All Forum Posts by: KC Pake

Hello all! I’m just curious on how some of you pros would start out if you had a stable dual income household $135k/yr, a 3 month emergency fund, and 15k saved up. I'm going to be stationed at NAS Pensacola but my wife will probably be working at Hurlburt Field or Eglin AFB.

My thoughts are find a house that doesn't need rehab because I'll be extremely busy with training. I want to get a 3/2+ or 4/2+ and rent out a room to 1 or 2 roomates with furniture/utilities included for $8-900 each. After I move again in 1.5-2 years I would love to just LTR but I think I need to convert this to a MTR and fully furnish because I'll be coming out of pocket $500+ a month if i LTR because of reserves & mortgage. LTR rental rates I'm seeing are roughly $1700-$2100. I'm feeling apprehensive about making a mistake and not sure where to start and really want to get specific on my strategy.

Hi Marcus,

With a solid financial base of a $135k/year dual income, a 3-month emergency fund, and $15k in savings, your plan to invest in a property while stationed at NAS Pensacola sounds promising. Focusing on a move-in-ready home that accommodates your requirements (such as a 3/2+ or 4/2+) and is conveniently located between NAS Pensacola and potential employment locations for your wife, like Hurlburt Field or Eglin AFB, is a smart move. This will not only serve your immediate needs but also appeal to future renters.

Renting out rooms at $800-$900 each, including utilities and furniture, to 1 or 2 roommates can help offset your mortgage costs initially. It's important to make sure your rental rates are competitive and to have a clear rental agreement in place. As you anticipate a move in 1.5-2 years, transitioning the property to a rental is a key consideration. Analyzing the financial viability of Medium Term Rentals (MTR) versus Long Term Rentals (LTR), especially in light of the potential higher returns of MTR despite its more hands-on management and operational costs, is crucial. This analysis should include all potential revenues and expenses.

If managing the property remotely becomes challenging, hiring a property management company could be a beneficial move to ensure the property is well-maintained and the tenants are properly managed.

Finally, having an exit strategy in place for unforeseen circumstances or changes in the market is necessary. Whether it involves selling the property or exploring alternative solutions, being prepared for various outcomes will help you navigate this journey more confidently.

Best of luck,
KC

0 Votes

Quote from @Adam Marx:

This question comes from me finding a property that seems to be in decent condition for this type of property however it will need alot of work including a second bathroom if I were going to be able to sell it as current 3/2 prices. This would be required to make the numbers work imo. However I have never even approached a REO property. I guess the real question is this something I should just stay away from in general? I feel like if a bank has bought a property then they aren't going to be as open as a homeowner would be in selling the home for less than the asking price. At least, this is what I have seen the number of times I have been to an actual auction. So the question is more in the general sense or if someone has any experience in the particular arena could you provide some insight on providing an offer to the bank? If this question is not in the correct place I do apologize. Still new to the website! Thank you.

Hi Adam,

In response to your inquiry about approaching a Real Estate Owned (REO) property, it's essential to clarify a common misconception regarding banks and real estate. Banks are not in the business of "buying" properties in the traditional sense. Instead, they acquire properties primarily through the foreclosure process when borrowers default on their loans. Once a bank has possession of such a property, its primary goal is usually to sell it as quickly as possible to recoup the outstanding loan amount, or as much as possible. This urgency to sell doesn't necessarily mean banks are more rigid or less open to negotiation than individual homeowners. In fact, the willingness of a bank to negotiate on the price of an REO property can vary significantly, depending heavily on factors such as how much was owed on the property at the time of foreclosure and the bank's current inventory of REO properties.

When considering an REO property, especially one that requires significant work like adding a bathroom to make it comparable to current 3/2 homes in the market, it's crucial to do thorough due diligence. This includes assessing the cost of necessary renovations and understanding the property's market value after improvements. While it's true that dealing with a bank may differ from negotiating with a homeowner, banks can and often do negotiate on the price of REO properties. Their primary goal is to offload the property, not to hold onto it or get the best possible price.

If you're considering making an offer on an REO property, it's advisable to approach it with a clear strategy:

Research the Property: Understand the extent of repairs needed and estimate those costs accurately.

Know the Market: Determine the after-repair value of the property to ensure your investment makes financial sense.

Submit a Competitive Offer: Based on your research, submit an offer that is competitive but leaves room for the necessary renovations. Include your findings to justify your offer price.

