All Forum Posts by: Pedro Gutierrez

I‘ve owned my first primary house for over a year and had a lease with a renter signed in December of the second year I owned it. Can I still write off the depreciation for the year in which I started renting it? It’s still within the tax year so I’m guessing yes.

I understand this sort of advice comes with disclaimers, though hoping someone can just share from their experience. Thanks everyone!

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Quote from @Lane Kawaoka:

For people low on liquidity IBC does not make sense cause the fees come out in the front and as a new investor every penny should go to buying properties.

But for more high net worth folks (500k+) IBC is a good way to get tax savings, yield, and sheltering from litigation.

This has been the most helpful in my decision-making thus far when it comes to an IBC. Thanks Lane!

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Quote from @Allie Pfannenstiel:

@Pedro Gutierrez

Especially right now interest rates are high to do a cash out refi or to take a line of credit. I also think that people who don't have their own savings to invest in the next property tend to become over leveraged and that is a risk I don't recommend.

Also I think you can find a renter in any area since not everyone can afford to buy. Here are some closed rentals in the last 90 days.

https://www.flexmls.com/share/...

I see what you mean now about potentially over-leveraging.

Thanks for the insight on the what's been renting and how fast. I feel more confident about being able to find a tenant, I'm just trying to now focus on what the right deal for me would be to get into a new primary residence. Lots to consider!

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Quote from @Allie Pfannenstiel:

Hi @Pedro Gutierrez

First off feel free to call me and discuss if you would like. It is hard to be a good advocate for your situation without knowing all of the details. I am a huge fan of building wealth through real estate and prefer a more conservative approach. Homeownership can be a huge blessing or a huge burden, depending on if you jump into it without being financially ready.

Are you financially ready for a 2nd property?

1. Do you have a detailed budget and know how much money you make, save, and spend each month?
2. Have you paid off all your consumer debt?
3. Do you have 3 to 6 months of expenses saved up?
4. Can you afford a down payment on the next property? You mentioned taking out a heloc...I prefer not taking out money from a primary residence. However, if you do....what are the terms of repayment and is it something you can afford if crap hits the fan

If you are confident about those financial pieces then you can start with reaching out to realtors in the midwest. I am able to rent all my properties with in a week in Arizona so I think its best to find a property you like best then rent yours in Arizona. However, It may be best to sell your place here in Arizona and buy a duplex to fourplex in the midwest if you really want to move to a cooler state and get some more doors in your portfolio.

Hi Allie,

I appreciate your response! It's nice to hear from someone here in AZ. I'm curious as to why you prefer not to take money from a primary residence.

Also, the location of my current home may be a potential "wrench" in my plan to rent it out: I own a new-build (2yrs old now) in Magma Ranch in the town of Florence. Do you think I have a chance at finding a tenant in this location? My house is a 3/2, 1550 sqft with upgrades offered by the builder.

I got the house at a 2.7% and before the market went up...so I'd prefer to cash flow this as the average rent is much higher than my current mortgage.

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Quote from @Jared Hottle:

I think the first thing I would do is connect with local banks in the area you are wanting to move to in the Midwest. Tell them your plan and fill out their applications and see if you can afford to buy while still owning your house in AZ without rent. This will give you the most information possible. I do not think I would put it up for rent at least until you are under contract with a home in the Midwest. As far as the Midwest goes. Home values likely will not increase like the AZ market but they have increased. You are still going to get a nice deal if you work at it and know what you want and are aggressive when you see it. If you come to Iowa would love to help!

Thank you, Jared! I hadn't considered calling potential lenders in the areas I'm looking at. Sounds like a great way to get more information for the decision. Right now I'm looking at Augusta, GA, though nothing is set in stone so I may look into Iowa to see if it has the same pros as we found there.

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Quote from @Nathan Gesner:

Quote from @Pedro Gutierrez:

You should learn what constitutes a good investment, then decide if your current house is worth keeping or if you should sell and invest the money elsewhere. Here's a guide that describes what good cash flow looks like and how to analyze a property.

https://www.biggerpockets.com/...

