All Forum Posts by: Matthew Terry

Hello BP Mates,

I thought your perspective would be value in regards to an REI attorney. We have one SFR and will acquire between one and three more this year (probably not in AZ). Right now I'm assuming the contracts we are signing, for our property management company as an example, are well written and cover important matters because of stellar reviews the company gets. We aren't rolling in the cashflow yet and want to start slow, so we are a bit concerned of attorney fees\retainer , but I'm almost more concerned that we are making the mistake of not having one as part of our team yet.

When is a good time to get guidance from an REI legal professional? Should I have already sent contracts to an attorney for their review?

Personally, I withdrew a large chunk of my Roth IRA contributions last week because I figured things will get worse before they get better. Good move considering what has happened to the stock market. Now I have a chunk of cash to invest in RE, but I'm not being too hasty. Like others have suggested, there might be panic selling to take advantage of or RE markets that may be hit with a financial domino effect, perhaps ones that are heavily dependant on tourism, auto industry or energy.

I second Tom's opinion, mainly because that's what I did. I took out a chunk of my Roth IRA contributions 4 days ago because I didn't see things getting better until they got worse. I just avoided losing 10% of my money. Now that I have cash, I'm waiting to see which RE markets will drop because of the financial domino effect COVID-19 is causing.

Hello BP Mates,

Last October we acquired our first SFH rental property and now it is time to understand and execute a tax strategy that aligns with our goals and maximizes our ability to invest in the future. We are fired up to build our rental portfolio and this will be the first time we look for a tax professional to guide us as opposed to our normal Turbo Tax form filling.

Do most CPAs have an understanding of taxes related to REI so I should start my search with simply online reviews? Should I be searching for CPAs who brand themselves REI experts? Are CPAs typically also tax advisors I could spend a few hours with them explaining our current situation, investment strategies and goals or do I need to find a tax advisor and a CPA separately? I want to build a relationship with tax professionals and develop a long term partnership, but will they take me seriously as a new investor with a single SFH?

Any guidance would be most appreciated.

Juan, 

While I agree with the posters before me, keep in mind there are sacrifices to be made if you house hack. I dont know if you live in the Phoenix area as well, but it is very hard to find a duplex in a good neighborhood. All of the residential multi-family that I've seen pop up are in C class or worse neighborhoods. You could buy a SFH and find roommates, but you need to now manage strangers in your house as well as manage the property. You hear stories from the characters on BP renting out every room in their house and they would sleep on the couch, but would you be comfortable with that? With renting, you have little responsibility and no work to maintain the property, so maybe that gives you the freedom to invest in more rentals rather than the possible stress and time constraints of living with roommates and having to manage a property.

Another benefit to house hacking is the much lower interest rate you might get financing a primary residence. When you move out, that rate is locked in.

I am very excited about BRRRR, but ask around town and see just how often a crazy distressed property shows up and then how easy it is to win when people much richer and more experienced than yourself are all over the Phoenix market. I'm not saying dont try, just have a realistic expectation of how often you can deploy your capital if you first need to save every penny, then find a rare deal, then find a team that can get the BRRRR done. You may miss out on other good buy\hold or turnkey opportunities while you are holding out for an elusive BRRRR property. I'm also being told that pulling out 100% of your capital is almost non-existent now. Expect to leave 10-15% in the project, but that is still much better than 25-30%

Hello BP Mates,

Welcome back after the holidays, I hope they were fabulous.

I'd really appreciate some stories of your experiences to illustrate your thoughts.

I'm looking to invest in markets that have good cash flow fundamentals, but slower and more linear to appreciate than others because of the lower capital needed typically to buy properties.(Kansas City, MO, Memphis, Indy, Huntington, AL, OKC).

Let's say I want to achieve $20K in passive income per month within 10 years and I'm starting from $0. Should I be considering markets that appreciate more to get to my goal faster?

After 10 years, SF homes that appreciate at 5%to 6% ( as opposed to 2-3% might allow me to leap ahead in cash flow because 1031 exchange funds would be much higher. Maybe at year 10, I might only be at $15K monthly, but I'd jump $5K in the last year because I bought an apartment building or mobile home park.

Otherwise, would I consider averaging $2K per year in new cash flow as a goal?

Does focusing on appreciation, as long as cash flow guidelines are met, make the snowball larger faster?

I'm not sure it's easy to find 1% rule SF in markets that appreciate at 5-6%. In order keep my capital deployed, would I go down to 0.8% R:V in a market that appreciates 100% more? Is their a guideline, like the "1% rule" for an appreciation to cash flow ratio. Or is appreciation just speculating since I'll be waiting 10 years?

 Mike, that's about right. We bought the property in March 2015 for $210 and now it's worth between $300-320K. 

Thank you for your perspective! If I keep the Mesa property, it appreciates around 2-3x KC. If I sell it, I will get 2-3x cash flow in KC. My thought process is (based on my limited research and almost non-existent investing experience)

1. I want the money now to reach FI sooner.

2. Home values and rent rates can crumble in Phoenix, where they are more stable in KC in the event of a recession.

How important is it, or how would my strategy shift considering I have a 50% equity position in my Mesa property?

I hear RELOCs are hard to get.

Hey John, I have an SFH now that has appreciated quite a bit and I was interested in 1031 as well.

Can you elaborate on what you mean by not having to pay a high downpayment for multi-family? Do lenders see a 1031 exchange as less risk and will allow a 20% down payment instead of 25 or 30%?  

Sean, do you know if they would do a HELOC on a rental property? I did some calcs and cashout refinance won't work. I'm thinking of using HELOC for BRRRR strategy. On that same note, do your lenders require a 6 month seasoning period to refinance a rental property bought for cash initially?

Sean, that's awesome! Right now I have a 4.25% APR on the loan for my rental because it was my primary before. My concern is that doing a cash refinance on a rental will jump the rate to 6% or more and I'll be in negative cash flow territory. What kind of rate did you get?