All Forum Posts by: Mackal Smith

Quote from @Account Closed:

What I've learned is that financial advisers don't usually advise on real estate, they don't make money on it. ;-) However, a sophisticated investor in real estate may be able to help. What are you trying to accomplish?

uuugh... it's complicated... I own 2 businesses and have a 50/50 partnership in a 3rd (all owning small muti-family properties). One of the companies owns 2 properties free and clear and 2 others with small mortgages. From that company, I could sell one of the mortgaged properties and use the proceeds to pay off 1 additional property owned by that company and a second property owned by my 2nd company. That would leave me with Business #1 owning 3 free and clear properties, business #2 owning 1 free and clear property, and 2 additional properties with mortgages. The I would have the 50/50 partnership which owns 6 multi-family properties.

The overall goal is to divest the properties all over a period of time leaving another income stream (by either selling and holding the notes, or using a Deffered Sales Trust) to keep capital gains manageable and not push me into another higher tax bracket. I want to divest because even with the automation, property management, CPA services, and financial advisor I currently have, it would be way too complicated for my wife to understand and manage when I pass away.

I haven't even started thinking about how to effectively cash out my part of the partnership. If you look at all of that then factor in stocks, mutual funds, personal pension, social security, 401K, and Roth IRA's (which I'm currently doing 401K conversions to the Roth) most of which I currently pull from to sustain a lifestyle I'm comfortable with in retirement. You can see how it gets complicated quickly.

I want to leave her with an easy income for life without having to deal with all the complexity. That's why I would really like to work with a different financial advisor than I have currently. I need someone that can look at every facet of my income and investments and bounce ideas around with until I come up with the best plan for me... 

I have been retired for 7 years. My current financial advisor deals well with my stocks, 401K, Roth IRA, and Annuity but I also need help figuring out the most tax efficient way to get out of the small multi-families I own across 2 companies and a partnership with small multi-families. I don't want to leave a burden for my wife when I pass so I need to work with someone who can look at all my assets and provide me my most tax efficient way to structure an exit plan.

I own some properties outright and am open to selling some to loosen up equity with a strategy of owner financing others to provide a steady stream of income over the next 15 to 30 years but this needs to fit into an overall plan including all my existing income streams ( social security, a fairly large annuity, substantial 401K, substantial non-401K investments, and a real estate portfolio worth a couple million).

I can find financial advisors that deal with investments other than real-estate, but I have not been successful finding someone that is willing to deal with the complicated overall financial picture I have including real estate.

Any help would be very much appreciated

Generally the same banks, credit unions, savings & loans, etc will all make commercial loans. All my properties are small multi families and all are carried on commercial loans... oops take that back, the very first property I bought was bought using a personal loan. The rest have all been commercial. I used US Bank commercial loans for the first 5 properties, the last 5 or 6 have been local portfolio lenders. You will find that commercial loans are much easier to get with about 1/4 the paperwork. You need to get used to the fact that you will have a 5 year balloon payment but once you get comfortable with that you will probably never go back to personal loans...

B areas may be your problem. You'll find cash flowing properties in C areas. You can find them in B areas also (depending on your market) but it is MUCH harder. 8.3% is probably good if you are self managing. If you are using a property manager 2 months is better. Capex costs are harder. If you are looking in B areas then you may be high if you are figuring 20% (that's what you meant by 10% for each, right?). I say that because if you are looking in B areas the properties and mechanicals are probably newer and/or in better shape. That's a PROBABLY not ABSOLUTELY... if you are looking in C areas that may be right. If your goal is simply to get some positively cash flowing properties that you can go look at, then generalize at 10% repairs and 5% for Capex costs but look closely at the mechanicals when you go see the property (or have your inspector do it for you)... Good luck.. Don't ignore C properties

oops and I almost forgot one of my big mistakes starting out. I used to think that I would only invest in properties of a caliber or in an area where I would not mind living myself. That is just wrong thinking. The right thinking is this. Everyone needs some place to live. Just because your income is lower doesn't mean you should have to live in a hovel. Focus on making the properties you own clean, fully functional, secure and well maintained. If you do that, you are providing a better product than 90% of the other landlords out there. 

