All Forum Posts by: Milton Rivera

@Jessica Howell

The fastest evaluation here is the trying to meet the one percent rule (1%).  Rents = 1% of purchase price.

None of these properties even come close to meet the criteria.    I am not sure what your end goal is, I am assuming you are using house hacking to live on the property, in essence, rent free and I am assuming the rental number you mention above assumes all units rented.  

If you are looking for appreciation, negotiate a lower price and make improvements to the properties (metering, adding HVAC, etc.)

Good luck, 

@Kyra Ames

The restrictions around the 1031 exchange have to do with the "alike property" and timing.  In principle, if the property is new it should not matter (think if you were buying a new home from any home builder).  The issue you may run into is the timing.  You have 45-days from the sale of the old property to "identify" the replacement property(ies) and 180-days to close.   

In this case, some of the questions:

• Can you actually get the property build and close within six months?  You will need to have all plans, specs, permits, etc. in place so that the contractor has six months to actually built.  
• How will the property be financed?  The builder will want draws at certain milestones (poured slab, framing completion, mechanical/electrical rough-in, etc.)  Is the builder going to front all of the constructions costs?  Can be done but you will pay a premium for them to carry the loan.  

Depending on the actual capital gains the 1031 exchange may not be worth the tax savings.    

Good luck

@John Nguyen

I am assuming your 45 day identification period has expired and hence cannot swap property B for another one. 

In this case, you will most likely have to pay taxes on the balance.  You can do a google search for a 1031 tax calculator to get a ballpark idea (you will need a few data entry points (sale price, depreciation taken, balance on the loan, 1031 fees, etc.)  You can also talk to your CPA to get a quick ballpark number.  Overall it should not be a huge amount given that you will use some of the funds.  

Answers to other questions:

Yes, you can purchase other properties. If you are in the 45-day identification period you can just swap the proposed property with the intermediary.  If not, you may have to wait until to actually close on the property A and request disbursement of the remaining funds.   

To my knowledge, there are no time restrictions on long you have to wait.  You just have to meet the criteria and adhere to the 1031 exchange rules (45 days to identify - 180 to close).

Good luck

@Nathan Doherty

What is the plan for the first property?  If you are going to keep it as a rental, the key is for that property to be cash flow positive.  In essence, the property will be considered as additional income.  The lender will most likely look for you to have a reserve fund (say three months of mortgage).  They will also take about 80% of the revenue from the rental (the remaining 20% will be considered vacancy).  I recommend calling the bank and/or a broker to see what other tips they could provide. 

@Nathan Doherty

Have you considered house hacking that is living in one of the units and rent out the remaining units. If so, you may qualify for an FHA loan with about a 3% down payment requirement.

@Lisa Miller

Send me a private message with what you have.  I prefer small multi-family.  I can forward the rest of my criteria via private message. 

Thanks,

Milton

@Diego Lopez

The financing option is up to you (unless they are providing owner finance) since you would be the one to bring the money to the table.  In this case, the determining factor is how were these properties titled.  If they are titled, zoned, etc. as two independent quad units than you can get two residential loans that close on the same day.   

There may be other reasons why the units may be sold separately, say one is completely vacant or has a lot of deferred maintenance and the other has very little upside than it would be up to you to run the numbers to see if the deal meets your overall goals.  

@Rawn Wilson

I would engage a civil engineer in the area that is familiar with the local jurisdiction and help provide solutions.  These could include finding out who actually owns the land, if the city is the owner, did the owner/developer of the complex get an easement in writing and/on record?  What happens if the city revokes the easement, what alternate solutions can the tenants be given?

I am not sure why they would not share any info, perhaps you can send them a non-disclosure agreement but you have the right to complete your due diligence and come up with solutions.

Good luck

@Charles Wang

A few things to consider:

1. What are your long-term goals and how does this particular transaction applies?  Are you looking for passive income/appreciation/combination?  
2. Looking at the numbers, if you rent on the lower end of your range ($2,600) you may be just breaking even.  You will need to account for the vacancy (1/12 month 8.33%), repairs (these are short-term items and it sounds like you have already done some of the work yourself - assume 5% of rental rate $130), property management (assume 10% $260), cap x (assume 5% - $130).  In this case, about 29% of the rental income will be used for expenses on top of your mortgage and taxes (2,600*0.29) = $764 total expenses = 2,000+764=$2,764.  You would need to nail down the rental rate.  Also, HOAs in Florida are famous and expensive so don't forget to include if it applies. 
3. You are not going to get that type of interest rate these days.

@Dan L.

There are a couple of options here including:

• Cash out Refinance - this should be able to get you somewhere in the 60-85% of the value of the home.
• Get a HELOC - you can also tap some of the equity by getting a HELOC loan and using it as a down payment for additional properties.
• Sale one or more properties and complete a 1031 exchange