All Forum Posts by: Jeff Roth

Hi Jonathan-

Great questions.

Should you have a general contractor walk the property with you at a fixer-upper you are interested in to get estimates on the cost of repairs?

This is a good idea and should be done during due diligence after you have the property under contract.

There are some contractors that just work with investors and efficiently get the work done on fixer-uppers or flips in a timely and cost effective way.

They may charge you for the estimate which is credited to any work you have done.

A general contractor is not a replacement for a quality home inspector and the home inspector may find additional work that needs to be done so good to have them there on the same day if possible.

Both results and estimates are useful in retrading or renegotiating after the due diligence.

To your success!

Hi Kenny-

Great question about whether you should put a house you plan to live in and rent out parts to others in an LLC.

Certainly putting it in an LLC would help with asset protection and limiting personal liability.

However, you may lose the ability to claim the part of the house you live in as homesteaded tax rather than the higher non-homestead investment property tax for the entire property in an LLC. A trust may offer some of the same benefits as an LLC, depending on your goals, and allowing you to claim the part of the house you live in as homesteaded tax.

Make sure you have the right home insurance and consider an umbrella policy for extra protection.

Certainly buying a house, using conventional financing with limited money down as a primary residence and renting out parts of the house to help pay the mortgage, is a smart financial move. Then, in two years, you can go out and buy another primary house renting out the entire previous house and keep doing that to build your portfolio.

Smart!

To Your Success

Hi Ryan-

Great question! You asked how to locate off-market duplexes. Here are some suggestions:

1. Network with local property managers as they will know who is thinking of selling or needs to sell. I bought a great off-market duplex myself this way.

2. See if you can get a list of duplex properties and where the tax bill is sent from a local title company or online service for this and send them direct mail on a regular basis asking if they are interested in selling. 

3. Drive neighborhoods looking for duplexes with tall grass and deferred maintenance and look up the owner using the local property tax assessors website and see where the property tax bill is sent and if they are behind on their taxes. Send them direct mail regularly. 

4. Network with local investor friendly Realtors who would know when a duplex owner is thinking about or needs to sell.

5. Ask for help finding potential distressed duplexes by offering finders fees to bird doggers like Amazon delivery people, postal delivery workers, other delivery drivers, and Uber drivers to name a few.

To your success!

 Let me ask my CPA.

Great question Hamidou!

Should you consider investing in Detroit from out of state?

Personally, I think the taxes are high and the services you get for your taxes low there.

I know people that invest in Detroit but you must know the area down to the street and have excellent property management.

However, I just talked to my CPA today about a referral he was sending me who is a client of his that has 30 rental properties in Detroit and selling them all because the City doesn't really help, charges for everything, and they never have given a security deposit back to a tenant after they stayed because of their behavior or lack of payment. Certainly this is not the case for everyone but a cautionary tale nonetheless-especially being out of State.

My CPA is referring this investor to me because he knows I like the Lansing, MI area where prices are similar but taxes are lower, labor cost lower, and lots of economic development because it is the State capital.

To your success!

Hi Juliette-

Great question!

You want to rent out your house but wonder if you should use a property manager or self manage.

I always advise my clients to use a property manager to make owning investment real estate as "passive" as possible and if the property manager is good they will help you maximize rents with their management and reduce turnover and the cost of tenant turnover. I also use property managers for my properties.

Additionally, unless you are an expert on Fair Housing laws you can easily find yourself in violation even when you think you are acting reasonably and find yourself in a lawsuit or under investigation.

Finding reliable contractors is an issue and a good property manager should have those relationships saving you time and hopefully money.

Navigating non-payment of rent or an eviction can be time consuming and expensive and a good property manager should help you avoid needing to do that with good tenant screening or have the legal resources to deal with it if you have to.

You do have to manage the property manager and watch expenses especially for large repairs. Always insist on three estimates for larger projects.

To Your Success!

Hi Kristi-

Great question!

How to pull equity out of a duplex to invest in another property without doing a cash out refinance because you have such a good rate on the mortgage?

I have done this exact thing for the exact reason using a Home Equity Line of Credit. Not all lenders offer HELOCs on investment property but you can find the ones that do by calling around. Try credit unions. The one I used was the University of Michigan Credit Union.

The loan to value is lower on investment property but if you have a strong equity position it makes sense.

Then, the blended rate between your HELOC and primary loan is still better than the rate on a cash out refinance.

Plus, the HELOC is flexible and can be used over and over if you pay it down and you have no payments until you use it.

Dry powder waiting for the right opportunity.

To Your Success!

Hi Juan-

Great question!

Should you protest or dispute your property taxes?

In general, it is always good to look at the taxable value every year for your property while you still own it when the tax statement comes.

If you feel you can support a lower taxable value with sold comparables that are like your property nearby, then it is worth your time to try to dispute the value.

It is true there is a very short timeframe to schedule a time to go in and dispute the taxable value with your local property tax assessor usually and the deadline is printed on the annual tax statement.

The reality is real estate does not always go up in value.

To your success!

Hi Ariana-

Congratulations on deciding to become a real estate salesperson.

You asked about passing the exam to be licensed in California and business in general.

As far as passing the exam, I remember taking my real estate coursework at night, in person, after work. I studied released questions and there was a practice test one could take that was created for the test here in Michigan. They both helped.

In terms of what I would do starting out in business if I were to do it again, I would recommend working for a larger team to learn their sales process and have practice in the field. I started on my own and learned everything by asking more experienced mentors and modeling my practices after them with trial and error.

I would also network with other small business owners in your area as they understand business and will help you if you go out of your way to help them.

Additionally, I would start writing content or creating videos about real estate in your area so people can see that you are a subject area expert and over time they will decide to work with you. Plus, you create the content once and it works for you over and over.

Finally, I would try to create more value than you receive in return as that will grow your business more than anything. Creating massive value! I always try to create 10X in value what I receive in compensation for my services.

To your success!

Hi Rachel-

Great question!

Should you pay off your personal debts before starting to invest in real estate?

In general, it is preferable to reduce or eliminate debt that is not producing cashflow before investing so your personal balance sheet shows more assets than liabilities.

It sounds like you are in a great position being a year away from paying off your vehicle and student loans. Congratulations!

I would stay the course. Pay those off. Enjoy the increased cashflow and look for ways to house hack so you can reduce or eliminate your housing expense which is one of the largest expenses anyone has.

Imagine a lifestyle where most of your personal debt is paid off, you have reduced or eliminated your housing expense and now have the cashflow to focus on making your money work harder for you through real estate investing and maybe can free up some more time to do that now that you have reduced your living expenses and can work less.

To your success!