All Forum Posts by: Cory Binsfield

I've always liked the saying that problems are opportunities in disguise. If I were in your shoes, here is what I would do.

1. Dig deeper with your CPA or find a new one the specializes in real estate.

I'm not an accountant. However, if you file a joint return and elect to group all your rentals as a single activity, you should be able to bypass the passive loss limitation since your wife is a realtor working full time and assuming she is working on the rentals. This is partly why Donald Trump can avoid paying federal income taxes. This is my understanding and you need to verify this of course since my advice is worth exactly what you are paying for it right now.

• Sit down with your wife and map out your why.
• Do you really need all this taxable income?
• Could you simplify your lifestyle?
• Downsize?
• Move to the same market as your Dentist friend for a lower cost of living/lifestyle with better real estate returns?

You are in a unique position with your income and skill set. Technically, you could go after multi family deals instead of single family deals to replace all of your spouse's income. She could run the multi family side by overseeing the property mangers.

Here comes the interesting part. If you look at your after tax take home income, you could easily replace it by finding the right buy and hold deals after you factor in the almost tax free nature of buy and hold real estate. This might require buying and holding a series of multi-family properties. Maybe it means a 50 plus unit deal. 

Check out the Wheelbarrow Profits podcast or book by Jake and Gino.  Don't worry, I'm not affiliated with these two guys. 

Bottom line...depreciation expense offsetting my active income was my big wake up call after my CPA called me about 12 years ago and said I was getting a tax refund after having to always pay taxes in my day job. 

I still work my day job, but my professional real estate/rental income status dwarfs my other income. 

Once I discovered my true take home income, I set a course to replace all of it with tax favored rental income. It was actually easier than I thought it would be since the tax benefits kept snowballing as I added more multi's. 

2. Notes or crowdfunding?

You are smart to question the high returns in notes and other ventures. I'm VERY biased here so here is my opinion on notes and crowdfunding. 

Real money goes to the owners and not the loaners. On a note, you lose all the amazing benefits of buy and hold real estate. Frankly, buy and hold residential real estate is the most tax favored investment in the country.

Let's count the 6 ways you make money.

1. Cash flow

2. Depreciation which makes the cash flow virtually tax free if done right. Better yet, can offset active income.

3. Equity capture by purchasing a value add deal

4. Appreciation. Real estate keeps pace with the cost of living.

5. Mortgage paydown. Your tenants pay your mortgage and you keep the benefits of the interest deduction and the principal paydown on the loan.

6. A bank will loan you the money to capture all these benefits. Try asking for a loan to invest in stocks or one of the crowdfunding platforms or notes.

You are asking all the right questions. Now you need to design your perfect life and then execute on the income portion via real estate, a small business, etc. 

By the way.....never ask financial advisor who only knows how to sell stocks and bonds if real estate is a good investment. 

I would simply say no lease no close. You are in a stronger position than you think. You are paying all cash. Ya need to act from a position of strength versus fear.

Hey Michael, not sure if I can help, but I'm a licensed FA in CA and know a thing or two about building wealth in both areas. 

Feel free to ping me if you wish to explore ideas.  You mentioned a local person, so I'm not sure if we would be the right fit. Just checking. 

Also, make sure ya listen to BP Podcast #169. He is in the Bay Area as well. Great show for people in a expensive market. 

Ask Josh Dorkin how he feels about Condos LOL!

I'd stay away since you give up too much control to outside forces. I have a friend who barged his way into the association and then systematically made life hell for all the landlords. He used to brag about all the fines he was assessing on the landlords.

Better to buy a single family. Better control and appreciation potential coupled with less hassle. 

Unless you feel the market is ridiculously overvalued like back in 2007, I'd keep your golden goose.  If you sell, you pay some hefty taxes (assuming is wasn't your primary). 

The other problem you create is prudently reinvesting the equity.  If you can cash flow and appreciate in your local market, I'd focus on that area versus going into the turnkey marketplace. 