Prepare for Negotiation: Be ready to negotiate with the bank, keeping in mind that their main objective is to sell the property rather than achieve a maximum sale price.

Approaching an REO property requires diligence, but it doesn't have to be a process you avoid altogether. With the right preparation and understanding of how banks operate regarding these properties, you can potentially secure a deal that works for your investment goals. Just remember, every bank and property situation is unique, so there's no one-size-fits-all approach.

All the best,
KC

0 Votes

Orlando, Florida

Rehabbing & House Flipping

Post: Anyone use only minisplits to cool/heat an entire house?

KC Pake

Lender

Pro Member

Posted February 06, 2024 09:04

Investor
Orange Park, FL
Posts 169
Votes 106

Quote from @Joseph Weisenbloom:

I have a flip I am currently working on and there is no space for ducts. I am considering buying a few multizone minisplits and placing the heads in the bedrooms, kitchen and the living room.

My question is will this strategy work? How do I circulate conditioned air to hallways, bathrooms etc?

Hi Joseph,

I have used this strategy in a large basement (1100 sqft) with multiple rooms. Opting for multi-zone mini-split systems (link is just a sample, there are many to choose from) offers a practical and efficient solution for heating and cooling an entire house, particularly in renovation projects where space for ductwork is constrained or entirely absent. These systems provide the flexibility to install individual air handlers in key living spaces—such as bedrooms, kitchens, and living rooms—without extensive ducting, making them ideal for streamlined and efficient climate control throughout the property. One of the primary benefits of mini-splits is their energy efficiency; by enabling individualized temperature control for different zones within the house, they significantly reduce energy waste associated with heating or cooling unoccupied spaces.

However, a common concern with this approach is ensuring that areas not directly served by an air handler, such as hallways and bathrooms, also receive adequate conditioned air. This can be effectively addressed by strategically placing the mini-split units in locations where they can facilitate airflow into adjacent spaces, and by implementing simple modifications like undercutting doors to promote air circulation. Additionally, the use of ceiling fans in these areas can further assist in distributing conditioned air more evenly throughout the house.

It's also important to conduct accurate load calculations for each zone to ensure that the mini-split units are appropriately sized, thereby maximizing their efficiency and the overall comfort level within the home. Consulting with HVAC professionals experienced in working with mini-splits can provide valuable insights into optimal unit placement, sizing, and strategies for enhancing airflow to areas without direct air handler placement.

With careful planning and installation of multi-zone mini-split systems, renovators can achieve a comfortable, energy-efficient environment that appeals to potential buyers, overcoming the challenges of limited space for traditional ductwork and enhancing the property's value through the added benefit of zoned climate control.

Good luck with your project,
KC

2 Votes

Austin, Texas

Quote from @Lina Vezzani-Katano:

Hi all, I'm in a conundrum and need smart suggestions.

I currently rent out a 1 family house that is way below market value. The current rent barely pays for the monthly mortgage and I am scraping through to pay for property taxes.

I have two options in mind:

1. Sell the house.
2. Get a loan to fix the basement to bring rent to market value.

I'm sure I would need to provide more information for answers so let me know!

Thanks in advance! - Lina

Hi Lina,

Your situation is very common, and deciding between selling or investing more into your property to potentially increase its income is a pivotal choice. Here are some considerations for both options to help you make a more informed decision:

Option 1: Sell the House

Pros:

Immediate liquidity: Selling the house can provide you with a lump sum of money immediately.
Eliminate financial strain: If the property has been a financial burden, selling it could relieve you of the ongoing stress and financial obligations.
Capital gains: Depending on how long you've owned the property and the real estate market conditions, you might realize significant capital gains from the sale.

Cons:

Capital Gains Tax: If the property has appreciated in value since you bought it, you could be liable for capital gains tax, which could eat into your profits.

Loss of potential future appreciation: Real estate generally appreciates over time. Selling now means you could miss out on potential future gains.

Market conditions: If the market is currently down, you might not get as much for the property as you would in a stronger market.

Option 2: Get a Loan to Fix the Basement

Pros:

Increase property value: Renovating the basement can add significant value to your property, both in terms of rental income and resale value.

Higher rental income: With the basement fixed, you can charge market value rent, which could help cover the mortgage, property taxes, and the cost of the loan, with the profit potential.

Tax deductions: The cost of renovations can often be deducted from your taxes, either through depreciation or as an immediate expense, depending on the nature of the renovation.

