All Forum Posts by: Account Closed

I think so.  Most banks require anyone with over 20% ownership to be a signer.

When making this decision you should factor in a whole lot of other things as well (income, retirement, safety money, etc.) so I am not going to give you advice on that without knowing your situation. 

However, my personal opinion on borrowing anything, in this case the heloc, is that you should have a clear plan in place to pay it back. I am assuming you are getting the HELOC for the down payment and that you are going to get traditional debt for the rest of your purchase.

A lot of people treat helocs like free cash and then get hurt when it is due. They buy properties that don't generate income but bank on appreciation to pay it back. That is gambling. Make sure the cash flows of the property can pay down the heloc for the term. If you can't pay the HELOC back by the end of the term, you may not have enough to refinance the property if you can't sell it and can't re-up the HELOC. This assumes that the property doesn't depreciate. Just really think about the worst case situation and if you still feel comfortable with it.

Putting my passive investor goggles on, 10% wouldn't be enough to attract me for an investment.  Once again it just depends on who your circle of investors are and what they want.  I actually did a youtube episode on this topic.  PM me and I can give you a link to it if you are interested.

@Gino Barbaro

Thanks!  I am a huge fan of yours.  You are one of the reasons I decided to get into multifamily a year ago!  Sure.  Any references are helpful.

@John Woodrich Gotcha.  Thank you!  Clearly lots to think about.

@Amir B.

You are thinking correctly. I came to that same conclusion a year ago. I started looking at SFH but then I calculated how many houses I would need to buy to make decent money. I ended up buying a 54 unit and it has been the best decision. The downside is you would need more cash obviously to buy bigger but I can't really see very much downside at all.

@Fabian Kulynych

Partnership structures vary and depends on who is investing.  I would ask your specific investors that you have in mind that question and start from there.  It is all a negotiation at the end of the day and there is no right way to do it.  There is however a wrong way and that is where you are not making enough money.

@John Woodrich Thanks John.  Let me make sure I understand you correctly.  Let's assume I can accelerate $900k of depreciation in the first year.  You are saying that if I sell the property, I will have to add $900k of income to my property for taxes in the year that I sell?  Can you clarify if I am understanding you correctly?  If that is correct, that is pretty outrageous.  I would have expected my tax basis in assets to go down by $900k so that when I sell, I would have more capital gains tax to pay.  Also if the $900k is treated as income and added back when you sell, then does that mean the tax basis of the property doesn't change?  That would be like double dipping.

I quit my job in the beginning of February 2017.  From Feb - Dec, I started real estate investing.  If I were to get the $900k back and if I made more than this in the past 2 years through my job, then I should still be able to take advantage of the deductions plus the appreciation.  Right?   I think with all these benefits, I would probably still owe the IRS money if I went back 2 years.

@Paul Caputo and @Yonah Weiss

Thanks guys.  That's reassuring on the audit stuff.

@Paul Caputo and @Yonah Weiss

What is the typical % of your clients that get audited from your experience because of cost segregation?