All Forum Posts by: Matthew McNeil

After buying 3 SFHs in the Boise/Meridian Idaho Treasure Valley area, all of which are producing healthy positive cashflow, I'm ready to buy another SFH. However, the Boise area market is [arguably] the fastest growing in the US and home values are currently priced at levels that would result in zero or negative net cashflow because rents are not rising in proportion to values.  

Note; Even though the Boise area market home values are increasing by double digits annually, I’m not interested in anything that doesn’t produce positive cashflow (such as focusing on long term equity growth) for various reasons covered on other BP forums and blogs.  My real estate agent of 10 years, ranked as one of the best agents in the valley, confided to me that very few investors are currently buying rental properties in the Boise area – for the reasons listed above.

I'm ready to buy another SFH, and I’m looking for an alternative healthy market in Idaho or Washington.  Help me refocus on a new growing market.  Deeply appreciate anyone who can point me in another direction, based on what they're seeing and where they're investing after crunching their numbers.  Thanks!!

Thanks much to every one for the great feedback!

Jay, my 3 SFHs are located in Meridian, Idaho which is growing rapidly!  The median home price of $270K was up 9.5% from the previous quarter and is up 21% during the past year.  I’ve purchased 2 SFHs in the past two years, and the one I bought in 2017 is up $50K in value.

However, the current seller’s market is overpriced and my realtor confided to me that investors aren’t buying as many investment properties as in previous years because the rents aren’t keeping up with the rising home prices.  That "disproportion" erases net cash flow for investors looking to buy SFHs in the current market as they look at their spreadsheets.

That said, my secondary follow-up question is this. Rather than doing a Recast, if I invest the $50K into another SFH (at a price point that's right for me) I'll end up with $0-100 net monthly cashflow compared to my 3 other SFHs that are producing $2200/month net monthly cash flow (cumulatively).

Based on the incredible growth going on in the Boise/Meridian Treasure Valley area (with an additional 400,000 new residents expected to move into the valley in the next 30 years) is it worth it to have a rental in my portfolio that is funding its expense but not netting anything to me?  Is it worthwhile to let that one SFH have a growth in equity strategy? In a simplified nutshell; I'd have 3 SFHs with healthy positive net cash flow that can fund all expenses included a significant maintenance issue that might pop up + 1 SFH with zero cash flow, but expenses are funded.

Thanks!

Honored to be a part of the BP family, and I’ve learned so much!

I own 3 SFH properties. I have enough money to do a $50K Recast on one of my properties with the highest principal owed. Recast meaning paying a lump sum toward the principal which results in re-amortizing the loan (note; this is not a REFI). Lender charges a flat $500 fee. I actually did a Recast on another property last year that shaved $250 off my monthly payment, which added to my cashflow.

Rearview mirror hindsight is a great mentor, and although I don’t regret doing it I realized sometime later that the drawback of recasting is I ended up trading fluidity for equity.  

My question is simple; invest the $50K in a Recast on an existing property, or invest the $50K in another property?  Would appreciate numbers to support varying perspective.

Thanks!

@Costin Iorgulescu

sorry... accidentally hit the "Post Reply" button before finishing.  Meant to write that my houses are less then 10 years old in a bedroom community previously owned by single owners.  Titles are not as complex here as they may be in larger metro areas. And, the concern Constin raised regarding the Quitclaim issue is VERY important and needs to be researched before transferring a deed.  I was previously not aware of it and that's why I apprciate this blog!

@Costin Iorgulescu

I decided to write another email to my Title Company because I wanted to make sure I wasn't assuming anything or misunderstanding what you pointed out regarding the DOS. I specifically asked if the Lenders insurance is invalidated if I processed a Quitclaim to my two-member LLC, which is in my name of my wife and myself. They replied; " The Lenders insurance is not affected by a subsequent transfer of title via Quitclaim to the LLC in your name." However, this falls under Idaho state law and may be different in other states. Also, the houses I own are relatively new; <10 years old in a bedroom community, and they were previously owned by one a married couple who didn't divorce, file bankruptcy, have liens against the houses, county easements, etc. Your caution, however, is very valid and needs to be on the radar for people considering a Quitclaim, and I wasn't previously aware of it.  That's why I appreciate this blog!  Finally, each owner needs to carefully research anything related to their properties before they do anything, and not base their model on the points I highlighted to @Patricia Smith

Costin:

Regarding the Quitclaim concern. Your comment prompted me to seek advice from my attorney and the Title Company. The Title company told me the Lenders policy remains intact. My attorney stated; "As with a trust, Lenders do not exercise the "due on transfer/sale" clause when real property is transferred to the same individuals in an official capacity i.e. when the LLC members are the same names as the names on the house sale." In my case, my LLC is in the name of my wife and me; 2-member LLC.

My attorney also advised that we use an updated Quitclaim format permissible in Idaho;

“This transfer is being made subject to the terms of an existing mortgage against the property that contains certain terms and provisions. As such, to the extent this transfer is ever deemed to violate any “due on sale or transfer” provisions of the mortgage or related loan agreements, this transfer shall be deemed void and title shall be recognized to remain in, or otherwise automatically revert to the Grantors, personally. Grantee shall execute any necessary instrument to implement such reversion, as needed.”

Costin, you wrote; " -you made one possible mistake - you quitclaimed the deed to the property - operation that usually doesn't carry the title insurance."  I was not aware of that and I need to bring this to my attorney.  Owning rental properties places us on a continual learn curve.

Patricia, like you, I chose to educate myself. I learned a lot watching several of Coon's teachings on YouTube and I've also read the comments and appreciate each perspective. As for me personally, my investments are in single-family rental properties. Based on good legal counsel I did the following for each property; I set up a two-member LLC ($100 filing fee), Quitclaimed each property into the name of the LLC and recorded it with the county, applied for an IRS EIN for each LLC, set up a separate bank account in the name of the LLC, secured $1M liability insurance coverage and had the insurance company identify the LLC as the "primary" insured, hired a property management company identifying the LLC as the client, made sure rental contracts are in the name of the LLC and I file Form 1065 tax returns for each LLC. NOTHING is in my name of the name of the other LLC member. My assets strictly follow the legal structure for which LLC's were created (to limit the liability of its members). I'm 55 and throughout my life I've learned to consider risk assessment, and I've determined the structure I've carefully followed minimizes my liability and protects my assets. "Minimizes" being the key word, which is the same word Anderson uses on their website. It doesn't say "remove." Ultimately, the question I asked myself is this; if LLCs were set up to limit liability then why do I need to go with an additional Turn Key service facilitated by a third-party to accomplish the same thing, or what my attorney will do to protect my assets if challenged – as long as I set up the LLC correctly and made sure nothing is in my name by which the "veil can be pierced." I recommend this link for your review;

http://www.mlwfinancial.com/news/2016/9/26/rcxi1sz...

Thanks Christopher. Any idea how to "opt out" of the rules?  Is there an IRS form or its just indicated on the taxes?