Cons:

Additional debt: Taking out a loan adds another layer of financial obligation and risk, especially if the increased rent doesn't cover the loan payments.

Renovation risks: Renovations can sometimes uncover more issues that need fixing, leading to cost overruns and delays.

Market risks: There's no guarantee that the market rent will remain high or that you will find tenants willing to pay the increased rent.

Additional Considerations:

Current Market Analysis: Understanding the current real estate market in your area is crucial. Are property values expected to rise? Is there a high demand for rentals?

Cost-Benefit Analysis: Consider conducting a cost-benefit analysis for renovating the basement. Estimate the total cost of the renovation and the expected increase in rental income. Compare this to the potential profit from selling the property now.

Long-term Goals: Consider your long-term financial goals. Are you looking for immediate financial relief or are you in a position to invest more now for potentially greater returns in the future?

Financing Options: Explore different financing options for the renovation. Interest rates, loan terms, and the feasibility of securing a loan with favorable terms should all be considered.

Best of luck with your decisions,
KC

0 Votes

San Jose, California

Tax, SDIRAs & Cost Segregation

Post: Very New investor with very little tax knowledge

KC Pake

Lender

Pro Member

Posted February 05, 2024 10:42

Investor
Orange Park, FL
Posts 169
Votes 106

Quote from @Omar Hassan:

Hi everyone, i wanted to put my ignorance out there and see if I can learn some valuable information from you all.

I'm looking to form a simple tax strategy based on a very small portfolio, I want to do it right while taking advantage of all the tax advantages that come with REI.

I've owned a single family home for 2 years, my primary was owner financed, and im an LP on an rv park.

What advantages/tax forms should i take advantage of, how does owner finance vs traditional lending change things and how does rental vs primary change things?

Is a professional needed for this or can i file independent? Im not against either just looking for the most bang for buck method.

Any insight helps and all information is likely to be new info.

Hi Omar,

Navigating the tax implications of your real estate investments, including a single-family home, an owner-financed primary residence, and a limited partnership in an RV park, requires a thoughtful approach to maximize your tax benefits. One key advantage for both your owner-financed primary residence and potentially the single-family home, if it's not your primary residence, is the mortgage interest deduction. This can be claimed on Schedule A (Form 1040) if you itemize your deductions. Additionally, if the single-family home is used as a rental property, you can benefit from depreciation deductions over the property's useful life, which you would report on Form 4562 and deduct on Schedule E (Form 1040). Rental income and related expenses for both the single-family home and your share in the RV park also go on Schedule E, allowing you to offset rental income with expenses such as repairs, maintenance, and property management fees.

The intricacies of owner financing versus traditional lending primarily affect the loan's terms rather than its tax implications. Regardless of financing type, interest deduction, property taxes, and investment-related expenses remain key considerations. However, the distinction between rental properties and primary residences significantly impacts your taxes. While primary residences benefit from mortgage interest and property tax deductions, rental properties allow a broader range of deductible expenses, including depreciation and operating costs. Also, the sale of a primary residence can qualify for a significant capital gains exclusion under certain conditions.

Given the complexity of your situation, especially considering the limited partnership and owner financing aspects, consulting with a tax professional familiar with real estate investments is advisable. They can ensure you fully leverage available tax benefits and comply with IRS regulations. While independent filing is feasible, especially with the help of tax software for straightforward situations, the unique elements of your portfolio suggest that professional guidance could provide the most value, ensuring you navigate the tax rules effectively and maximize your investment returns.

All the best,
KC

0 Votes

Quote from @Todd Hotes:

Curious what peoples thoughts are on triple net leases? New to real estate investing and it seems that it's an easier road to take for commercial real estate investing.

Hi Todd,

I've also been exploring the realm of commercial real estate investing and recently did some research on the concept of triple net leases (NNN). From my understanding, triple net leases can present an appealing route for those venturing into commercial real estate investing. Here's why:

Advantages:

Predictable Cash Flow: Tenants are responsible for most of the expenses, including property taxes, insurance, and maintenance. This setup allows for a more predictable cash flow since the landlord is not regularly footing these bills.

Lower Management Responsibilities: Because the tenant handles most of the property's operational aspects, the landlord's management burden is significantly reduced. This aspect makes NNN leases particularly attractive for investors who prefer a more hands-off approach.

