All Forum Posts by: Jason Turgeon

I had a somewhat similar situation, but not as extreme as yours and with some other wrinkles. We were making ~$10k/year cashflow on a duplex in Boston that we had about $350k into and it had appreciated to be worth double that. It needed about $50k in repairs so I decided I would rather sell it than put 5 years of my cash flow back into it. Because we had lived in it recently, I was also able to pull some cash out tax free. So I ended up with about $200k I had to reinvest.

I used @Dave Foster and he guided me through all the hard parts of the actual process. But he just makes sure the IRS is satisfied and the cash gets transferred between buyers and sellers quickly. He doesn't pick out replacement properties for you, or do rehabs, or place tenants. That is on you.

I found the process was way more stressful than I anticipated. I made dozens of phone calls, spent probably 100 hours scouring the internet and vetting deals, and flew down to Houston to check out properties. It was not really much fun. I had to kick out good tenants in the property I sold. That property had a drawn out sale process. Once it finally closed, I had a stressful 45-day identification period. Then I had to go through the headaches of making new relationships out of state and lining up financing. I had to learn about LLC formation and start new bank accounts and interview multiple CPAs and get much better at bookkeeping. I have been dealing with managing a rehab from 2000 miles away, and that rehab has gone sideways and is now costing me lots of money. It was (and is) a lot of work!

But the payoff was totally worth it. By being lazy and relying on appreciation, I was passing up huge opportunities. I ended up buying two properties in Texas, a 22 unit and a duplex. The larger one has turned out to be a very good investment. The duplex has turned out to be a dud. But once everything is rented and refinanced out, I will have net rents of ~$5000/month between the two properties. I will have a professional property manager handling the hard stuff for me. After refinancing, I will have about $200k of equity (the amount I needed to 1031) left in two properties worth ~$1M. And I will have over $150k in cash left over for me to do with as I please (because I had lived in the property).

So to sum up: I traded a $700k house with a $50k repair bill and $10k of cashflow. I had a stressful year of exchanging and improving. And I ended up with $1M worth of property cashflowing at $60k/year and $150k in my pocket. 

Now I am trying to figure out how to do it all again, so with my remaining $150k I am taking risks on markets where the appreciation may be greater than the cashflow.

As a realtor, I think it's a very pro-consumer move. Sellers are supposed to get the best possible marketing from listing with an agent. Buyers get access to more deals. Both sides win.

As an investor, it doesn't really bother me. I have ethical issues with a lot of the wholesaling model. If you know a house is worth $50k to an investor and you buy it for $30k and make $20k off the spread, what value are you bringing to the deal? The seller should really have gotten $50k minus a small commission. The focus on buying "below market" really means taking money out of the pockets of sellers. I don't want to make my money that way. I want to make it by adding value and offering a great product to the marketplace.

Those are some compelling numbers. I have some investments in SETX about 90 minutes outside of Houston. I may have to start looking in Houston itself. Thanks for providing the lender info, I have not been loving my current lenders and am ready to try something new.

I gave up on the BP calculator long ago in favor of this one: 

https://www.mortgagecalculator.org/calcs/residential-income.php

I maintain that everyone should self-manage their first few investments. Only after a few years of learning the hard lessons are you qualified to let someone else have that much control over your business. And even then, finding and keeping a great PM is almost as hard as finding and keeping great tenants.

I use property managers in my out of state investments because I have to. But everything close to home I still self manage. 

@Billy Linn, yes. I want to be able to roll up everything into something that I can hand to my accountant and use for generally keeping tabs on the property's financial performance. 

@Kevin DeVargas thanks for the reply but I'm not quite sure how that would work or how I would create a system to automatically manage everything as I input shared expenses like insurance or landscaping. 

What are those of you who house hack or live in unit and rent out another doing for bookkeeping? 

I live in one unit (40% of building). My tenants live in the other (60% of the building). Their rent is less than my mortgage and expenses, so I deposit their checks into my personal account and pay bills from there.

Not one software package out there seems to be able to handle this. Even if I open a separate account and transfer money into it from my personal account to pay the mortgage and other bills, nothing works. Quickbooks can't cope with divvying up my new roof or my insurance and water bills 60/40 while also allocating 100% of my unit turn costs to Unit 2. Nor Quicken Home and Business. Nor Stessa, Personal Capital, Mint, YNAB, Xero, Wave, Expensify, or pretty much any other software package I've tried.

Yes, I could just go back to keeping a spreadsheet. But I have 2 other rental properties, 2 schedule C businesses, and bank accounts and credit cards to match, and I want to be able to import transactions and manage everything all in one place, instead of having a completely separate spreadsheet based bookkeeping system for the house I live in. 

I'm baffled that with all the various software packages out there there isn't one that does these things well. I spent most of 2019 bashing my head against the wall trying to make QuickBooks work. I just hate it. It's not made for small entrepreneurs like me. I live in a 2-family house and rent one unit, deposit the rent checks into my personal account...Intuit completely leaves me hanging in this situation.

Gave up today and tried Quicken. Spent hours linking all my accounts (except for a handful that won't link). Couldn't get my mortgage account in. Terrible reporting for Schedules E and C. Still no way to handle the situation where I live in one unit and rent out the other.

Personal Capital doesn't handle real estate or things like my schedule C realtor income at all, from what I can tell. 

I'd try Stessa for real estate and Personal Capital for, well, personal stuff. But Stessa doesn't work on Android, nor does it help with my duplex bookkeeping, and neither of those will help with my schedule C commission income.

https://www.mortgagecalculator.org/calcs/residential-income.php

@Account Closed, yes I picked up 24 units in Texas with a great property manager down there. Happy new year!