All Forum Posts by: Michinori Kaneko

Hi, as a new investor as well, i went back and forth between SFH and MFH. It's really just a trade off between risk and return (no risk no reward) so it boil downs to what you are comfortable with. I ended up starting out with SFH (and probably stick with it). Here are some pros and cons:

SFH

Pros:

better tenants (if you can afford it, why would you share a home with someone?) that may stay longer than 1 year.

can off load expenses (mowing the lawn, carpet cleaning, etc.)  to the tenant

more liquid (only investors would buy multi family, where as SFH, can be purchased by people looking for primary resident as well)

Cons:

Less GROSS rent (typically)

more roofs and other capex to repair

MFH

Pros:

More rent

less capEx

even if some units are vacant, there may be SOME income to cover your cost (but not always)

Cons:

most likely attract not as established tenants. more possibility of eviction or tenants not taking good care of the home.

if you are managing it yourself, it's a headache to deal with multiple tenants (more work, more complaints)

you are liable for expenses around maintaining the common areas

I think you just need to run some numbers based on your area and see what you are comfortable with. MFH would have higher vacancy rate and faster turn over than SFH in general, and you would need to layer in additional maintenance expense that you would need to pay for SFH. Hope that was helpful!

Hi,

I would think cashing out is the best route.  On top of $750 cashflow, are you also making more on the principal repayment?  It's great that you are making 18% return on your initial investment, but you have to consider the "investment" you've made over the years too (aka principal repayments).  what's more relevant here is opportunity cost (if I sold my property now and invest that amount, how much more or less can i be making?).

Note that like kind properties 1) does not have to be in the same area, you can invest in other states or cities that generate better returns, and 2) it doesn't have to be 1 to 1, you can buy 5 properties with your $350K, and that'll probably generate a lot more than $750 a month.  Check this link:

Price to Rent Ratio in US Cities

looks like texas is a good place to start.  

Hope that helps!

Hi,

I'm just starting out on real estate investing.  I've put significant chunk of my monthly pays into stock market/mutual fund since I was in college.  I just went into contract on my first investment property last week, so i'm almost at 100% stock (Have small money in bitcoins and other "alternatives" if you count those). I intend on increasing my allocation to real estate over time (without selling out of my stocks/mutual funds - they have significant unrealized gain so it will trigger a pretty large taxable gain if i sold them). 

To answer your question about financial advisers, its easier for common people to invest in mutual funds and the stock market. it's more liquid, and all you need to do is buy a mutual fund. not much research required. you just set it on auto pilot.  with real estate, you need to put in more effort into finding the right property, crunching numbers, communicate with vendors stake holders, etc. there's a lot more work. 

In short, stock market is easy money (in a longer term) and you can do it with smaller sum of money (or at least that's the perception). real estate requires effort, illiquid, requires larger capital upfront, but if done well can do very well. Major advantage point of real estate is taxes. with stocks/mutual funds, unless they are in ROTH IRA or ROTH 401K, you are taxed on the realized gains. You can also invest in traditional IRA and 401K which will DELAY your tax payments, but that's not the same as tax avoidance. For rental properties, you can avoid most of the tax on your rental income for about first 10 years or so from just depreciating your home + interest payments (if you finance your purchase). After 10 years, you can do a like kind transfer and get a new home without paying tax on the gain as well (and then your first 10 years of rental will be tax free again!). I'm not as knowledgeable about flips, but I imagine there are many ways to get around paying taxes on it as well (or at least delaying them).

i don't think if you are doing well in real estate you need to follow 90/10% rule at all, but i do recommend you look into investing a little into the stock market, at least to max out your IRAs and 401Ks (especially, if your employer provides 401K match, you should definitely make sure you get the full match, as that's free money).  I also recommend that if you do decide to go 100% real estate, make sure you have some rental properties.  Flips may be lucrative and good to build capital, but do you really want to be spending time in your 70s and 80s looking for properties to flip? instead, if you have sufficient rental properties to have enough passive income to cover your expense, you can live freely doing whatever you'd like :) 

That was long, but hopefully it'll be helpful to someone!

that's great idea. i have a 1yr old daughter, so i'll try that strategy out in 17 years haha. 

Disclaimer that i'm new to real estate investing.

From just quickly looking at the numbers, looks like you have way better investment choices than the property you listed. for a $300K loan (and $70K Equity), you can find 3 x $100K properties that can get you $1000 a month (or more) depending on the area that you invest in. obviously, you will have more cost (closing, inspection, etc. + more CapEx as you have 3 roofs instead of 1), but in a longer term I think you will generate way more cash than keeping that investment? Your situation is not about whether the property can generate cash or not, but rather what your opportunity cost is.

Great! Thank you so much for your help.  I'll open the account soon, along with your suggestion about capex savings account!

Thank you Joe,

that's every helpful.  So if I distributed all the money to my personal, then decide I want to purchase another property, it's probably better to transfer more money into the business checking and buy the property from there, correct? 

Thank you both for your inputs. I do intend on utilizing LLC once my portfolio grows, but probably not until i have a handful of properties.

@Joe Hines How do I become "Creative with how to pay myself"?  I guess my question is, when i'm transferring money from my business checking to personal checking, how is that different from mixing the two? I suppose my question is how do I have a  clean separation? do I schedule like a set amount of quarterly distribution or some sort of "rule"? 

I am a CPA and good with excel so I think i'll be ok with maintaining my records (I don't really practice CPA though, so I'll still need some advice from people who practice in these type of situations).

Hi,

I went into contract on my first rental property a week ago, and getting ready to close the property in few weeks (under my own name, with no LLCs).  I am wondering if opening a business checking account is recommended, and if so, what do i need to be conscience about? Can i "distribute" money to my personal checking once every few months, or do I need to keep it in the business checking account?  Thank you for your help!

Agreed with Kathy Selig for Fort Wayne. I met her through Camilla, and she's been above and beyond realtor for me! went into contract on my first property last weekend via Kathy!