All Forum Posts by: Randy Rodenhouse

CrowdStreet, a prominent real estate crowdfunding platform, recently faced significant issues related to its escrow practices, particularly involving investments with Nightingale Properties. Investors discovered that funds from two major Nightingale deals were not placed in escrow accounts but were directly controlled by Nightingale's Elie Schwartz. This lack of oversight allowed Schwartz to misappropriate nearly all the investor money, using it for personal expenses and risky stock trades​

I am not familiar with Yield Street, but many of these platforms are questionable and you need to look into the operator. I have used Equity Multiple and I have not had any issues to date.

It really depends on what you want to do.  If you are looking to be an investor or you don't necessarily need a real estate license. I have purchased and sold many properties and do not have a license. However, my focus is on long-term rentals, creative real estate (like buying sub2 and with owner finance) and buying mortgage notes.  For me, the license would just focus your attention on listing and showing properties and not building my RE portfolio.  

Please do not use GPT chat for something like this. You need to get a proper calculator and learn how to use it.

With that being said, I did a quick calculation and your return on capital invested will be around 12% (IRR). Now this number will change if the person pays off early, etc. This also assumes as you get the $100k down (which you will probably not get on a $300k house) and the person pays the loan consistently. Typically seeing around 10% down is more reasonable, which would be around $30,000 which would give you a return of around 7.25% on capital invested.

If  you sell houses with owner financing, you need to shorten the term to maybe 10-20 years. This will help your returns a little.  

One thing I've learned over the years is that sometimes doing nothing is the best thing. For example, the properties I held for many years have increased in value, have given me cash flow, tax write offs, etc. Holding long-term has been for me a great wealth strategy.  Sometime very hard to do.  

You just need start again and figure out what types of investments interest you... whether it be rental properties, buying mortgage notes, etc.

Is it a single family house and just renting a bedroom? Why do you want to have your property treated as an investment property? Your primary residence you get to deduct the interest and taxes but not the insurance. If it is an investment property, you can deduct taxes, insurance and expenses for maintenance, etc.  However, when you rent out a portion of your home, you need to make sure you're properly dividing any expenses you pay to maintain the home between personal and rental uses. So not sure saving that much in taxes when all said and done.   The IRS imposes a 20% penalty for inaccuracy when a taxpayer significantly overstates expenses. 

I believe you can convert your primary to a short term rental without an issue (but check with CPA). If you work and have a W-2 job then extremely hard to meet the REPs requirements...almost impossible. However, a STR is not considered a rental activity (section 469 of IRS code) if your rent it 7 days or less on average customer use and therefore not passive for tax purposes. But you have to material participate.

For short-term rental properties, the depreciable life is 39 years. This is longer than the depreciable life of 27.5 years for long-term rental properties. By default, the depreciation method for short-term rental properties is the straight-line method. This method allows you to deduct an equal amount of the cost of the property each year over its depreciable life. However, you can use a cost segregation study to break the property into different class lives and claim more depreciation up front. There are some limits on the amount of depreciation that you can deduct for a short-term rental property based on the number of days that the property is rented out each year.

Unlike a 401k, you cannot borrow against an IRA. However, you can invest with your IRA into real estate as long as you have the correct self directed IRA setup. Also, you cannot buy a property you already own into your IRA that is self dealing. There are rules to follow but not hard to do.

To answer your question more directly, I typically look at minimum 0.20% the value of the property for cash flow. For example, $100,000 house I want a minimum $200 a month cash flow, for a $200,000 house I want $400, a $300.000 house $600/mo, etc.  This is super high level and just a rule of thumb. It does depend on many factors.

Also, in general, the lower the equity position, the higher cash flow I would want.  If you have low equity and low cash flow then that is not a good situation. 

This is an easy answer. You don't buy a house sub2 if you don't have sufficient capital to make payments if something happens to your renter/buyer.  I would never contact the seller to have them make the payments. I would make the payment and at same time evict the tenant.  

That being said, I would never just rent a property I bought sub2 but instead would sell it with lease option and get a downpayment (i.e. option consideration) which can be used when needed bad times. If I collect a 5-10% down, then I have that as a buffer. 

Dodd Frank will apply...see below.

Not More Than 3 Properties Exemption

Any person or entity cannot provide seller financing to an owner occupant more than 3 times in a 12 month period without using a MLO (mortgage loan originator). The loan cannot include a balloon. Seller does have to prove borrowers ability to repay. Other restrictions are:

• Interest rate fixed for first 5 years and no negative amortization.
• Adjustable rate allowed but restrictions on the amount of increase and frequency of rate adjustments.
• The loan cannot include a balloon.
• Seller must not be the builder.

More Than 3 Properties You Must Use a MLO and Comply With All Regulations Such As:

• The loan cannot include a balloon.
• Seller does have to prove borrowers ability to repay.
• Interest rate fixed for first 5 years and no negative amortization.
• Adjustable rate allowed but cannot adjust more than a certain amount per year.
• Seller must not be the builder.