All Forum Posts by: Jack B.

I don't have to do an ARM on the blanket loans though do I?

I would never buy in Florida, I looked into it there extensively, the taxes there are not what you think, they are even  higher than WA and the insurance is insane. I get quotes for 16K on 300K properties central florida far away from the coast....

 Yes, I have thought about buying cash flow properties out of state, but I don't like it. I prefer the appreciation of the west coast.

Is this a good strategy?? Read on to find out WHY I want to do this..

I have 8 houses. I'm considering buying two more rentals so I can max out my conventional loans while I'm working a W2 job.

I'd put down 200K on each of the houses, and even with the current rates, I'd break even or be cash flow negative by about $100 a month on each of the two new houses. No big deal. Nice thing is, prices are depressed, and I make my money primarily through equity. In fact I take out money every few years to buy more houses via cash out refinances.

Here are big reasons I want to do this:

-Max out my conventional loans, before retiring from my W2 job at 42.

-I will do cash out refinances with a portfolio lender after that, to buy more houses, since they don't require W2 income. So the desire to max out conventional loans is primarily for that reason. Then again, since the rates are so high, I guess it doesn't matter if I do it later with a portfolio lender. But at least I can get the houses at a huge discount right now.

-I'm tired and want to retire.

-I have 1.4 mil in cash sitting in CD's.

-I plan on retiring with dividend stocks and rental income from my other rentals, and having about 600K in tech growth stocks for long term wealth in addition to the dividend stocks.

-I have never done well in the stock market and am a bit wary of putting significant money in there. As such, I'd rather put 400K down on two more rentals, this way more of my money is in real estate which is where I have done well.

-That said, had I left my money in Apple stock instead of using it to buy a house 15+ years ago, I'd actually have more money, so it seems with stocks the key is to buy quality and be patient...with houses patience is built in since it's expensive to buy and sell...

tl;dr

I already have 8 rental houses, but I want to retire soon and live off dividend stocks and rental income mix. I'm leery of putting too much money in the stock market, so I am planning on buying 2 more rentals with 200K down EACH, to make them cash flow at current rates. This way I max out my conventional loans and when I retire in a few months, I will have maxed out my conventional loans and lose nothing by not working anymore, since I will have to use a portfolio lender to buy rentals and don't need W2 income for that. Plus this way I have more of my liquid assets invested in safer real estate and less at risk in the stock market.

So I went on a date with this chic last night, she mentioned she just moved to the area and she is renting an ABNB room rental in a house with room mates for $1,300 a month in SeaTac. I thought to myself, hmmmm, this is interesting. Mind you she didn't offer the details until I asked, but that's why I perked up.

I thought to myself, if I could rent out each room in my 4 bedroom houses for that price, I'd be making bank from cash flow. Then I did some research on ABNB and I found dingy room rentals for $1,500 to $2,800 a month, with most being around $1,800 per room for the month. Hmmmmm....

Yes, I get it, there will be turn over as room rentals are very transient, so you'll never have each room rented all the time for the year. And yes I get it, it's more work as you have to deal with frequent turnover, screenings, etc. 

But HOW MUCH hassle is it dealing with room mate conflicts? Has anyone ever done this and how bad has it been? My ex rents by the room in such a setup but we no longer talk so hard to ask her questions at this point, but I will say while we were together it seemed there were constant conflicts between her and her room mates that the landlord had to get involved with. Mostly just a text message or so to clear up.

I'm thinking of trying this out next time I have a vacancy, to see how it goes. 

 How does that work? Wrap mortgages issue is the due on sale clause. So do I not transfer title until they pay the balloon payment?

Keep the ideas coming fellas, good suggestions.

 Does this work in a 1031 exchange? Or will I have to pay capital gains tax?

I make 350K a year W2, so I'm paying 20% capital gains tax PLUS the surcharge of 3.8% for Obamacare for selling a long term rental I've owned for a few years. But how does the capital gains affect my W2 income taxation? Will I be taxed differently on W2 income? Slightly higher tax bracket if the capital gains are tacked on to my W2 income? But I don't pay taxes AGAIN based on my W2 tax rate on the capital gains right? From what I read, there is no effect on my other taxes on my W2 tax situation by paying capital gains taxes, is that correct?

Reason for selling:

Property 1: The area has declined, it's more and more difficult to find quality renters although it is currently rented, it sat for about 8 months recently, only day care scammers wanted to rent there, and it has an under ground oil tank for heating that makes me nervous. PLIA insurance is good for 60K. But I wonder if I'm better off not registering, as they may then come out and inspect it all the time. Equity in this is about 400K. I did a cash out refinance 2 years ago to buy more properties.

Property 2: HOA has been driving me nuts for nearly a decade and is getting worse and worse. They replaced the property management company and things improved, then suddenly a year later they came back...now they are even WORSE. Equity in this is about 400K. I did a cash out refinance a couple years ago to buy more properties.

Property 3: Nice area, but the kitchen and bathrooms need an overhaul. It's not difficult to rent the place, but I can't rent it at market due to the outdated kitchen, etc. Equity in this is about 300K.

If it wasn't for the rates, I'd sell and 1031 into other properties, but that's a non starter for the next few years to come due to rates. If I could, I'd use the proceeds to buy properties in cash, but the 1031 rules debt replacement rules stop that unless, again, I just replace the cash I have to replace the debt. I don't want all my eggs in real estate. 

What can I do?

 Reading comprehension, as well as basic math lessons are about to begin.

"I recently started renting out the MIL at my lake house. It has been a cash COW!!!"

"Heck even a $250 cleaning fee for a whole house will be good for me. Multiply that by 10 houses for example, 4 stays per month on average. That's an extra 10K a month I make to do janitorial work myself..."


"...replacing my regular houses with more lake front houses, I could pull in 500K a year profit"

3K a month profit per house is 30K a month or 360K a year. Principal paydown is 70K a year.

That brings us to 430K.

Add to that the 10K a month for cleaning fees that are typical, at $250 a pop as stated, four stays a month per house, that's 120K a year.

So that brings us to 550K a year.

My current lake house is 10K a month....so these numbers are a bit conservative...Realistically it would be over 600K...per year....

 Do you use both and just block out dates on the ABNB when you get a booking on VRBO?