All Forum Posts by: Kisean Smith

Wow I never knew you could househack one property at a time per year. I’ll definitely do some more research on that.

@Charles McCabe Thanks for the advice Charles. Good point about the benefit of residential financing. The problem is you can only househack one property. Now that I want to expand my portfolio I would like an LLC to show Private lenders or small banks that my business is legit. Also what do you mean by househacking provides the same liability protection of an LLC to begin with?

@Linda Weygant

Thanks for the response Linda! I really appreciate it. I have an additional question. Could I take these deductions by making a multi-member LLC (aka getting someone to contribute capital for a minimal interest)? That way the LLC would be a partnership and no longer a disregarded entity. I understand I would now have to file Form 1065 and distribute K-1s. Would you recommend that or believe the IRS would scrutinize this?

To all - Sorry if my questions/responses come off irritating. Trying to figure the best way to go about this property and future properties. Thanks a lot for everyone's guidance.

@Linda Weygant

I have a couple of questions and know exactly the right person to ask so I've tagged Linda Weygant a CPA that was on podcast #244. Definitely my favorite podcast by far not sure if that is because I'm an accountant as well. Highly recommend everyone to listen to podcast #244. I've learned the most from that podcast. Whelp I've started this discussion since I'm sure other people have the same exact questions.

It is known you can NOT deduct a 100% of the expenses if you are house hacking. This is because a portion of those expenses are considered personal expenses and not business expenses. My question is why can't the formation of an LLC which the property is owned by take 100% of the deductions while you pay the same amount of rent as other tenants? Obvious reasons for this is to deduct all expenses and not do a pro-rata allocation of expenses. I believe the only disadvantage of this is that the amount of rent you pay to the LLC will be included in your taxable income once the income is allocated back to you. That being said what would you recommend structure wise for someone who is househacking? I want it to be an LLC cause it makes everything more official when you look for financing down the road. In addition, keeping separate books were 100% of the expenses are deductible will be a lot less work.

Lastly any other additional advice is more than welcomed. Please everyone feel free to chime in to provide some advice.  

@Kenneth Hawkins, Jr. yes they do expect the home to be owner occupied. Basically a first time homebuyer program www.investatlanta.com/intown-living/homebuyer-incentives/. However, if I remember correctly as long as you don't own another house on closing date you are fine. The info session provides everything you need to know. Also they do provide assistance up to quadplex assuming you will live in one of the units. Related to the PMI question - I have PMI under a conventional loan. I believe some of their lenders provide options were they would pay PMI. You will notice they have requirements such as you have to use their closing agents and lenders.

@Rick Baggenstoss Ashview Heights - Right across from the AUC (Morehouse, Clark Atlanta and Spelman). Yeah I don’t understand why more people don’t take advantage either. I’ll tell friends and they will still purchase without assistance. It’s free money for not too much extra work. I only put $1,300 of my own money down and ended up closing with immediately 7.5% equity (purchase price - mortgage)/purchase price. 

Alright I will try my best to hit the highlights of my process. I won't be able to mention everything but the small details are also important so always reach out to someone (BP) for advice. I've learned you can never be too sure as well. I've learned you can ask 2 people the same question and get 2 different answers. Then after you do what they tell you a third person comes along with the right answer.

My goal when searching for a home was to find a home with 5 bedrooms and 10 minutes away from downtown Atlanta.

Why this was my goal?

I've always been super interested in airbnb. I believe airbnb is the best way to do some work and raise a lot more income in order to purchase more properties. Being a close option to downtown Atlanta is perfect for airbnb. Quick tangent. Got in contact with a guy who was airbnbing a tent in a backyard with a shower cabana for $40 on weekdays and $50 on weekends. He was booked at least 20 days a month. Yes I said a tent. A lot more to the Story. Lastly the more bedrooms the more rooms I can rent out.

First, I used a feature on the Trulia app called Price Trends to find the cheapest areas near downtown Atlanta. The feature basically shows a map and colors areas from dark green to dark red. Green being cheap and red being expensive. I noticed the darkest green areas were only in West and South Atlanta. So that is when I began to research. During my research I found out about down payment assistance programs that would basically give me free money for my down payment and closing cost. I ended up getting $20,000 but it depends on how you work the system. Realistically expect 5% of the purchase price of home.

