All Forum Posts by: Luciano A.

@Eric Young

You are correct. We just signed one of our new builds and that is how they structured. They become the tenant and we are the host. Their members are members of that LLC.

With their new lower management fee, it was worth us to go through them, and they will provide legal assistance if theCity starts causing headaches. 

@Clara Arroyave

Great info. I would love to see how you structure your room rental lease. Can you PM me with a copy, as I am very interested in what it entails?

Best

 I would personally stay away from the downpayment assistance programs as they have many strings attached. If I recall correctly I remember one program here in Houston had a 20-year requirement of you living there and if you move out you pay the loan back. 

Use an FHA loan to buy. We recently built a duplex that has 5 beds/5 baths on each side. House Hackers Paradise when it comes to cash flow. I think a duplex is a great way to help you qualify for a loan and allow you to rent out the other unit and still give you privacy. Once you have educated yourself on being a landlord you can turn the additional rooms in your unit into rentals. Banks wont look at your SFR room rental the same way as they would from income from one side of a duplex.

Don't fall for what I call the more doors the cooler you are. Some people brag about the number of doors but cash flow is very little. Renting by the room can make each property a cash cow. What you should focus on is how much money you want to earn from your rentals. Reverse engineer that and you can figure out how many properties you will need to reach that goal.

Best of luck

 Personally living in an area versus investing in my opinion are two different worlds. I have made more money, especially these last few years with the appreciation in areas like Third Ward/5th Ward/EADO than investing in safer areas like Katy, Cinco Ranch, and Cypress. I remember what the 3rd and 5th wards were like back in 2010. There are still pockets in those areas but if you screen and give a good product you can attract great tenants. However, with that being said you have to figure out what is best for you and your family. 

If you are looking to invest so it can help offset some of your mortgage or other housing costs you can always buy a nice home and add an ADU to help generate income. Of course, you will want to make sure there are no deed restrictions. With the City's new ordinance, it is making it easier to add a second unit to your existing property. I have friends in CA who converted their two-car garage into an apartment and used it for additional income. Duplexes are mostly in upcoming neighborhoods. I've seen a few in the suburbs but with their HOA fees, and mandatory PM fees, it is not an investment. It's for those with 1031 money to park it.

Don't have FOMO and just rush to buy. Make sure the numbers work and by work I mean don't be too optimistic and hope for future appreciation or rent growth to make numbers work. This market has gone up like crazy. Be patient and keep looking. Find one or two neighborhoods you and your family like and become an expert. Get your loan approval in place and once you see a great deal jump at it. 

Best of luck 

@Ben Omonira

House Hacking is a great way to get into the RE as well as reduce your overhead cost. As an investor/builder/developer, I have been in the Houston market since 2006. Safe can mean different things to different people. Safe also comes with a much higher price tag. 

Areas close to Rice have higher price points which can make qualifying a little more difficult, especially in today's interest rate environment. I agree with @Chris Kersey about Sunnyside. I have built tons of SFR and duplexes in that area and have only seen it getting better. I normally tell new investors who are starting in their RE investing that want to house hack, who don't kids to invest in gentrifying markets or in areas that are starting to move in that direction. We were selling new construction for $140k just 4-5 years ago but now in that same area, duplexes are reaching over $500k. My team has 18 duplexes planned for Sunnyside. Our most recent build for a client was under contract to be purchased within 6 days after listing. The ones we are currently framing already have potential buyers.

One thing to consider when you are budgeting is the taxes and insurance. Taxes when they get reassessed to reflect the purchase price can eat away at your cashflow. 

New construction in my opinion is much safer than buying and rehabbing unless you are handy and know what to look out for when dealing with contractors. 

The more bedrooms the better. Check out websites like Padsplit if you want help with locating tenants for the rooms in your place. We are very bullish on room rental as well as midterm rentals. 

If you come across a property but need a second opinion just send me a PM and I would be happy to help. 

Best of luck 

@Lynn Wong

Thanks for reaching out. Now I am not giving you legal or financial advice. I will answer as to how I would do it. The first thing to consider in CA an LLC will have a $800 per year Franchise State Tax fee. I still have a few businesses out there and even though we no longer operate I have not shut down the LLC thus get that notice yearly to pay. Plus the yearly filings of taxes.

I would forgo the LLC route even though your homes are worth $1M. I would focus on protection using insurance. I would protect myself by getting with my insurance agent, looking at your current policy, and making sure you have good protection. For the new property, I would place a landlord policy, not a homeowner policy. I think a good policy that has good liability protection with an Umbrella policy of say $1m-$3m would be cheater and give you protection. I would advise your nephew to also carry good insurance for his car (liability), in addition to an umbrella policy. These umbrella policies are $300-$600 per year. Most insurance carriers provide so not hard to get.

Hope that helps.

Best of luck

@Stephanie Baron

Congrats on jumping into the Landlord business. 

Report your income on Schedule E on your taxes. Make sure to keep receipts/invoices of repairs or payments you have made to help with taxes. 

Reach out to your Insurance Agent and inform them you are no longer living and need a policy designed for landlords. Then ask for an umbrella policy. With good insurance, you don't have to worry much about lawsuits if you have a mortgage on the property. The bank has first position on the loan so they will defend against any attorney trying to take the property away in a lawsuit. 

As long as you have lived in the property for at least one year then you do not need to call your mortgage company as you have fulfilled your requirement when you got the loan in the beginning. 

Enjoy your time in Europe. Don't worry about setting up LLCs or S corps. Keep it Simple until you start approaching $1M in worth or value in the property then you can start using LLCs for liability coverage. 

Again congrats on leaping into the rental business and hope all works out so you can keep buying more rentals.

Best of luck 

For the Buyer to get the loan they will need to own the lot. No bank will give a loan to a buyer who doesn't own the lot. Construction loan is typically 70-80% of the LOC. If the lot is paid off the buyer can use that towards their down. You can draft plans, get them permitted then advertise built ready lot for sale. In the listing can state builder will be willing to build if they pay the full asking price. Normally the lot should be 15-20% of the total cost of the project. You might get lucky or unlucky if a buyer buys but ends up not choosing you to build. So there is a risk. But your strategy to bake in all your profits in the lot is only going to work with an uneducated buyer.

Best of luck

 That is everything. Materials/Labor. What we consider hard costs. So permits, plans, and impact fees are soft costs and those are not included. 

@Michael Cheng

Welcome to BP. First, don't tell agents or anyone you are looking to buy all cash. The sharks start coming out of hiding. Just because someone is a Real Estate agent doesn't mean they will work have your best interest. 

Just like anything new, if you are just getting into RE I would advise you to listen to Podcasts, read some recommended books listed on this site, and search both for sale and for rent to learn what areas of town you want or feel comfortable investing in. Spend the next 1-3 months just educating yourself before signing a Buyer representation agreement and get comfortable speaking the real estate lingo. If you put in the work then you will take it seriously. These agents are helpful until the closing is done and they get paid. You want to build your team and once you have a team then go and buy.

I have paid off properties and I'm not worried about lawyers. I always advise those who have assets to have a good lawyer and a great insurance broker. Insurance policies that cater to your situation will help you and protect your assets.

Best of luck