All Forum Posts by: Pretty Khare

Hello,

I currently am a second year college student and have recently been introduced to real estate. I had a friend take me to his properties in Cape Coral, FL and saw the great upside real estate has to offer. I am currently reading "Rental Property Investing", which has provided me a great insight and basis of real estate. After I will be reading "Investing in Real Estate with No and Low Money Down." 

Furthermore, I do not have much capital at the moment to put down for a property, which is hence why the "Investing in Real Estate with No and Low Money Down" appeals to me. My gameplan for the ladder half of this year is to keep learning and actively using what I've learned to analyze properties. I have been using the BP calculator to practice the math on properties. 

Additionally, A goal of mine is to buy a property by the end of my second year. Currently, small multifamily properties is what I would like to invest in down the road. A question I have is, should I contact a realtor to have an insight on the market, even though I am not currently looking to buy a property within the next 6 months? Also, any other tips that can help starting out? 

Thanks, 

Ben

@Kyle O'Connor

You might be on to something Kyle, crack pipe notwithstanding. Anecdotally, a friend and fellow broker of mine here in Cape Coral bought a new construction cabin two years ago in the Georgia mountains to use as an STR. It was booked solid over the last two years during Covid but recently rentals have fallen off a cliff he says. Kids are back in schools, people are back at work, and high gas prices are all playing a huge role in killing his property's profitability. He's now looking to sell the cabin.

Hi Pretty Khare, that does seem like the best course of action, thanks for your input and reading/listening. Do you have Airbnb yourself and if so, is Airbnb's insurance insufficient on its own? 

I've been working with Nevada Corporate Headquarters (NCH), and it's been stressful to say the least. 

Situation - I house hack, rent out a suite of my primary home to Airbnb (STR). I also am in construction to a property in Cape Coral, Fl that will be completed by early 2023 (LTR).

Person #1 at NCH told me to get an LLC active for my Airbnb (cost $1322), telling me to create an S-Corp, to shelter me from self employment tax. Also told me to get an LLC passive for the LTR (cost $1322), stating Nevada LLC's are more protective than Florida LLCs. Also told me to get a Revocable Living Trust (RLT) (cost $1842) to protect my primary home. Also referred me to tax consulting and 2 hours of consulting (cost $1700). I paid $6183 to NCH.

Person #2 at NCH realized I shouldn't have created LLC active for my Airbnb because it is still passive (do not provide special services), and recommended to have 2 LLC passive (one for LTR and one for Airbnb/primary). Now I'm unsure if I can trust their advice since what they initially told me was incorrect.

Person #3 (not NCH) advised I don't need either LLC's right now, I would be subject to $800 a year for each LLC since I live in California, which NCH neglected to tell me. At this point, I don't trust NCH any longer for now providing wrong advice and not being transparent. Person #3 also advised I put my primary into RLT for estate planning purposes.

Person #4 at NCH agreed I don't need LLC active and can provide me refund, but advised to put Airbnb/primary into LLC passive and not under RLT since any litigation with Airbnb could risk my primary home.

Question - What is the right/best move here? I've had 4 different advice and don't know what to do now. Yes I do want protection but don't want to pay for LLC or RLT if it's not necessary/will be more of a headache/put me at more risk. Does anyone else House Hack and what is your approach? Anyone else had a similar experience with NCH?

Thanks in advance for your feedback and help.

Raquel

@Pretty Khare can you share your numbers on how you are calculating that?  I'm showing that the cash flow is still very positive (over $200 a month) with interest rates at 6.5% & rents staying the same at $2,400 a month (which we are already seeing rents go up beyond that in the $2,500 to $2,600 range).  Surely a year from now when the home is completed rents will be much higher if the market continues as it currently is.  All in all, I think the cash flow still makes sense, especially in a market that has higher appreciation, strong rental demand on a brand new built home that will attract quality tenants & have minimal maintenance.  Also, we are working on reducing the mngt fees with our mngt partners to allow for more cash flow.  They are open to the idea since new construction is very easy to manage with builder warranties in place to handle all maintenance.  As you stated, if the cash flow is not as attractive as you anticipate, you can always liquidate the property for a gain to reinvest elsewhere.  Everyone that has completed a build so far has had a tremendous amount of equity & many have elected to sell instead of hold just to cash in on the equity.  Even though I recommend holding for a year to 1031, or doing a cash out refi.  ; )

@Pretty Khare

Great question! Thanks for asking. This is something many people are wondering about considering the dynamic interest rate environment we are in. We are seeing rates on the rise, but I'm confident they will level off, or possibly come down some in the future. Regardless of what interest rates do, we are still seeing consistent increases in rental rates and market values that far exceed the minimal impact we will see on the mortgage payments from a higher interest rate. In 2021 we saw a 22% increase in rents & 29% increase in market value for these types of assets. When we are looking at cash flow & ROI numbers we are using today's values. When the homes are completed in the future we anticipate the rents to be much higher than today allowing for more cash flow & ideally more equity. That is exactly what we have seen over the past few years and the population growth is not slowing down. So this is a long answer to say, yes, the numbers will still work quite well regardless of where the interest rates are at that point in time. Ideally the numbers will be even better than we are seeing today. The investors that are just nearing completion now have more equity & higher rents than they initially anticipated. @Trevor Fleck would be a good person to ask about initial projections vs actuals on homes that are being completed.  Please also keep in mind that you do have the option to sell the property if you decide the cash flow doesn't make sense.  You likely will have a large amount of equity by the time it's completed.  Additionally, there are loan products you can explore to lock your rate now, or rate lock programs for a year that some lenders offer.  Hopefully this answered your question & still gives you confidence to explore taking action now as we will continue to see land & build prices increase over time.

@Bhavya Shah

Thanks for the question.  I understand your concern when you are seeing many people investing in the outstanding opportunity in SWFL.  The simple fact is that all the builders combined cannot keep up with the demand for housing (both rental & retail sales).  There are a tremendous amount of people moving to the area, and generally the state as a whole.  Simply supply and demand shows that there is an increasingly higher demand year after year for housing beyond what supply can keep up with.  Once you gain a better sense of the growth happening in this market it will be clear to see that this is the type of market you want to invest in to be in the path of progress.  We are seeing the least amount of housing inventory on the market than we have ever seen in this area, and the houses that are on the market (for rent & sale) are on the market for the shortest amount of time that we've seen in recorded history.  There are over 1000 people moving to FL a day currently, and this isn't slowing down.  We are only making a small dent in the overall housing supply to try to keep up with demand.  We often see a waitlist for rentals, and tenants signing leases before the home is even at CO.  Even over the past year we have seen rents increase by an astonishing 15% - 24%, and values consistently increasing by over 20% in many of the areas we focus on.  This is an exceptional place to live, visit, and most importantly invest!  @Stetson Miller shared some great stats supporting this information.  Here is another good article to read: https://www.dailymail.co.uk/ne...

Hopefully this helps to answer your question.  Feel free to reach out with any other questions.