All Forum Posts by: Logan Allec

Welcome, @Johnson Michael.  Have you thought about house hacking a 3- or 4-unit property, living in 1 unit, and renting out the others?  I snagged my first property this way, and it was a great investment and a great learning experience!

@Chris Papa, if you're going to be investing with a partner, it's definitely money well spent to hire a good attorney to form your entity and draft your operating agreement or otherwise memorialize the economic arrangement between you and your partner.  Remember, a good agreement makes a good deal better, but a bad agreement makes a good deal bad.

Also, as @Dan H. alluded to, if either of you performs any activities whatsoever while residents of California, the state of California's position is that you will have to register your LLC with the California Secretary of State (even if formed in Texas or some other jurisdiction), file the annual Form 568, and pay the annual $800 tax.

Also, by forming an LLC in Texas, you may be subject to the Texas Franchise Tax.

So really the only person who can answer the question of whether you need an LLC or some other entity/arrangement is a qualified attorney who thoroughly understands each partner's situation with respect to themselves and each other.

If you need a reference to a good one, I have one.  Like I do for my practice, she works with clients remotely, so distance is not an issue.

@Paul Aguilar I can't tag him but I've seen Sanjeev Advani post here and there on the boards about Bakersfield.  You may want to reach out to him.

I used to own a property in California City on the outskirts of Kern County.  It was a decent investment, primarily because I was able to get it from a distressed seller at below market.

I love Simi Valley, by the way.  Love it so much I got married there!

@Kevin Phu, the typical method is by square footage where you take (Square Footage of Rented Space + Pro Rata Share of Common Space) / Total Space in House.

@Caleb Heimsoth August '88 here.  Here's to 30!

Have you looked into refinancing your student loans?

@Scott Anderson, a few years ago I bought a 4-unit with FHA financing (3.5% down). It's really not that much different than buying with a conventional loan...there are just some additional requirements in terms of the property's condition, cash flow (self-sufficiency rule), etc. Have you yet spoken with a lender or mortgage broker or agent?

@Kevin Phu

How did you come to the 1/8 calculation?

Let's say each unit is 2,000 square feet, so the entire property is 8,000 square feet (in reality my property is way smaller but just for sake of example).  So we have:

Unit 1: 2,000 square feet rented out

Unit 2: 2,000 square feet rented out

Unit 3: 2,000 square feet rented out

Unit 4: 1,000 square feet rented out; 1,000 square feet occupied by me

So 7,000 out of 8,000 square feet is rented out = 7/8.

And 1,000 out of 8,000 square feet is occupied by me = 1/8.

Did you calculate by total rooms in the units or just by bedrooms?

I personally used square footage, but that's not the way it has to be.  You can come up with any allocation you want, as long as it's "reasonable" (vague, I know).

@Caleb Teachout I know that if I try to pick stocks, I will have a very minimal or even negative return on my time.  So I invest in low-fee index funds.  I'm OK with being "average" in the stock market because that's probably the best that I can do in the long run.

With real estate, it's a different story.  I believe that it is easier for me to beat the benchmark (I personally use the S&P 500) with a diversified real estate portfolio of properties that I "picked" than it is with a diversified portfolio of various stocks I picked, especially considering taxes.

Also, in my opinion, past performance is a better indicator of future performance for an individual property than it is for an individual stock (of course you have to take into account the real estate cycle).

And future returns are not guaranteed in real estate.  A local economy might collapse because its major industry had been disrupted by a new technology (but hopefully one wouldn't invest in one-trick economies).  Or your building may have a "surprise" issue that costs you tens of thousands of dollars to fix (but hopefully one has healthy cash reserves to cover these issues when they pop up).

Also, past performance itself is easier to see transparently with a rental property than with a publicly-traded company.

Even as a CPA, sometimes when I read the financial statements and annual reports of publicly-traded companies, I'm left wondering what kind of tricks they're playing on the inside to make themselves look better than they really are.

But with a property, the due diligence is a lot more straightforward.

But of course all these advantages of property come at the cost of investing a significantly larger portion of your wealth into a single, illiquid asset than you would if you wanted to invest in a single, liquid stock.

Anyway I rambled a bit there, but my personal philosophy is that both equities and real estate are incredible wealth-building tools, but similar to @Andrew Johnson I am much more "active" in real estate.

@Vijaianand Thirunageswaram I completely agree with you.  If I didn't go down the dastardly "go to school and get a good job" route, I could not have invested in real estate like I have today while still in my 20s.  Nor could I have developed a decent side hustle income doing taxes while keeping the W-2 job.  Nor could I have quit my job to start my CPA business, working from the comfort of my home (or wherever I have my laptop and an Internet connection).

I don't say this to brag, but to point out that early on in life the most important thing you can do to someday have the life you want to have is to 1) gain skills and 2) make and invest as much money as you can.  And like it or not, the quickest, most surefire way for most people to 1) gain skills and 2) make and invest as much as money as they can is to pursue the Kiyosakian antithesis of "going to school and getting a good job."

That being said, while I'm clearly not the biggest Kiyosaki fan myself, I have listened to enough people far more successful than I am who took life-changing risks as a result of reading his material and are in a much better place today than they would have been had they spent the next 30 years in a cubicle and contributing to their retirement plans.

For others, of course, Kiyosaki's message led to a path of ruin. With no savings, plan, or viable product or service, they quit their jobs, thinking by doing that they would magically figure it all out and get out of the "rat race," only to find out that they had no idea what they were doing.

I personally think the best route is a middle ground.  Get your bachelor's, get your master's if your field requires it to progress, and kick butt at what you do in order to maximize both your active income while educating yourself on passive income sources, like real estate, so that you can invest in it wisely. It's a lot easier to set yourself up to fund your passive income sources making $200,000 a year, albeit at a slavish cubicle job, than making $20,000 a year at McDonald's or—worse—making $0 a year at no job. But hey, at least you escaped the rat race!

Just my two cents.