Long-term Leases: NNN leases often have longer terms, sometimes extending up to 10-15 years. This can provide stability and reduce the frequency of tenant turnover, offering a steady income stream over an extended period.

Challenges:

Tenant Dependency: The success of a NNN lease heavily relies on the financial stability of the tenant. If the tenant's business fails, the property might sit vacant until a new tenant is found, disrupting the income flow.

Property Specificity: Some NNN properties may be built to suit a particular tenant's needs. If the tenant leaves, it could be challenging and costly to modify the property for a new tenant.

Market Risks: Like all real estate investments, NNN leases are subject to market risks and economic downturns. A weak market could affect tenants' ability to pay rent or the property's overall value.

In conclusion, while triple net leases can offer a more straightforward path to commercial real estate investing with potentially lower management overhead and stable income, it's crucial to thoroughly understand the associated risks. Diligent tenant screening, awareness of market conditions, and preparedness for potential vacancies are essential strategies for mitigating these risks.

Curious to hear others' experiences or thoughts about making the most out of NNN investments!

KC

0 Votes

General Real Estate Investing

Post: 🤔 Seeking Advice: Combining Adjoining Waterfront Lots - Pros & Cons?

KC Pake

Lender

Pro Member

Posted February 02, 2024 10:17

Investor
Orange Park, FL
Posts 169
Votes 106

Quote from @Sean Hudgins:

Quote from @KC Pake:

Quote from @Sean Hudgins:

One Thing to consider is what is around the lots. Are there other 2.5 acre lots in that area? or are they mostly around the half acre size? I would suggest that those buyers that want a 2.5 acre waterfront estate want to be surrounded by those types of properties, not tract homes on .65 acres.

Have you considered partnering with a builder to develop out the four lots? It would be a longer time horizon but could increase your profits substantially. I think that if you can find the right builder in the area they would be more than happy to develop out those lots and do the hard work of marketing them to the public.

I think the biggest question I have is really the surrounding area and what would be the most appropriate use of the land according to its surroundings.

If you end up keeping the lots separate I would not suggest a package deal as you lower your buyer pool substantially, I would sell them all separately, and maybe make mention in the listing that they can be combined as a package.

Sean,

Thanks a lot for the great points you've brought up! It really made me think more about what's around the lots and how that affects what I should do with them.

You're right about considering the neighborhood vibe. If there are more large estates around, someone might love the idea of a big 2.5-acre waterfront spot. But if it's mostly smaller lots/homes (which is the case here), then maybe keeping them separate makes more sense.

The idea of teaming up with a builder to develop the lots is very interesting and something I hadn't thought about. It could be a game-changer in terms of profit, even though it might take a bit more time. Finding the right builder who gets the vision could help make the most out of this unique waterfront property.

And you've made a good point about selling the lots. If I keep them separate, selling them individually but mentioning they could be combined seems like a smart move. It keeps options open for buyers who might want just a slice or the whole pie.

Appreciate your insight! It's given me a lot to consider and definitely helps in figuring out the best move forward. Cheers for sharing your thoughts!

KC

Happy to help!

Are the lots on the St. Johns River? I spent a good amount of time visiting down in that area when I was in the Navy and I do love the idea of navigable waterways. What kind of pricing were you considering when doing separate or combined?

Sean,

These lots are along Black Creek in Clay County. Black Creek leads to the Saint Johns, ~ 20 minutes by boat. I was also Navy! Thank you for your service, my friend.

I have not figured out the pricing yet. I've been trying to figure out splitting the lots, or selling as one. Now it's time to determine prices.

R/
KC

0 Votes

General Real Estate Investing

Post: 🤔 Seeking Advice: Combining Adjoining Waterfront Lots - Pros & Cons?

KC Pake

Lender

Pro Member

Posted February 02, 2024 08:34

Investor
Orange Park, FL
Posts 169
Votes 106

Quote from @Sean Hudgins:

I think the biggest question I have is really the surrounding area and what would be the most appropriate use of the land according to its surroundings.

0 Votes

General Real Estate Investing

Post: 🤔 Seeking Advice: Combining Adjoining Waterfront Lots - Pros & Cons?

KC Pake

Lender

Pro Member

Posted February 02, 2024 07:16

Investor
Orange Park, FL
Posts 169
Votes 106

Quote from @Bruce Woodruff:

I have no experience with this exact situation....but since you're asking for opinions....I would sell them separate lots. Easier, quicker and possbily more money (?)

