All Forum Posts by: Katherine Serrell

Hey Marc - Great question. Like you said.. to each their own. I was in a very similar position in late 2019. I was fresh out of college working absurd hours as a CPA at Big 4 and had very little time to sit down and learn. However, 6 properties later (roughly 2.4M), I can confidently say that I am very happy I didn't go down an institutional path like Roofstock, Rent-to-Retirement etc 

There isnt anything inherently wrong with going down a more prefab route like Roofstock if that is what makes the most sense for you. That being said, regardless of how you approach investing...you need to know what your are buying, where you are buying, and why. Otherwise, this will be a costly lesson either at your own hands or the hands of others. 

As much as I love a good spreadsheet, a formula cant decide that for you since a formula doesn't compare apples to apples. Roofstock's one-pagers cant either. You have to take into consideration things like neighborhood quality, deferred maintenance, common property issues in the area, appreciation potential, historic rents, city planning etc. which is why having a local market expert(s) is crucial.

Personally, I just spent a little bit of intentional time each day on what I wanted to focus on even if it was just 10 minutes. There are thousands of resources but if your goal is to buy multifam units... I would focus my "learning energy" on where you want to buy, how you plan to finance, and what you want your return to be. Once you have that nailed down, you can leverage the knowledge of a good real estate agent (preferably one who has done what you want to do) who can help you fill in the knowledge gaps. 

At a bare minimum, you need to know enough to be able to weed out a good deal from a bad deal. 

Matt Lents is the best. He is based out of Jacksonville but does business all over Florida and nationwide. I am a CPA but still go to him since he is also an investor and his practice specializes in real estate. He is both phenomenal and affordable. 

https://www.taxadvantage.org/ 

You should only become a real estate agent if you want to be a real estate agent. 

I am an agent in NC but I would imagine this is universal advice... Between brokerage restrictions, state laws, mandatory disclosures, etc it can really be a disadvantage. Additionally, you have annual fees, continuing education requirements, annual cap amounts, monthly fees, MLS fees, Realtor association fees, etc that can really add up. I originally took the course for my own personal educational benefit without the intent of becoming an agent and I found it immensely helpful. You can take the class, take the exams, and then decide whether or not you want to go through with the licensure.

Keller Williams, eXp Realty, Coldwell Banker, etc are very "corporate" and have very strict guidelines and regulations you must to adhere to with little to no flexibility which is totally fine if you want to be a real estate agent. If you still really want your license and want to wholesale, you would likely need to find a small, boutique firm that is less rigid and see what they have to say.

If everyone at your REIA is saying dont get your license... I would take the advice from people who have been around the block.

Hi Austin - Great question. 

The landlord always pays property taxes and property insurance. Taxes and insurance are typically built into your mortgage payment. 

Househacking multifamily units: If the utilities are separately metered, most landlords have the tenant pay their own utilities unless the market dictates otherwise. For example, if all of the other listings in your area include water.. you likely should as well. If the utilities are not separately metered, you build this expense into the rent you charge. Tenants typically pay their own wifi. Landlords typically pay for lawn care. 

Househacking SFH by the room: You typically provide water, electric, gas (if applicable), lawn care, and wifi. You can opt to split these expenses evenly among the house members. However, if you have ever had roommates, I am sure you are familiar with at least one roommate complaining that another roommate uses too much water, always forgets to cut off the lights, works from home and therefore uses more electricity, etc etc. I prefer to avoid those scenarios so I personally pay those expenses and charge higher monthly rent accordingly.

There is no "right" way. You can do whatever works best for you.

Hey John, 

I was in a virtually identical situation last year. I had roughly 200k in equity in an investment property and I wanted to leverage that to build a 90-110k ADU on my primary. I got bids and everything.

The investment property has a 2.375% 30 year fixed rate so there is no way I will ever refi out of that. The only option I had was to pay cash or to get a HELOC. However, I couldn't find a lender to give me a HELOC on an investment property because they stopped doing that given the current economic situation. Back in the day... builders apparently would offer in-house financing for ADUs but they also stopped doing this because they are still so busy they don't need to do that to get business.

After I spoke to several lenders as well as builders, including those I have done multiple deals with, the best way to finance this work right now is to pay cash. 

Hi Katie - CPA here!

Yes - this is considered a rental property. Yes - there are things you need to do for tax purposes. Yes - the entire studio apartment can be deducted. 

Since the studio apartment is now an income generating asset...any expenses associated with the studio apartment are deductible. You can deduct a proportionate amount of your mortgage interest, property taxes, insurance, electricity, water, gas, etc. and you can deduct any expenses that are directly associated with the portion of the property that is being rented out. You can even deduct the depreciation. After taking all of those deductions, it is unlikely that you will ultimately owe any taxes on the rental income. 

Between now and the end of the year, you just need make sure you keep track of expenses, receipts, etc and at the end of the year your CPA can handle it. If you do your own taxes and use TurboTax or a similar site, there are prompts that will guide you how to treat these expenses for tax purposes. 

Unfortunately, there is not. In my opinion, the best way to get comps is to find comparable properties on Furnished Finder, save them, and see how long they sit. You have to make sure the listings also are providing similar services (i.e. linens, wifi, lawn care, etc) because some dont which would impact time on market. If you make a Furnished Finder account they also send emails with prospective renters, what their budget is, what they are looking for, etc. so that gives you an idea as well just not in real-time unfortunately. 

If you really wanted to go down the rabbit hole you can call local hospitals and ask if anyone is looking and what they expect to pay you can ask the hospital what company they contract with and ask the contracting company. I have heard of people having luck with that. Obviously more time consuming but if you really want more info you can try that.

I have MTRs in Raleigh and I get a lot of graduate-level interns or grad students doing work-study programs from out-of-state. I get a lot of people who are relocating... people who are waiting for their apartment, new build home, etc to be move-in ready or who are relocating and want to spend a few months getting to learn the area prior to buying or prior to renting for 1+ years in an area they are unfamiliar with.  

Matt Lents with Tax Advantage is great. I am also a CPA but don't specialize in this niche. He specializes in real estate and I have found him to be a great resource. https://www.taxadvantage.org/

1) Yes absolutely. 
2) The lender will only take into account rental income if there is a 12 month lease in place.. otherwise you need 2 years of rent-by-the-room, short-term rental, mid-term rental, etc income on your taxes for them to include income. This is the biggest challenge. *Maybe* you could get lucky and find a lender who will count that but very, very doubtful. You would need to try and get one tenant to lease the entire place for 12 months and just allow that tenant to sublease to the others or something along those lines... DTI is the hardest obstacle to overcome with househacking. Also, unless that 20% guaranteed bonus is in writing, that doesn't count either until it has been on your taxes 2 years.

Lastly, you have to have a "jump" or else the conventional lenders wont underwrite the loan (unless you get lucky) which basically means you cant go from your 4 bedroom single family home to a 2 bedroom townhome because underwriters will assume you are going to automatically turn it into an investment property. You have to be able to justify the move. For example.. if the 2 bedroom townhome was walking distance to downtown, work, etc you could probably swing that with no issues. Alternatively, maybe you want an identical 4 bed house but with a backyard for the dog or now you want a 2 car garage, etc. Just be prepared to explain your reasoning.  

PM me if you want to discuss. I have done 3 househacks (soon to be 4) and I have made it work but had to get creative a few times.