No matter where you invest, buy it right and provide a great product and you will make money.

It may be where you are looking. Are you focusing on A or B areas or are you looking at C properties? Are you doing your own searches only using MLS or are you working with an investor friendly realtor who can set up a custom feed for you? Rather than estimate insurance, talk to other investors and see who they use for insurance. Call the agent up and give them an idea of the types of properties you are looking at along with prices and general locations and get a realistic number. If you are working with a realtor, they can ask for actuals on properties then you'll know what the water/trash/sewer costs are. You can generally get property tax info from the county or city web sites. Don't forget to account for vacancies in your calculations. I would be extremely surprised if you can't find any positive cash flowing properties. It has to be the areas you are focused on...

Hey everyone,

I haven't provided an update since my last post in November. At that time I asked everyone's opinion on using rental properties to help offset my daughter's student loans. Well, I'm 5 months in and I figured I would give everyone an update.

My daughter finished school about 4 years ago with a little more than $100K in student loans. She has been able to defer the government loans, but the private loan payments (that I co-signed) run her about $850/mo. The most she can pay is around $600/mo so my contribution is around $250/mo over the last 4 years.

I just finished setting up a line of credit for $125K and I'm lucky enough to live in St Louis where I can find positive cash flowing properties. I already own 25 units so I know the market fairly well.

My plan has been to acquire a couple (or three) 4 plex units that should net me $150 to $175/unit/mo (based on what I have seen over the last 3 years with my other units). Luckily I was able to find a couple. The first is $135K and the second is $112K (after lots of wrangling with both). Rents for both come in at $2025/mo for the $135K property and $1850/mo for the $112K property. These 2 should provide me close to $1,000/mo to cover her student loans after debt service, insurance, capex, opex, taxes, and vacancies. The nice part is that I need $27K down payment for the $135K property and $22.4K for the $112K property which I will use the line of credit to pay for. My daughter will pay back the line of credit which should reduce her payment to less than $350/mo.I'll then use the cash flow from these properties to pay her existing student loans.

I formed a new company which I named EdRecoup Properties, LLC. I'll keep everyone updated on how I make out, but at least I was able to find properties in the same farm area where my other properties are and on the surface it seems that my plan will work...

25 units all in my same city... Accepted contract on 4 more (4 plex)closing in April, Accepted contract on 1 SFR AirBNB property closing in April, 2 more contracts out on 4 plexes hoping for acceptance by Monday...

Not in the lower rent units. You don't get the payback from the cost. Just a nice countertop from Lowes or home depot will generally make your unit better than 8 out of 10 of your competition. I'm constantly amazed at the investors who never do even the smallest rehab. It doesn't take much to make your units stand out in a crowd. Clean lines, fresh paint, decent floors will put you miles above most of the competition. As for Granite counter tops, in the lower end rents it just doesn't make sense. Stick with clean neutral paints and Lowes or Home Depot counter tops. Renters won't expect nicer, they won't pay more for nicer, and they won't treat them any better.

@Nicholas Richard Ray, dishwashers help a little (you can probably get $25 more per month). Most of mine do not have dishwashers. I have a duplex I just refinished on Louisiana. It was actually one I bought a couple of years ago and just happened to have a chance to go through both units. These are shotgun 2 bedrooms. I installed new flooring, counter-tops, wall and trim paint throughout. It does have a carport in the rear but my phones are ringing off the hook at $675/mo. I'm really picky on screening so it will probably take me a month or so to get good qualified renters in there but I would say that is pretty typical for my units...

The best thing you can do is make sure that the units look good. This particular building had drop ceilings that I meant to replace last year, but with renters in place there was just never a good time to schedule it. Getting those off and replacing with good sheetrock well finished and new lighting (along with the other replacements mentioned above) will get me good renters who feel like they are getting a deal at $675...

I have a couple of duplexes on South Grand and one on Dewey in the same general area that are fetching $750/$800/$925, but these are really finished out nicely... (and do include dishwashers btw :)