If an investor wants them all, they can buy them and combine them themselves...

Thank you, Bruce! I appreciate your insight, exactly what I was looking for when I posted here.

Regards,
KC

0 Votes

Quote from @Andrea Evans:

I've owned my primary home in Charlotte, NC, for seven years using an FHA loan this June. I want to use the new 5% conventional on a four-plex unit-to-house hack (MTR strategy) in Cincinnati, OH. Can I utilize this strategy if I rent out my current primary in Charlotte and move to Cincinnati to invest in real estate? My current savings pot is low; I believe this will enable me to accelerate my savings goal as the barrier to entry is significantly lower. In addition, my W-2 job is entirely remote. I would only be in Cincinnati for that entire calendar year and then return to Charlotte to my primary home.

Greetings Andrea,

Your plan to house hack a four-plex in Cincinnati using a 5% down conventional loan while renting out your Charlotte home sounds like a solid strategy, especially with your remote job offering flexibility. Here are key points to consider:

Loan Eligibility: You can buy a multi-family property with a low down payment if you occupy one unit. Ensure you meet the lender's requirements and discuss your plan to make sure you qualify for the best terms.

Renting Out Your Charlotte Home: Given you've lived in your home for over the required period, renting it out is a feasible option. Just ensure you comply with your mortgage terms and local regulations.

Financial Planning: With limited savings, it's critical to account for all potential costs, including maintenance and vacancies. Building a financial cushion for unexpected expenses is essential for successful property investment.

Remote Work and Relocation: Your ability to move freely due to remote work aligns well with your investment plan. Ensure you have a property management strategy for when you return to Charlotte.

Legal and Tax Considerations: Consulting with a tax advisor and a real estate attorney will help you navigate tax implications and ensure legal compliance in both your investment and rental activities.

Short-term Investment and Return Plan: Since you plan to return to Charlotte after a year, consider the short-term nature of your investment and its implications on your overall strategy.

In summary, your strategy has potential, but success hinges on careful planning and navigating the financial, legal, and logistical aspects of real estate investments.

Good luck with everything,
KC

0 Votes

All Forum Posts by: KC Pake

KC Pake has started 17 posts and replied 166 times.

Post: Pensacola FL, First time VA purchase, Questions on Location/Strategy

Post: REO Listings? Good or bad idea?

Post: Anyone use only minisplits to cool/heat an entire house?

Post: Should I sell or keep?

Post: Very New investor with very little tax knowledge

Post: Triple Net Leases

Post: 🤔 Seeking Advice: Combining Adjoining Waterfront Lots - Pros & Cons?

Post: 🤔 Seeking Advice: Combining Adjoining Waterfront Lots - Pros & Cons?

Post: 🤔 Seeking Advice: Combining Adjoining Waterfront Lots - Pros & Cons?

Post: Can I Do This??

KC Pake has started 17 posts and replied 166 times.

Biggerpockets Logo Post: Pensacola FL, First time VA purchase, Questions on Location/Strategy

Biggerpockets Logo Post: REO Listings? Good or bad idea?

Biggerpockets Logo Post: Anyone use only minisplits to cool/heat an entire house?

Biggerpockets Logo Post: Should I sell or keep?

Biggerpockets Logo Post: Very New investor with very little tax knowledge

Biggerpockets Logo Post: Triple Net Leases

Biggerpockets Logo Post: 🤔 Seeking Advice: Combining Adjoining Waterfront Lots - Pros & Cons?

Biggerpockets Logo Post: 🤔 Seeking Advice: Combining Adjoining Waterfront Lots - Pros & Cons?

Biggerpockets Logo Post: 🤔 Seeking Advice: Combining Adjoining Waterfront Lots - Pros & Cons?

Biggerpockets Logo Post: Can I Do This??

Post: Pensacola FL, First time VA purchase, Questions on Location/Strategy

Post: REO Listings? Good or bad idea?

Post: Anyone use only minisplits to cool/heat an entire house?

Post: Should I sell or keep?

Post: Very New investor with very little tax knowledge

Post: Triple Net Leases

Post: 🤔 Seeking Advice: Combining Adjoining Waterfront Lots - Pros & Cons?

Post: 🤔 Seeking Advice: Combining Adjoining Waterfront Lots - Pros & Cons?

Post: 🤔 Seeking Advice: Combining Adjoining Waterfront Lots - Pros & Cons?

Post: Can I Do This??