All Forum Posts by: Joel Allen

@Cameron Philgreen

As you’re looking at the various options, make sure you’re in line with the security deposit laws for the particular state the property is located.

The laws can vary significantly from state-to-state.  For example, Texas law does not at all specify how landlords need to hold the security deposit. 

Other states are much more restrictive…for example, Maryland law requires the security deposit be held in a federally-insured financial institution in an account exclusively for security deposits, and the account must be interest-bearing.  When returning the security deposit to  the tenant in Maryland you have to include the interest accrued, which is the greater of the US Treasury yield curve rate or 1.5% per year.

Who knew we’d have to do calculus to return a security deposit…lol.

@Greg Lyons

It sounds like the concept that’s commonly referred to as “Velocity Banking’…if you do an internet search of that term, there is a lot of material (both in favor and opposed to the strategy).  There have also been some spirited discussions here on the BP forums debating the pros and cons of velocity banking.

Before levying any kind of penalty on the tenant, you'll want to know if Houston (assuming that's where the property is located) has implemented any type of watering restrictions that has prevented the tenant from watering the lawn.

For example, in San Antonio we've been under Stage 2 water restrictions since April, which limits residents to watering their lawn only once per week using an irrigation system/sprinklers, and only at specified hours on that one day per week.

There's even some discussion about San Antonio possibly moving to Stage 3 water restrictions, which limits watering even further to once every 14 days.

@Jacob Pham

If you get caught up on all the BP podcast episodes and need some more content to consume, there are a few really good podcasts that focus on real estate investing by military members.  All are hosted either by Active Duty, Reserve/Guard, or recently separated/retired members:

- Military Cashflow podcast with @Dan Wynn and Mike Glaspie

- The Military Millionaire podcast with David Pere and Alex Felice

- Active Duty Passive Income podcast with Kevin Brenner

I agree with the assessment by @Harrison Sharp.  The Texas Real Estate Research Center at Texas A&M University puts out a lot of good real estate-related data about the Texas market, including tracking median home prices.  Current data (June 2022) for the major metro areas are:

- Austin/Round Rock:  $537,475

- Dallas/Ft Worth/Arlington:  $430,000

- Houston/Sugar Land:  $350,000

- San Antonio/New Braunfels:  $340,000

I'm most familiar with San Antonio, and a lot of the excitement stems from the city's growth along the I-35 corridor toward Austin.  However, there is growth and development happening in other areas of San Antonio as well that seem to be overshadowed.

Texas Real Estate Research Center:  Home - Real Estate Center (tamu.edu)

@Vincent E peters

Thanks for your service. My wife and I are in a similar situation….we each have VA entitlement through our military service. The VA loan is a powerful tool, and when you both have entitlement, it compounds the possibilities.

You each will have a Certificate of Eligibility showing your individual entitlement.  If you have full entitlement, there is no loan limit as long as the lender can qualify you.  It’s when you utilize the secondary entitlement that the county loan limits apply.

You're correct…a VA loan can be used on a 1-4 unit property, as long as you occupy one of the units as your primary residence for at least a year. In an ideal scenario, you could house-hack a 4-plex using one of your initial entitlements, then a year later house-hack another 4-plex using the other person's initial entitlement. Then, if there is still secondary entitlement remaining, that opens the door to more options a year later.

There is a provision that allows two VA borrowers to combine their VA loans together and do a ‘joint loan' for a multi family property of more than 4 units. Although I don't personally know anyone that's done it, it's explained in VA Pamphlet 26-7, Chapter 7.

One of my daughters is getting close to that age, and my plan for her once she begins having an earned income is exactly what David recommended….a Roth IRA. It will likely need to be set up as a custodial Roth IRA at first, but then will convert to your son when he turns 18 or 21 (depending on the state).

Your son can put up to $6,000 per year in the Roth.  With a Roth, taxes are paid up front…and your son’s current tax rate will likely be much lower now than when he begin to withdraw the money later in life.

One other benefit, if your son plans to attend college. A Roth IRA (along with other qualified retirement accounts) is not counted as an asset as part of the FAFSA, while a savings account is…which could impact eligibility for financial assistance.

Note:  I’m not a financial advisor, and I didn’t stay at a Holiday Inn last night.  But it’s the plan I intend to use for my own children.

@Nicole Murphy

I use a ‘hybrid’ approach to self-manage a small portfolio of out-of-state properties, but all are single-family homes that my family and I lived in for a few years and then turned into a rental when the military sent us to a new duty station. Since we have previously lived in the homes for 2+ years each, I’m very familiar with the area/neighborhood and we have built a trusted group of contractors (plumbers, HVAC, electricians, etc) at each location that I can call whenever a maintenance issue needs to be addressed.

The 'hybrid' approach that we use for managing those properties is….

We hire a leasing agent to manage all the items up until the point the tenant moves in (photographing the home, listing the home for rent on the MLS, coordinating showings, accepting applications, screening tenants, accepting security deposit, etc). On the tenant's move-in date, the leasing agent meets the tenant at the property, provides them with the keys and a welcome package that we provide, reviews the lease with the tenant, and conducts a walk-through inspection with the tenant.

As soon as that walk-through inspection is complete, the leasing agent officially hands over management to us and we are self-managing for the remainder of the tenant's occupancy. 

This 'hybrid' approach allows us to have the necessary boots on the ground during initial tenant on-boarding & exit. We pay the leasing agent a one-time leasing fee once the tenant is placed, and it eliminates the ~10% monthly property management fee.

If I was ever to try to scale to a much larger portfolio, I would use a PM. But that’s not my goal, and I enjoy managing the properties.

@Mark Nickoson

I agree that inflation is a silent robber that can blur our thinking (and our numbers).  Interestingly, housing costs (combination of rent and implicit rent for homeowners) account for approximately one third of the Consumer Price Index.  So, the inflation numbers in the CPI are reflective in many ways of the overall price increases in housing. 

The benefit of real estate compared to many other investments are the tax advantages.  For primary residences being sold, there's the Section 121 exclusion which allows for the profit on the home to be excluded from taxation (up to a certain level of profit, and as long as the home was owner-occupied two of the previous five years).  For investment properties, there are the tax deductions for mortgage interest, maintenance and repairs, depreciation, etc.

I agree with your point, but real estate does provide a reasonable hedge against inflation and is still handled favorably in terms of taxation.

@David M.

You’re right…that particular page shows it’s only available in NJ, but I believe it’s now expanded to additional states.  When I go to a separate FAQ page about the program, that page shows it’s now available in 27 states and Washington D.C.:

https://www.annie-mac.com/page... (click on ’Where is Cash2Keys Available?’ under FAQ.

I sat in during a presentation from an AnnieMac Rep about the program a month or two ago, and it sounded like they were in the process of rolling it out to new states…perhaps the webpage updates aren’t keeping pace with the new additions.