My research also included reading a bunch of news articles and history on SW Atlanta and got to fully understand what was going on in the area. Why house prices were so much lower in these area, etc. I could talk about this for half an hour in itself. So for about 3 months I researched the area. I played basketball at least once a week. I went to different churches in the area. I also went to a community association meeting. After going to the community association meeting and hearing all the developments, I knew I had to buy now cause prices were only going to go up.

To answer your agent question, I realized no agent is going to work as hard as you. I rather not type up the whole situation but if really interested just give me a call. Just know agents are slow and in my experience you end up finding the house and they just guide you after that. I ended up going with the listing agent because I lost multiple deals cause of agents not being as passionate as me. I don't regret using the listing agent at all. I was able to communicate with the seller better and also got them to leave behind all the furniture.

I  ended up closed on the home and got 2 random roommates from FaceBook. I also used FB groups to check rent market in Atlanta as well before purchasing. As well as great resource to find tenants.

There's a lot that goes into the process and I'm definitely not going to type it all up but feel free to get on a call with me.

Hey Johnannie,

First of all it's great to meet new investors looking to invest in Atlanta. The city is definitely growing and the rent market is getting stronger by the day. A little background, I did the same thing as you on June 29th 2017, closed on my first property in SW Atlanta and got 2 random roommates off Facebook. Best roommates I could ask for. I would take them over living with any friends. With the 2 roommates, I've covered each mortgage payment by over $50. I got a contractor to start working on a bathroom addition so I can airbnb my basement about 2 weeks into moving into my new probably. The bathroom addition has really messed up my timeline and the contractor basically told me he is refusing to finish under our written contract so screw me right : ) . Based on my experience when I was looking for an area to househack, I believe South or West Atlanta to be the best area.

Where I currently live is pretty rough. I knew that going into the neighborhood but I also figured that is the only way for me to make any real money. See this for example you buy a home in North or East Atlanta. Probably going to cost ~$250,000 for a nice 3 bedroom in a nice neighborhood were you can charge ~$800/per room. Instead I purchased a home in SW Atlanta - not the typical buckhead/midtown lifestyle we all want. My home is basically 5 bedrooms and I purchased for ~$200,000 for a nice 5 bedroom in a rough neighborhood were I charge $600/per room for the 2 rooms. In the first example you can live rent free allowing you to save up money to buy another property. In the second example you are actually make money if you can rent out the rooms correctly. I'm not saying get a 5 bedroom like me but you can, however, purchase 3  2-bedrooms for around $75,000 - $80,000 a house. Just food for thought. There are also a lot of great first time buyer programs in Atlanta. I got $20,000 of down payment assistance as long as I don't sell the house for 10 years. If you are interested I can definitely point you in the right direction. There are also assistance programs where you don't have to live in the house for X amount of years but you get less assistance.

Hope I was able to provide some guidance. Feel free to ask any additional questions. 

Hey Gregory, best advice I have is keep moving forward everyday. I'm not too big on books I rather specialize my knowledge by researching only topics I believe I need. I can second that Rich Dad Poor Dad is the book that got the ball rolling for me. I also started reading "The 4-Hour Workweek" and the book had such an impact on me I could wait no longer and had to take action. That being said I have my first house which I'm househacking and haven't picked up from page 50 something in the book. 

"Take action don't wait any longer"

I'm kinda in the same boat. I'm under contract for a property in west Atlanta and need to build a full bathroom in the basement as soon as possible. I'll keep you posted if I get any leads.

So in Atlanta the assessed value is 40% of Fair Market Value. I was wondering if the Fair Market Value would be how much I pay for a property? Right now the property's Fair market value based on tax records is $160,000 and it's assessed value is $64,000 (40% of Market Value). My question is if I purchase the property for $200,000 does that automatically increase the assessed value ($80,000) which also increases property taxes? The website does state Fair Market Value is "The price at which property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy and both having reasonable knowledge of the relevant facts." I know it pretty much is straight forward but my Real Estate agent is saying my property taxes won't be that high. I know my formula is correct based on using my formula on properties in the same area so the only way for my property taxes to be lower is if Fair market value is lower. I just want to make my sure my calculations are correct when deciding to buy my first RE property.