Don't look at the last two years for performance. There are markets in the mid-west where properties were selling for $10,000 just a few years ago. Markets are generally good for appreciation or for cash flow, not for both.

What a great article, Nathan. It looks like I have a lot to consider in my research and what I want. Thanks for sharing this!

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Quote from @Account Closed:

Quote from @Pedro Gutierrez:

Hello!

What advice might you have for a first time home owner who wants to rent out his house in AZ and use a HELOC to buy a new primary home in the Midwest?

Context:

1.) My wife and I would love to experience a place less hot than Arizona to enjoy the outdoors.

2.) We want to start building wealth by acquiring rental properties (1st Gen Latinos so we are wanting to build wealth from nothing).

Questions I have about making this happen:

- should I put my house up for rent before buying a house out of state, to see how fast I can gain attention from prospective tenants? Or wait until I find a house to buy then start once I win a bid?

- Do house values in the Midwest increase like they do in AZ? I couldn’t do the “1% rule” right away with a house in the Midwest so I’m thinking I would have to wait at least a couple of years before I could make a profit on renting in terms of the home value.

Not sure if I’m asking the right questions. I value everyone’s expertise and experience here and look forward to learning more about building wealth with real estate! Thanks for reading.

Good for you for being so industrious.
First, you assume house prices are increasing in AZ. They are not. Last month 42% of sellers had to reduce their asking price to get their house sold in Maricopa County.
If you rent your house out, where will you sleep while you look for a place to live? If the renter stops making the payment, what will you do?
If you currently have a mortgage it probably says you have to occupy the house for the first year or be in violation of the loan agreement. Look for the "Occupancy" clause in your paperwork.
To use a HECLOC to buy another home, generally a lender will ask where your down payment came from and borrowed money a HELOC for instance, usually isn't acceptable.
Plus your payment on the mortgage, the HELCO and the new home combined might be more than the allowable DTI (debt to income ratio)
You usually need to be on the job for two years or more to get a loan, so moving to another state might interrupt that requirement.

All this doesn't mean, that what you want to do can't be done.
It might make more sense to decide where you want to move to, find a job in the same field that you are in before you leave your current job, rent a place in your new city to move into, rent out your current property and then consult a mortgage broker about buying another house.

Thank you, Mike! For some additional context:

I’ve been working for the same company for 6 years and I’m 100% remote. So I would not be looking for another job.
It sounds like renting the house might be risky if the tenant doesn't pay; I would need to prove to any lender that I could pay both mortgages with just my salary. Is it possible to mitigate that risk with a good tenant screening procedure, and locking in a 1-yr lease agreement to show that as expected income to help with the DTI? Or is that too risky?

Thanks.

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Hello!

What advice might you have for a first time home owner who wants to rent out his house in AZ and use a HELOC to buy a new primary home in the Midwest?

Context:

1.) My wife and I would love to experience a place less hot than Arizona to enjoy the outdoors.

2.) We want to start building wealth by acquiring rental properties (1st Gen Latinos so we are wanting to build wealth from nothing).

Questions I have about making this happen:

- should I put my house up for rent before buying a house out of state, to see how fast I can gain attention from prospective tenants? Or wait until I find a house to buy then start once I win a bid?

Not sure if I’m asking the right questions. I value everyone’s expertise and experience here and look forward to learning more about building wealth with real estate! Thanks for reading.

0 Votes

All Forum Posts by: Pedro Gutierrez

Pedro Gutierrez has started 2 posts and replied 8 times.

Post: Writing off depreciation of a rental

Post: Infinite Banking concept

Post: Advice for beginner on purchasing 2nd home

Post: Advice for beginner on purchasing 2nd home

Post: Advice for beginner on purchasing 2nd home

Post: Advice for beginner on purchasing 2nd home

Post: Advice for beginner on purchasing 2nd home

Post: Advice for beginner on purchasing 2nd home