All Forum Posts by: Jonathan Paz

For those mentioning PenFed, as @Frankie Woods mentioned, they won't give you an equity product or cash-out refi if you have 4 or more investment properties. I did a HELOC with them early on and then our business was done. Both my wife and I are military so we also bank with Navy Federal. We have done a couple of mortgages and 4 HELOCs with NFCU. My issue with them is that their HELOCs are higher than any other Bank I have seen. Our investment property HELOCs with them are now at 7%, and they adjust monthly. Meanwhile, I have another one from GTE Financial at 5.25% and closing on one this Monday from SCCU at 5.5%. They are also slow to work with for approvals. We basically stopped using the NFCU HELOCs, and I feel like they are doing a disservice to the military community with their high rates. There are definitely better rates/deals for investment property HELOCs from local credit unions, but it takes a lot of calling around.

@Jesse Chambers I am currently doing both a cash-out refi and a HELOC against rental properties I own free and clear in Brevard County. Let me save you some time. For HELOC, contact Space Coast Credit Union. They offer a HELOC against investment property at -0.5% Prime, which is the best you will find. Mine is closing this Monday at 5.5% with 80% LTV, virtual/free appraisal, at $99K line. As a bonus, the first year is fixed at 3.74%. Their rates are even better for HELOCs against owner occupied properties. With HELOCs and Home Equity products, you are capped at $99,900. Anything above $100K starts driving additional mortgage/full appraisal/higher closing cost issues, so at that point you might as well go for a full blown cash-out refinance mortgage which gives you the benefit of 30 year fixed low monthly payment, which also helps keep your DTI low. Keeping your DTI low is important, and you will realize that down the road when you start really scaling up. This is where having debt on HELOCs will hurt you.

If you really want to get the most equity out of your property (say well above $100K), and you don't mind closing an existing mortgage (say your existing mortgage rate isn't that great), then I recommend a cash-out refinance like I'm doing against my other property that I have about $175K equity in. The cash-out refi I am doing right now is through SunTrust, and it is 5.7% interest rate fixed on that duplex. Cash-out Refi's are much more difficult to qualify for, because they are full blown mortgages, and will require a healthy amount of reserves for investment properties. Space Coast Credit Union will only do Cash-out refi against single family homes, so if yours is a SFR, you can use them for both products. However, if you have a really good interest rate 30 yr mortgage already in place on your 2 properties, my recommendation would be to not close them, and instead put a HELOC on top in 2nd position to pull out your extra equity. This way you get the benefits of both.

@Wilson Burgos No worries.  I won't be in the area again for a while, but feel free to message me anytime with any questions you may have and I'll try my best to answer.  Best of luck on your real estate journey.   

@Ryan Solberg Looking forward to meeting up.  I'm definitely interested in learning more about the commercial side of the business.  Buying larger apartments has always been a goal of mine. See you soon!

Hello all!  Calling all Brevard County real estate investors (newbies or pros) to meet-up this Friday evening to discuss all aspects of real estate investing in the local market.  Parking is free at the Four Points hotel in Cocoa Beach, and I will be holding a table at the Starbucks inside from 7:30pm-9pm.

A little about me: My wife and I have been investing in buy-and-hold rental properties in Brevard County since 2011, currently holding 19 rentals throughout Indialantic, Satellite Beach, Melbourne, Palm Bay, Suntree, Viera, and Cocoa.  We are both active duty Air Force stationed in Hawaii.  However, we haven't stopped investing in the area, buying more and more every year.  We are so excited to visit the area again, check out our newer investments, and meet up with like minded individuals.  Feel free to call or text if anything at 808-256-5871.  

I'm just gonna mention a few other active local folks I have seen on the local forums. @Leah M.

@Dwayne Byrd @Scott Schuetz @Priscilla Z. @Kerry Baird

Wow, so you are saying that it doesnt matter that I've held the replacement property for less than 1 year because the hold period will take into account the original property that was exchanged?  That seems like an amazing loop hole to get down to 15% capital gains vs my 24% bracket.  Potential 9% savings on $15K = $1,350!  I'll definitely have my CPA look into that option.  

Oh, and I will try to do a 1031 exchange to defer paying all those taxes, I'm just looking at worst case scenario if I can't find a replacement property.

@Dave Foster and @Wayne Brooks thank you guys!  First, very good catch on the math error Wayne, definitely brain fart!  Dave, an 8824 hasn't been filled out yet because this has all happened this tax year.  Both the replacement properties are duplexes of similar size, but the one I'm interested in selling is the cheaper one ($157,500 purchase price vs. $170K purchase price).  I will talk with the CPA about how it can be best captured on the 8824.  Thanks for mentioning those options!  So my tax consequence should be about $3,300 (long-term capital gains from Property A, plus depreciation recapture of Property A), in addition to the tax (short term capital gains/ordinary income) on the gain on the sale of the replacement property C (probably about $15K x 24% = about $3,600).  So my total tax consequence should be about $6,900 for selling a property that has a $15K gain.  NET = $8,100 after taxes.  That's not bad, considering I don't like the property and there is a lot of upcoming work that will be required on it in a few months when the tenants leases are up...  I will happily take that and walk away from this problem property that has so much deferred maintenance.  Thanks again!

Hello, I am trying to get an idea for the tax consequences I would face by selling a property that I acquired via 1031 exchange.  Here is the background:

*I purchased Property A on Feb 2016 for $109K with cash, rented out, Sold 2 years later (Apr 2018) for $141K after closing costs.  So my long-term capital gain was about $32K.  I depreciated about $7K from the property over the 2 years.

*Proceeds after paying off a HELOC were $65K.

*I decided to do a 1031 exchange, and needed to fully invest the $65K, so I acquired 2 duplexes and split the $65K proceeds evenly for down payments between the 2 duplexes.  Duplex B was purchased for $170K and Duplex C was purchased for $157,500 (About $165K all-in after closing costs).  I closed on both properties in May 2018.

*I have received a strong off-market offer to buy Duplex C for $189K, where I may net about $185K after closing costs.  I really don't like Duplex C very much, and okay with selling it as long as I don't have a big tax loss/overall loss due to the 1031 exchange.  Plan would be sell early Jan 2019. 

So my question is, about how much would I owe in taxes if I were to sell Duplex C? 

I'm hoping that my tax due to IRS will be about 50% lower than if I were to have not split the proceeds evenly between 2 properties.  So, I had a $32K capital gain from Property A, along with about $7K in depreciation recapture, so if about 50% of it is owed back to IRS, it would look like this:

- Long-Term Capital Gains: $32K/2 = $16K long term capital gains at 15% = $1,600 due to IRS. 

- Depreciation Recapture: $7K/2 = $3,500 at about 25% = $875 due to IRS.

--- Total due to IRS will be about $2,500.  This would definitely make it worthwhile to sell, because I was all-in for Duplex C for $165K, can perhaps sell for $185K after closing costs, and that would put me at $20K profit (which will be taxed, short-term ordinary income bracket).  I then only owe about $2,500 in back taxes from 1031 exchange.  Overall I would have a profit, correct?

If I am in the ballpark in my calculations here, it sounds like it would make a lot of sense for me to sell

@david Pere can you use your Marine Corps priority to snag a morning tee time on Monday 12 Nov, Vererans Day (observed)?  I can pickup Michael and get him on base.