All Forum Posts by: Michael M.

I am choosing to turn my current primary into a rental in TX, and possibly moving to AL. I have not created an LLC yet, but it appears there are different types. I also have a trust that I'd like to put the LLC under.

Any advice on which llc to choose?

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Quote from @Bonnie Low:

Quote from @Michael M.:

Hello, I’m considering turning my primary residence into a rental and moving out of state. It’s a 3000 sf 5 bed 3.5 bath new build (2022) with really nice finishes. We bought at the peak of the market in 22, and can’t stomach the loss in equity + paying an agent to sell. Our plan is to hold the house 5 years + until the market comes back, or possibly just holding it long term.

I'm considering either the STR or LTR strategy, but haven't quite decided which would be better / less of a headache.

Mortgage is roughly 3250 and I think we could rent for 3450 to 3600. Not sure on how much I could airbnb it. We're located in Buda which is a bit outside of Austin, but still only about 20 mins from downtown, so I think there's still good STR possibilities.

Im curious if anyone has any advice or things to keep in mind when doing something like this as it will be our first rental. Curious if anyone here has gone through something similar and could share their thoughts / advice.

You're not going to cash flow as a LTR if you use a property management company. There's not enough spread between your mortgage and the LTR rates to leave much of anything after they take their cut. Are you prepared to self manage? If so, it's definitely doable but, again, it won't be cash flowing much and maybe you're ok with that. You're in a great area that will always be popular. I think Austin is pretty restrictive on STR regulations but that might not apply in your area. Use a tool like STR Insights to analyze STR potential in your area. Your property may have potential as an MTR. There's potentially a use case as an insurance placement as this is the type of home that can bring high dollar insurance contracts if done right.

Hey Bonnie, where would you start looking to learn more about MTR? I haven't thought of that as a possibility.

And agreed, property management is out of the question.

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Austin, Texas

Quote from @Jason Grote:

@Michael M.

I'm very familiar with Buda, and we currently have an STR in Buda.

I feel your pain with buying at the top of the market. If you have the resources to hold the property until the market comes back, which it likely will, it makes sense to do so.

I will say that the STR market around Austin is not that great. Mine is in year three and it's best year was year one. Interview a couple of management companies and get their income projections, but definitely be conservative.

On the long-term rental side, I'm not exactly sure where your house is, but getting over $3,000 a month right now is for homes that are on the high end and in really nice neighborhoods. Yours may be, so if you can make your PITI in rent, then putting a tenant in the house and having the lease end at the beginning or middle of selling season could make a lot of sense. Good luck!

Jason, thanks for the reply and advice! When you say not that great are you at least breaking even on the STR? My wife and I have high paying jobs, so if I can at least break even (or even take a very small hit) I still think it would be worth rolling the dice on equity increasing a decent amount, as well as rent increasing over time.

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Austin, Texas

Quote from @Nathan Gesner:

Quote from @Michael M.:

I'm a big fan of holding property forever, but you need to know the numbers. Have you ever learned how to evaluate a property to calculate whether it's a good investment or not?

Your mortgage is $3250 and it could rent for $3600. That's only $350 a month. If the home sits vacant for one month, you lose an entire year of profit.

Here's a very common scenario. The tenant fails to pay their last month of rent, moves out, and leaves some cleaning and repairs. You lose the last month of rent ($3600), cleaning and repairs ($2000), and it takes a month to turn it around and place the next renter ($3600). That's $9,200 lost, which equals over two years of profit lost!

Here's a guide to learn how to calculate whether a property is worth investing in (or keeping).

Hey Nathan, thanks for the response. Yes, that is my biggest concern is the very poor cash flow - but with the area I'm in, I see appreciation being a large piece of the puzzle. There are still a bunch of new builds in my neighborhood and lots available, so it's hard to compete with builders right now - but I see that changing once the neighborhood is complete in a couple of years. In selling it I estimate I would lose somewhere around $30k of my initial investment, which I'm also factoring in.

Appreciate the guide!

1 Vote

Austin, Texas

Quote from @Jonathan Greene:

If you are 20 mins from Austin center, short-term would be ideal and really most of your stays will likely be a week. Your only issue is that STR management is costly in Austin, up to 25 percent. So, if you can learn to manage or get a co-host, you will do better. But remember that you have to furnish the whole place to the tee to crush it on STR in the Austin area, there is a lot of competition.

Thanks Jonathan! Good point, would definitely be some added cost in furnishing a larger home, considering we are going to take our furniture with us. Appreciate it!

1 Vote

Austin, Texas

Quote from @Ryan Kelly:

@Michael Mainini you have options and renting could be a good choice if your interest rate is low. I’m happy to help you analyze it as a rental. We have many clients who have kept their homes as rentals and I encourage it if you have the right plan. We have good property management recommendations as well.

Hey Ryan,

Thanks for the response! I will be reaching out for guidance.

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Austin, Texas

I'm considering either the STR or LTR strategy, but haven't quite decided which would be better / less of a headache.

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Austin, Texas

Thanks for the quick reply!

The thought initially was so we could get an FHA loan on one, as my wife and I do not want to move into a multifamily. I also like partnerships and expect we'd buy more properties together in the future. We could also afford a nicer property in a better part of town where I believe there is more potential upside on appreciation than areas we would be able to afford if we run it just my wife & I.

If we didn't do an LLC could we just put it in our names and still split? Then in the future refi and put it under an LLC that we start?

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So my wife & I have been looking to invest in real estate in St. Louis, MO for the past 6 months or so, and really would like to start with multifamily. We already own a home that we'd like to stay in. One of my single friends is looking to buy his first property to live in, and so my thought was that we could go in together on a nice 2-4 unit building, and that we could split the property. He would then live in one of the units, and we could rent out the others. My wife & I currently have a conventional loan on our home, and we're at 20% equity.

My questions are:

1) What are the down sides to him living in and us living out? Anything specific to worry about?

2) My thought was to start an LLC with myself and my buddy as co-owners with a 50/50 split. Would this be possible to do and still be able to get an FHA loan for 3.5% down?

3)Has anyone structured something like this before that could give me an idea of the best way to do it?

Any help would be appreciated!

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All Forum Posts by: Michael M.

Michael M. has started 3 posts and replied 9 times.

Post: Which LLC type should I choose?

Post: Turning Primary Residence to Rental

Post: Turning Primary Residence to Rental

Post: Turning Primary Residence to Rental

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Post: First Time Investor Question

Post: First Time Investor Question