The most successful investors I know never sell the good ones since  they realize how difficult it is to find a new property that performs better than the one you own. 

This is why Warren Buffet says his favorite holding period is forever. 

In terms of the HELOC, everyone who responded is right. You need a new bank. I used Helocs when I started and it helped me go to ten duplexes in 8 years. It took a lot of work finding the right banker, but it was worth it. Oh, every bank goes through a period where they are pushing Helocs or not offering them at all. It just depends on their portfolio and their risk profile with the bank examiners.

As I look back at the properties I was tempted to sell when I was growing my portfolio, I'm extremely happy I held on. 

All the rents are up 30-50% over ten to 15 years and they all cash flow nicely. Plus the mortgage payment seems so darn low due to inflation. 

same rules for single family? 

Wow, it's been years since I had to do a 30 year mortgage on a conventional rental (4 units or less). 

I'm thinking of trying it again for a property that i found. I could easily do a 20 year commercial, but I like Aunt Fannie Mae's terms better. 30 years locked at 4-5%. Can you believe how great it is to be an investor? 

Any mortgage experts/brokers out there who can answer the following? 

This may prove useful for new investors too.

• What are the Fannie/Freddie down payment requirements for people with 1-4 properties or 5-10 properties?
• What are the reserve requirements for PITI if you have 9 conventional investment loans? What about 1-4, 5-10?
• Does your primary residence count in this scenario? 

What advice would you give a new investor on growing a portfolio from 1 rental property to 10 properties for the buy and hold mindset In terms of how you project your down payment strategy? 

When I did this, it was waaaaaay easier. 

Thanks for the tips!

Try the website at http://www.lifestylesunlimited.com/category/radio_shows/

I agree that multi is the way to go. Be careful though.  As Warren Buffett points out, never invest in a business you don't understand. 

I'd join the Texas apartment association to network with multi family owners, property managers and vendors. From there, you could build your network. While you do that, you could analyze deals. 

Listen to the BP podcasts and focus on the ones who operate in the multi family side. Also, check out the Del Walmsely podcast. He is this quirky multi millionaire who built his fortune on the back of multi family. Just ignore the political rants. He features a multi family investor every Tuesday on his show. 

Don't be in a hurry to invest and recognize that most brokers won't take you seriously until you close a deal. Also, most banks won't loan to you without experience if you are going for a larger deal. You can get around it with persistence, but it will be another hurdle. 

Lastly, to get Fannie preferred multi financing, you have to hire a property management company and your net worth has to be similar to the deal since you have no multi experience. 

Sorry to burst your bubble, but this is the  way the multi space works.

Bottom line, the good deals are not listed with brokers who sell everything and it is a good 'ole boys club among investors and brokers. This is why  need to learn the trade first by networking with other multi family pros. 

I have no experience managing remotely. That being said, I'm  looking for a new market for multi family to create a lifestyle business. Maybe my search criteria that I'm working on right now might help. 

• Good property management team.
• Stable cash flowing market with diverse employment in an area I would enjoy visiting for extended periods 
• Landlord friendly state. Many states make it difficult to evict bad tenants or make it difficult to comply with local ordinances and zoning. For example, TX is very landlord friendly and Houston has no zoning.
• Tax friendly-my state is brutal when it comes to state income taxes, FL, TX, TN and AL are tax friendly.
• Near a major college for diversity
• Easy access via flight. Need an area where it's easy to find a cost effective plane ticket. 

You mentioned Ohio? If that's the case, go meet with property managers and ask them what they like to manage while offering lots of cash flow. If your long term goal is buy and hold and retire early, this is critical.  Lastly. I listen to the Jason Hartman podcast. I've never invested with his team, but he has the right philosophy and seems like a decent organization. He offers turn key rentals with local providers he vets with his team. I'm not affiliated with him, so don't take this as a shameless plug! Plus he practices what he preaches.  Lastly, slow down. Build cash and let the deal come to you. There is always a deal out there. While you wait for the perfect pitch,  research your markets, get pre-qualified to see what you can afford and narrow your focus.