All Forum Posts by: Justin K.

@Troy Gandee

Thanks a whole lot for your response! 
I'm talking with both a Farm-loan broker and the local counties to see what is possible.
From what I've found, the land has to be predominantly used for agriculture to qualify for the farm loan. I'm trying to see if I can get a few RVs on the property to get around some of the restrictions, but legally, of course.

Thanks again,
Justin

Hello!

I would like to purchase land near where I live. The land would be multi-use; some farming, some residential, and some airbnb. 

The idea so far is to get a farm loan. From the people I spoke with, at least some amount of agricultural income needs to happen in order to satisfy the loan; in this case, it was $4,000 per year of agricultural income. This isn't just from crops or livestock, but could be something along the lines of people visiting a corn maze, for example, as long as it is "agriculture related." 

After obtaining the property, I would like to put a pre-fab or modular home onto the property from which I could live, and then begin adding yurts or some other prefabs to airbnb. The market for this is just a calm location for people to escape the city, stargaze, or just be out in the country for a bit. Nothing crazy. 

The intent is to have something on the property which pays the bills while I hold the land long-term as an investment. 

From what I've seen, the main things to look for when searching for land is if the land can have septic (perc test) and if the land is suitable for agriculture (soil tests). 

I've had 3 rental properties in the past, which I'm starting to slowly sell off, and would like to shift gears into this land/short term rental industry. I just am completely novice at it and would like some feedback, or if anyone has tried it (failed or succeeded) and have some tips, I'm open ears. 

I've found a few plots of about 40 acres in southern North Carolina/Northern South Carolina, but am also looking around Charlotte. Purchase price (and budget) is below $200k. Farm loans are 10-15 years, and 20% or more down. So I'm looking at 40-50k down and around 2k/month for mortgage. Then there is of course insurance, property use within the contract with the bank, etc. 

The prefabs which I've seen range from 10k-70k (small yurts or domes up to 1/1 structures built from conex boxes). Those would be out of pocket, too. Land development costs, I'm unsure of, but I've seen anywhere from 5k-10k for a foundation, let alone adding electricty and water. Presumably, I could use solar and a well, but that depends on the property and local laws? 

If anyone could point me in the right direction for further research, I'd be really thankful,

Thank you,

Justin.

Thanks for the responses!

I hadn't considered the lines of credit for some reason. I guess in my mind whenever I thought of HELOC I just jumped to "adjustable rate is bad!"

The risk isn't too high, since the cash flow from another property can offset the negative cash flow of this property. But I'm still novice and don't know how risky that is, exactly. We've also got reserves for if one or both properties are vacant. However, I see your point that the 40k would have to generate more than the $500. 

Perhaps you can tell me if I'm analyzing that math correctly: If $40,000 is taken out, then it would have to make at least a 15% return in order to bridge the $500/month gap, correct? However, as rents increase then the return will not have to be as high (an increase of 100$ would then make the required return be 12%)? 

Thanks for helping me to clarify this and to not jump into a decision without fully understanding the math behind it. 

Hey everyone, 

If the potential money from a cash out refinance is greater than 15 years worth of cash flow on a property, would it be wise or unwise to conduct the refi if the end result is negative cash flow? 

After saving 20% for expenses and vacancy, a property that we've got cash flows $200/month. If we refinance it, then we'll be able to pull out $40,000. We can then use that money to reinvest into either stocks or more properties. However, by doing so we'll be trading a 3.5% interest rate and 200$/month cash flow for (after the last rate hike) probably 7.75% interest and -$300 cash flow until we increase the rent next year. 

Seeing how the rents are rising in Florida, I anticipate the monthly cash flow breaking even after 3 years of raising the rents, but that is speculative. 

I am curious about the pros and cons to each and there is always something that I didn't think about. I think that keeping it how it is is safer, however, if the prices do decline then we may not have as much cash to take advantage of opportunities as we'd like. At least what I can remember hearing from listening to the podcast, cash flow is more important when you're older and nearing retirement (which we are not), and capital is more important when you're younger as to take advantage of opportunity. 

Thanks for your wisdom,

Justin

If I remember correctly, traditional IRA contributions are tax deductible, and Roth ira contributions are taxed. Because of this, Roth accrued interest will be taxed 10% but not the contributions, and traditional contributions are taxed but not accrued interest. Double check that though, as I can have misunderstood it.

Based on the current office's actions, I wouldn't put it past them to give people money for a first home, but I don't actually know

Hope this helped, 

Justin

Hi Aaron, 

Thanks for replying a few years later; it was an interesting read. I'm glad that you overcame your hurdle. 

Justin

Thank you all for contributing!

Come January I'll knock out the license. Good ideas about helping people find places before they pcs... that'll be helpful and it might be a way to make some extra cash!

Take care, justin

Hey guys,

Question about access to the MLS from out of state:

My home state is Florida, as far as taxes are concerned.

I'm stationed in Germany with the military.

Can I maintain a real estate license for a state while stationed abroad?

Whenever I go on leave I try to go home and shop for/ get investment properties, or so far it has been the goal (covid constraints have gotten in the way this year). We've got two condos renting right now. The license would really be to stay up to date with the market, and I think that I'd learn a lot by obtaining it.

Any guidance would be appreciated!

Justin

HELOC is a great option, too. I suppose I'm curious about both because I've done neither. Has anyone had experience with circumventing the occupancy requirements of condominiums utilizing either HELOC or Home Equity loans?

Thanks for your response Ganessan,

Justin

Hey everyone, 

A problem that I run into occasionally when searching for investment loans is the tenant/owner occupied ratio in condos. 
I'm curious if there's a way around this by doing a home equity loan to finance the purchase of a new property? It follows the BRRR in a way, that is, get a loan using a paid off property as collateral, and then buy a property which you cannot get with a typical investment loan due to the rules of occupancy.

The issue I see with this is that if you refinance your property, then the financier would want to see what you'll be using the money for. Or are they typically not concerned with this? 

Any wisdom is greatly appreciated,

Justin