All Forum Posts by: Matthew Becker

for sure close in your name and switch to LLC. It is very common and banks are fine with it. There is no reason to pay a higher rate for a llc loan

I would consider a C a bad property.   I would not consider a house that cheap to be near a B.  

At $1200 in rent, you will probably have negative cash flow.  Rising maintenance costs, turnover, Taxes, and other expenses will also contribute to this.  

It is OK not to have cash flow if you get great appreciation.  But I can't see why Cleveland would increase in value based on negative population growth and, generally, being a bad place to live.   If you can break even in Boulder, CO, with 20% down, the property value will probably double over 10 Years.  Not that you can break even there without a huge value add.  You will probably get very little appreciation if you break even in Cleveland.   

At most, you will pay down the debt, and inflation will eat up all gains. You would be better off putting money into a fund that performs at 6% to 8% somewhere with appreciation.  If you can find a good fund that is paying out cash flow.  Based on what I am seeing, many of them are doing calls.  They did their pro forma based on interest rates dropping to 5%.  We won't see that for quite some time, so they are upside down and not cash flowing.  

My goal is always cash flow the first year.  If I can't do that, I don't buy it.   I do BRRRRs mostly and still can hit what some seem to think is hard to find—the old 1% rule.  I also do more significant development that takes longer through a fund.  But mostly buy a house with a large lot in a high-density area.   Turn it into a duplex, and then build a duplex behind it.  I am doing three right now.

I just got under contract on a hotel that I will convert to workforce housing.  That one will take a year, but then it will get 25K a month on 2.5M, and there is an RV park as a bonus.   We will turn into a tiny house village.  It will just take time to remodel the place.  I just told my partners when they launch the next fund to market Canada.  Your prices are crazy.  It would be hard to cash flow anything there.  I don't think they have tiny house villages in Cleveland unless you count the homeless encampments.  They are not good on equity growth side of things. 

Cleveland is not a great place to invest in.   I realize you are close by geographically.  You will not be managing it, so there is no difference in doing it somewhere else in the US.  I assume there will be a lot of Canadian dollars heading this way with the potential tariffs.  I would never put my money into a shrinking population base.  Yes, the cash ratio of rent to price is better than some places, but appreciation will not be good.  The quality of tenants could be an issue.   Similar numbers can be found in other places that are growing.  I can't imagine that Cleveland's growth rate will change. It is not a great place.  I would invest in the West, as it has worked for the last 170 years, but not in liberal states that are tax hells.  What do you want to accomplish?  How long do you want to hold it for?  What are you looking return-wise?  There seems to be a lot of people saying invest in Ohio. I don't see how it is great for long-term wealth-building.  I am from the Midwest, and there are wonderful people there, just not much money.  I invest in Idaho, which is Landlord friendly, not a lot of competition.   I have found deals in Moscow, McCall, Sand Point and Coeur d'Alene all in the last 45 days.  Closed on 3 and closing on one in March.  

 Dan seems to kmnow what he is talking about 

1031 arms length could be risky?

OK Sorry for the delay.  I did not do computer time today.  Just enough time to return emails.  

I have more questions.  - Does he want to retain some owner ship?  Is he just looking to have no house payment?  

Total Value $660K. 

Basis - $323K 

Debt $66K 

Liquidation Cost estimate 10% if he sells through broker - $66K.  This can be less I just use this as a conservative estimate because the math is easy.   

Cash Equity. $528K.  So you should make sure he does better than that so it is good for both of you.   

I can't stand Dave Ramsey because he advises people with out asking 100 questions that you should before you give advice like this.  You really have to understand people situation a lot more before giving advice.  I would rather talk to both of you for a hour and advise.    I do deals with friend and family and they are loose because I trust them.  So that has a lot to do with it.  

Credit, jobs, income, age, married, plans for future all this matters. If he makes less 94K a year and married he can take advantage of zero tax rate which would come into play.  You can structure the deal to pay him gains at a zero federal tax rate.  

If he is ok with not owning the properties  The easiest thing to do is buy him a house.  He sells you his house for his basis $323k carries the note.   He buys a house for $500K and you pay it off.  Then you owe hime another $40 to $100K depending on how you figure it out.  You and your husband gift him $19K each.  If he is married you can each give him and his wife $19K x 4 =  $76K  in one year.  Or hand him an envelope with $100K in it.  People love cash.  

He will be allowing you to leverage your money with his this is very good for you.  

I am not a tax adviser and barely graduated high school so I am not sure if I would listne to me.  There are a lot of ways to skin this cat. 

If you don't have a great accountant which most are not.  I have one that is awesome and smart and specializes in Real Estate tax planning mostly because he is an investor as well so he is really good at what he does.  

Anyone can get pro account for free.  most people don't know and this might get me in trouble.  HD actually has another level above pro.  They have outside regional guys and you order through them.  You don't have to go to the store.  I am not sure what you need to spend but north of 2M but man does it save a lot on doors, trim and finish stuff.  Last order I save 40% 

I have to eat I will get back to you in the moring.  I am on vacation so I am a bit behind. 

I can probably help you I have done a lot of private deals and I don't pay taxes.  I have some question.  How much does he owe on each property, what is his basis and how much are they worth?   How much does he want to spend on a house?  How much cash do you have available?  With this info I can probably point you in the right direction.  In general I would come up with a solution and tell my accountant what I am doing.  I just did a deal very similar to this with a couple houses.