All Forum Posts by: Jack Faysash

Back of the napkin - if the property can rent for 1% of the purchase cost it will likely be profitable. When analyzing quickly, I add up the expected monthly mortgage, property taxes, home insurance, property management fees, maintenance costs. Then subtract all these expenses from the estimated monthly rent to get the cash flow. Remember, the cash flow will be subject to income tax, so you'll want to get smart with claiming expenses to minimize those taxes.

DeAngelo, always think about what you consider your "hourly rate" when doing business. If you can pay someone for less than what you value as your "hourly rate", you should pay someone else. This not only spreads out business in the community, but also won't bug you down with things that aren't worth your time. Plus, you can deduct the expense of paying someone, while you cannot deduct the "imaginary expense" of doing work yourself.

@Michael Plaks is your go to guy in Houston!

I agree with Nathan for his situation of owning 12 properties, but for someone just getting started I wouldn't suggest getting locked in with the one-time fee.

Abby, I'd say at this point a CPA or financial advisor could be useful if you have business plans you want to run through the numbers with, but not something you necessarily need. I'd see it as an investment in yourself if you choose to meet with one. Once you start making a decent income ($50k or over in my opinion), it may be a good idea to meet with a CPA or tax advisor to discuss tax strategies. In terms of finding the best for real estate, look no further than bigger pockets. Won't get much better than the folks in this forum.

If you expect the property to increase $40k, and have $30k in cash, I think you should use the cash. Make the purchases on a credit card and pay it off to build your credit. I wouldn't invest any more than $30k for a $40k return. Also, have you considered making the property your primary residence for two years? It could save you some in taxes.

Chip and Joanna Gaines... But if you're looking to go with a short term rental you should get it as close to "magnolia world" as possible. They attract so many visitors from out of the area that of course will need a place to stay.

Lake Travis is a very fun spot, especially for boat owners. There is also Canyon Lake, another popular lake within 1 hour of Austin and San Antonio. The night life scene is very popular in downtown Austin, and the crowds have begun moving away from 6th street and towards Rainey Street. Finding an STR that can accommodate a bachelor or bachelorette party would be a smart move if you have the money. One thing to think about is the peak seasons the lake areas go through. I'm sure you could fill the STR nearly everyday during June and July if it's at one of the lakes, but I think downtown would be more ideal for year round consistency.

Sorry to hear about your family member. Your family member hopefully has a a will in place that specifically writes out who is getting what assets. The will should also state who the executor will be, which is typically an attorney or trusted family member (I think an attorney is best). It’s very important to make sure nothing is passed on until your family member passes so you can avoid paying capital gains tax. IRS allows 11.7 million to be passed on through an estate without being subject to estate tax.

There's likely several expenses you can capture on your schedule C, such as a home office and mileage. I see a common misconception that you can just begin investing in real estate and have less taxable income. You can minimize taxable income on your real estate investments by depreciating the property over 27.5 years and capturing all your expenses. You can only offset you're other income if you have losses from your real estate investing, but this is more of a "backup" in my opinion incase you make bad investment decisions and lose money. But what investor plans to lose money?

Also, the IRS doesn't really view house flips as an investment, they view it as a business. They view the houses as inventory, and therefore profits get taxed in your income bracket rather than the capital gains rate. If you live in CA, you better hope bill AB1771 doesn't get passed, which will add a 25% tax on house flips.

Make sure you set aside federal income tax, self employment tax, and state income tax for your recent flip.

Cash is going to be king as interest rates are going up. If you're taking out loans for rental properties, cash flow is going to become much more difficult, but not impossible.