All Forum Posts by: Lesley Resnick

Using the SDIRA seems way to complicated to be worth it. Diversification through an IRA with securities sounds like a good plan. RE investing offers enough tax advantage, you can own most properties tax free. Expenses, accelerated deprecation, mortgage interest, etc. RE investors need to learn about 1031 swaps as tool to avoid paying tax on capital gains on properties when they are sold.

FLIP

If you have 78k and can get 178k out, gross $100k.  Move it along.  

If you get $1200 and it cost you 600 a month, just using 50%. Mortgage and Tax insurance, etc.  You would make $600 a month.  Back of the napkin calculation is a cross over in 13 years.

Take your 100k and go on to the next project with it.  Do a 1031 tax swap and you will not pay taxes on the profit.  The other calculations assume you do nothing with the money.  It sounds like you are interested in continuing on.  Cash is king in this business.    

I have been looking at S8 housing for about a year and have not pulled the trigger.  But plan to in 2016.  My assessment is that it takes a good business model to support it.  Forgetting for the moment the low cost financing and tax credits.  

I can only speak to Jacksonville S8.

The rent is guaranteed, that is huge.  No collection, no late payments.  Evictions are easier and less costly S8 will help you.  There is a 2 year waiting list in Jacksonville to get a house, these people do not want to lose their place. There are good and bad people every  where and you will run into some of each.   Your maintenance costs will be higher, however you can use lower quality materials and labor.  The numbers must also support property management.  It is worth the expense to have someone who specializes in that market.    

Appreciation is unimportant to me.  These are all about cash flow.  I would take cash in hand over the promise of equity in a building.  You would need to  borrow money from a bank or liquidate the building to get at the money. 

 I think equity is a fallacy, if you own the building outright then that is one thing.  In the event of crisis like 2007, you would be better off with less equity.  If you have greater cash flow, in a down turn you would be more likely to be able to cover the debt service.  In the event you can not cover the debt, it will be unlike you will be able to sell the property.  The cap rate will not be sufficient to another investor to buy.   In this example the cash flow, would still be high enough to cover the debt and ride out the crisis.  Furthermore, the bank would foreclose on the property with equity first.  

The Flip market is getting tough.  The really good deals post the crash are gone.  Fannie mae and the other mortgage owners are getting to the bottom of their stock of non performing assets.  The economy is getting better, jobs growth, and the mortgage rates are still historically low.  Worst of all it is on TV.  They never lose money, nor have carrying costs overruns, unforeseen zoning etc.  This has also led to a lot of people getting into the biz who should not.  With that said, there are always deals.  It may take more time and require more patience.

LLC is a legal entity, not a tax entity. The single person LLC and Sole proprietor (owning the property in your name) will be treated the same for tax purposes. The more important part is your profession. If you are not a "real estate professional", you can only take up 25k of deductions against your regular income subject to income limits. The real estate expenses (depreciation, travel, maintenance, etc.)can be taken against the income of the business to lower your taxable business income.

I think it is a great idea.

There are a lot unique challenges that military investors face.  A forum would be a fantastic addition to BP.

 No, I can pay with a debit card or through my checking account.  I have three different banks and none of them let you use a credit card.  If you google, " can I pay my mortgage with a credit card".  It outlines ways that used to work but by mid 2015 they were shut down.  The strategies I have seen all involve using 3rd party products that make it prohibitively expensive.  

I have a related question, has anyone found a way to pay their mortgages with a credit card?  I would like to use a points/reward card to cover all my mortgages.  I would pay them off immediately and incur no interest charges.  Based on my current spend I would earn enough points to take a nice vaca every year.  The problem is the banks only take debit or ach.  The banks would have to pay a fee to accept the credit card.  Cash advances start the interest immediately.  This would eat into the value of the points.         

I would not sweat the $5 bucks or late fees provided they are not chronic offenders.  This is one of the areas that landlords are at a disadvantage.  Some people take a very hard line approach PAY UP NOW or GET OUT!  The tenant could simply stop paying and force you to evict them.  Cost $250-$500 and the managements fees.  Could take 2-6 weeks depending on municipality and your ability to complete the paperwork correctly.  Try getting someone evicted during any holiday season or a particularly cold winter.  Assuming you can get them out quickly and they don't trash the place, you can now re-rent it.  You mentioned that it took 2 months or $2,000 to rent it last time.  My point is simple, sometimes it is cheaper and better for everyone to have some flexibility.  I do not advocate being taken advantage of, but it can be in your own best interest not to be a hard ***.  Furthermore, If my tenants pay the rent on time and take reasonable care of my place, I will not raise the rent.  The difference between profitability and loss in many cases is the vacancy.       

Asset protection is a function of where you are financially. The bottom line gets to, are you worth some bottom feeder lawyer chasing you? No contingent lawyer is going to sue you if they have no hope of collecting. Add an insurance company to the mix and there is a reason to sue. Lenders require insurance to backstop their losses. There have been a number of discussions of using paid off properties in LLC's with no insurance as a means of saving money. It has been advised that single entity LLC's be created and all funds flow through another LLC to avoid the cash being frozen should you be sued.

The other reason for using an LLC or C corp. is for tax advantages. You can issue dividends to yourself and be taxed at a lower rate. Hence, the Warren Buffet statement that his tax rate is lower than his secretary.