All Forum Posts by: Kyle Pockat

@Ryan Lucht, I'm no tax expert by any stretch of the imagination (before you judge my being a CPA, I'm an auditor :) - anyway, I'm fairly certain that you can only 1031 exchange a property to be used for investment purposes. Exchanging an investment property to a primary residence is not considered a like-kind exchange in the eyes of the IRS. If you were to do a 1031, you'd have to roll it into another investment property. There are quite a few restrictions with this - you have to identify the property you're exchanging to within 45 days or something like that. Furthermore, as far as I know, you generally can't do a 1031 exchange on a fix and flip because that's not an investment - considered to be active income by the IRS. Somebody more specialized might be able to chime in for the specifics, but I just thought I'd toss that out there in case you're banking this on the 1031 exchange tax deferral... best of luck to you!

Kyle

@Jacob Klee, are you planning on doing renovations to either side of the duplex? Or are you hoping to rent it out right away? Only reason I ask is because while it's certainly possible to find a tenant this time of year, it's definitely more challenging than in April - September. The small savings you might see for buying now could easily be offset with vacancy expense (which is easy to overlook for new investors). If the unit did sit vacant, you're not only losing the rental income for those months, but you'd also be paying to heat the vacant side (as well as other costs if there is a separate water meter, trash collection, etc). In my experience, it's easy to become a little more lenient in selecting a tenant when there are fewer prospects... which, when it's the case of sharing a wall with a tenant, I would want to more selective of who I'm having sign on the dotted line. That said, I just bought a single-family rental two weeks ago and had great tenants move in the day of closing! I suppose it boils down to if you're willing to chance it or not. Worst case scenario - you have a few months of vacancy. If you'll be financing the property, it looks like the Feds will be raising rates once more before the year is out, so it might not be a bad idea to pull the trigger sooner rather than later. Not sure any of this helps, but I thought I'd offer my two cents! :)

Kyle Pockat, CPA

@Brian Ellis - thanks for the advice! Unfortunately, I simply don't have systems in place for rehab projects 4+ hours away. Property management I can handle. I was hoping to focus on keeping my rentals in the area that I know best (Green Bay) but perhaps I need to look into investing here in the Chicago area. My only challenge is that I really don't know the area very well and between insane taxes and higher property values in this area, the costs are much higher to invest here. But maybe I can find somebody to partner with here in the Chicago suburbs at least until I can get back up into Wisconsin.

@David Hall - great advice--thanks! I see the Green Bay REI events pop up, but it's next to impossible to get up there in time from Chicago. But sending proof of funds to a few wholesaler's is an interesting idea that I might try out! Sometimes on the forums I see these new investors that talk a big game but when it comes down to it they're not actually serious investors (at least yet). Maybe that's how I'm perceived at this point from the players that could actually bring me the deals I want. If I can somehow prove that I'm actually in the game now and ready to expand my portfolio, they'd take me seriously. Thanks!

Thanks, @Charlie MacPherson!

I did have a pre-approval and did actually waive the home inspection contingency after doing some due diligence on the inspector that had already completed the inspection. I tried to submit as clean of an offer as possible with a quick close (my lender already had all of my paystubs, W-2's, tax returns, proof of funds to close, etc.). At the end of the day, with having multiple offers on the table, the highest bid trumps the potentially cleaner offer. I think your post solidifies my struggle more than anything. If I'm going to be paying 103% of list price in a hot market, my numbers just can't work. Unfortunately, higher list prices don't automatically translate into higher rents dollar for dollar. For this particular property, I did go in slightly above list, but another buyer came in at 105%. I know how buying a house for a primary residence can become an emotional decision which increases the amount a person is willing to pay... but with attempting to pick up a long-term buy and hold, at least in my experience, the profitably is largely determined at purchase (and of course subsequent to this, proper tenant screening and management of the property). Is there any way you might suggest to be able to get to these listings before they hit the market?

Hello all!

First time BP post here! I've recently relocated (somewhat temporarily) to Chicago but had been investing in the Green Bay area since 2012, focusing on buy and hold SFRs. The reason for my post today is not only to introduce myself and get to know some of the other investors, but to also get some feedback from the BiggerPockets Community in buying long-term buy and hold in a hot market. It's incredibly difficult to secure a contract on a property with all the right numbers when families are willing to overpay for almost any property. With being in Chicago, I'm not really looking to buy a property that would need extensive work. And, with only wanting to pick up 1-2 houses/year, I haven't found a wholesaler that will give me the time of day. I'm currently working a full-time and a part-time job so I'm not ready to try start my own marketing efforts. I'm hopeful there has to be a way to find a lead even in a hot market, but I'm starting to wonder if I just have to wait for things to cool down... my hesitation with waiting is two-fold: 

1) All the market trends and government fiscal policy indicate interest rates will only climb in the near future. With my W-2 income, I can still qualify for a 30-year fixed rate loan at 4.625% (a no-brainer in my opinion)

2) I have capital that I need to deploy and the measly 3% interest I'm earning simply doesn't compare to how those funds could serve me in the rental market. And as far as risks go, the only risks I'm willing to take are those in real estate (not into investing in the stock market until a lead comes my way). I'd consider a lending role, but would any investors would only be looking for $60-80k? And I wouldn't want to tie up that capital for long periods of time as I'd be hoping to invest myself!

I'm sure that I'm missing something and I would love to hear from anybody that's willing to shed some light on this for me! Thanks for your time and I'm looking forward to getting more involved in BP!

- Kyle Pockat, CPA

Mike, congrats on making the decision to make the first steps in investing in real estate! Determining those first steps will likely be the hardest part--but don't get discouraged! It will get easier (and less daunting) as you become more experienced. To answer your question about investing while renting, there are a number of investors that have become successful because they rented (at least initially while they were first starting off). In one of the early podcasts, the individual managed to convince his wife to sell their big house, move in to a smaller apartment and use their sales proceeds to invest in cash-flowing rental properties! In certain markets, renting may be more cost-effective than buying which means your monthly payment will be lower than if you owned a home. If you're thinking about conventional/bank financing, they'll look at your monthly expenses to determine what you can afford (rent + car/student loan payments, credit card payments, etc.). So if your rent is less than a mortgage payment + monthly property taxes + homeowner's insurance and PMI (if applicable), you might actually be increasing your purchasing power by renting! Seems kind of counter-intuitive, but if you look at the numbers, it makes sense! So don't let your current circumstance of renting hold you back! You got this!

On another note, are you thinking of investing in the Milwaukee area or elsewhere?

Kyle