rooms in the rest of the house. 

Apparently rooms in my area rent for much more than I had anticipated for this house/area (inflation thank you so much). I can rent my extra rooms for $700 a month, as the going rate in my area is $700-$900 for a room! The other option is to rent out the rooms, which will be more work, but less likely to involve noisy kids. Plus I can keep one of the smaller rooms for myself and "live there" in case anyone tries to complain. Alas, I need to see if Renton has any limits on how many unrelated people can live in a house. Lot's of cities in the area have rules for this stuff now...

Must say it feels good to buy houses. The house I bought is huge and if I ever fall on hard times besides equity in the rentals, cash flow, savings, etc. I can always rent out the rooms in the house I live in temporarily as well. Not ideal but if it means not losing the house...

 It is a liability in that a raid and an arrest followed by temporary detainment until they figure it out is still enough to ruin ones career. Remember the lawyer who was implicated in terrorism because of a false fingerprint match? 

He got his own cable and internet on a separate bill, apparently the monkeys at Comcast all tell a different story and it turns out he can get a separate everything on a separate bill.

The mailboxes are the community style stacked mailboxes and they are all occupied. I just told him he can use my address and I'll give him his mail. He doesn't get a key.