All Forum Posts by: Rick Reed

Just more food for thought in case you haven't considered it...

You could avoid paying capital gains if you sell and purchase another rental (like purchase). I'm no expert on the topic, but a quick google yeilds: http://www.irs.gov/uac/Like-Kind-Exchanges-Under-IRC-Code-Section-1031

Have you also considered taking out a HELOC against the property? That would allow you to have access to the equity in case you really need it later, but you are not committed taking the money. So you could have the cash available if needed, but only if needed. If you later change your mind about needing/wanting the cash, just close the HELOC. You may only lose a small application fee.

Regardless, you have a few options and that's a good position to be in!

I like what I'm hearing so far and it lines up with my suspicions, considering realtor.com shows a lot of houses close in price that meet a lot of my criteria. I just assumed that using a realtor to check MLS would yield better results than me looking on what's readily available to the general public on the web.

I guess the next natural question is, where does one look to find off MLS listings?

Thanks for the quick responses!

I'm currently looking for my first rental purchase in DFW (Plano, Allen, Wylie).

My realtor is telling me that what I'm looking for does not exist. It seems houses are selling very fast in this area, therefore no one is really willing to sell at prices near where I need to pay. I was wondering if anyone else is in the same boat in the same market?

Also, I'm wondering if I am off target with what I'm looking for. I'm think I need to find:

- 2-3 bedroom single family

- under 15 years old (looking for a long term hold)

- Around $130k

- Assuming a modest $1300 in rent

- Plano, Allen, or Wylie

- HOA fees under $200 month

I plan to use a property management company, so that has to be factored in. Running these numbers puts me near $100 in cash flow, which I think is too low. Am I being unreasonable to think better deals exist in this market? I fear over paying and being stuck in a few years if I need to offload it.

I hope I didn't come across as judgmental. My question was really to see what others think about what I was seeing as an inexperienced outsider.

Great feedback though. My eyes have been opened a bit, so thank you all!

@Jon Holdman Understood and well put.

@Dawn Anastasi I've often said, 'In IT there are two types of folks, those that talk, and those that do. VERY FEW can do both.' IT is filled with folks that love to talk about what they can or have done, but actually produce little to nothing of any real value. I'm seeing many similarities. BTW - I love your website. It's raw, and to the point. Great for an introverted type-A engineer like myself. Thanks for sharing your experiences!

@Nasar Elarabi I hear what you're saying. Again, similar to IT, some folks are only in it for "the money", very little actual experience and are always looking for the quick answer so they don't have to put forth the effort. Sadly, just proving an answer to such folks usually ends up creating a ripple effect of trouble later because they simply didn't understand what they were doing. Meaning, quick answers typically lead to getting in over one's head.

@Bryan L. Point taken, and I admire those who truly teach because they are good at it and enjoy it. There's real value there! I guess my cynicism is targeted more towards the folks that provide little to no real value, and charge a LOT of money for it.

Thanks for all the feedback. It's all great food for thought!

It's only been a few weeks since I've serious started looking into RE investing. The BP forums are a huge source of what looks to be valuable information on the subject. Being a cynic, I was initially very skeptical about the validity of the content on BP, just waiting to find the sales pitch. However, after reading several posts where the latest Johnny Come Lately and his new way of "building wealth" has been very professionally asked to provide details and back his claims, I started realizing that there really could be some honest folks here that are truly interested in networking & sharing ideas/experiences. I find that to be rather refreshing considering everything else I've read elsewhere has pretty much boiled down to long winded pitches that read like a novel, then state, "Buy my book to get the details". This leads me to my question...

Why are so many folks in the REI industry selling books and e-books? If one was so wildly successfully running a business, then why would they have the time to spend on writing books on the topic? Would their time not be better spent growing the wildly successful businesses they are writing about? Is it ego? Am I just being to cynical? It really gives a slimy feel to what could truly be a solid way of building long term financial wealth.

Now, I hope I haven't offended anyone with my question. I'm just looking for feedback from an outsider's perspective. I'm hoping no one says, "It's such a tough market to make any money in that causes people to instead sell books and systems".

Any insight?

East Plano would be ideal for me since I live just East of Plano in Murphy.

I have to ask though, what is it about the $90k-$120k range that makes you suggest it? Is the cash flow easier to achieve because of lower taxes? Is there some sort of "sliding" rule of diminishing returns above this price point? Can you elaborate on what makes this price more attractive (other than it costs less ;) )?

Ted, thanks for the feedback. Something I hadn't considered.

Blake, I hear what you're saying. $170k is our drop dead absolute max, not our target price. And yes, I am looking to stay as far away from being a slumlord as possible. Since I'm new to this, I figured I would create as much of a reasonable buffer as possible, and start scaling down from that number.

Last year we refi'd into a nice 15 yr with a very nice rate, so another refi is out of the question. But I like the creativity. I also like your logic about targeting the average Joe who's looking for his nice house, but around here, such a house starts around $300k - $400k, so I sort of figured I was already at the lower end of the scale (without being at the bottom). In fact, most of the houses I see for under $200k are 30+ years old and very dated - meaning reno costs.

Perhaps in my newness to this sort of thing I'm over looking something? Anyone in the Collin County area see a flaw in my targeted range?

First off, I would like to thank everyone for the wealth of information on this site. This site has kept me from jumping in head first and making some potentially huge rookie mistakes.

I'm looking to purchase my first rental property and trying to figure out the best financing option for my situation, so I'm looking for some input from others that have more experience than me.

Scenario:

We have $130k in cash, of which we are willing to invest up to around $60k (the rest of the money is for emergencies and any unforeseen expenses/carrying costs not just for investment purposes, but for us as well.

We also have slightly more than $200k in equity in our pri residence.

We are looking to purchase in Collin County TX (Plano, Allen, McKinney) for around $170k max. Those familiar to the area know that property taxes are around 2.5%, so taxes eat into cash flow quickly. I'm considering taking out a HELOC against our pri residence plus the $60k cash for a total of $160k to hopefully leverage a deal (thinking a cash offer could sweeten a deal to make up for the high property taxes)

Idea:

Potentially get a better deal for a cash purchase. Is this true? (It's very difficult to get close to the 1% rule down here, if buying at market prices.)

Pay back the pri residence HELOC shortly after purchasing the rental by taking a HELOC against the rental (looking to get the pri HELOC paid off ASAP.

Questions:

- Does such financing make sense?

- I've read others doing something similar by refinancing a cash purchase. Does that make more sense than a HELOC against the rental? How does one refi a paid off property that they own outright? Is this a purchase from self?

Anxiously looking forward to see responses. Thanks in advance!

Rick