All Forum Posts by: Joe Scaparra

Corbin,

I don't think I'm what your looking for but I am a small time buy and hold investor in duplexes. I own several around town.  I always enjoy a good conversation around investment real estate.  PM me if your interested.

Joe

Bought a duplex Feb 2015 there.  Rental market strong.

Good Job Huy.  When you ask  a question: good idea to sell or should I keep it long term, you are bound to get all kinds of answers.  

To clear up a few comments.  1031 can be a good idea but you have to identify property to exchange for and you must accomplish the exchange is a specific time period.  Additionally, you CANNOT TAKE POSSESSION of MONIES transacted from the sell, you must use an intermediary until the 1031 is complete.  

Now to your question Huy.  It depends on your objective.  If it is your goal to keep building cash to buy more properties maybe selling is the best course of action.  However, even with that goal there are options to get cash out and still keep the property.  However, if your goal is to create continuing source of predictable and sustainable cash flow for something like retirement planning or replacing job alternative then keeping the property as a rental would better meet those needs.  

As for me, I am 61 and looking to retire soon so I am extremely focused on creating cash flow from multiple sources.  BTW it doesn't matter the age, the earlier we start solving retirement cash flow the earlier we can either retire or do the things we want to .....its called Financial Freedom.  It is hard to get risk free yield today.  Real Estate is not risk free but when you are renting out at $1200 or below,  those in needs are increasing thereby reducing your risk of finding a qualified renter.  Lastly, you can always take a cash out refi on the money you personally put in the deal and keep moving down the road with none of your original money invested.   

Don't look back, keep moving forward, and keep making good decisions!

Sharon, I do understand what you are saying, however for example the renter paying 525 for the same unit someone is paying 625 and they haven't had a rent increase in five years, why would it be greedy to raise the rent to market. Market as determine by HUD to be $700. I am going to have to find out when the 625 was set in the 4 plex. Rents in Texas are exploding along with substantial increase in PROPERTY TAX set by the same county running the HUD office. Property values are rising as well and the person selling the 4plex is selling at a significant increase to what he bought. As a consequence newer owners will have to increase rent to equal what previous owner was profiting from. But as we know it is not about who was making what before, it really is what will the market bear. I am confident that if I was buying a vacant 4plex I could get $700 a unit no problem. I am interested if there are people who have had a similar issue and did the HUD office frown on the amount of rise or are they going to have no problem if it within market driven rent?

The tenants are month to month. I understand that the unit is inspected yearly so why would the inspection be any different with a renewal or new tenant? As it is now, one tenant pays $525 and another $625. Makes no sense to me! Besides a tenant leaving, what can I expect from the HUD office if I raise all rents to $700/month especially since the HUD office told me that is what they are currently authorizing?

1st time buying a 4 plex and 1st time dealing with Section 8 tenants. I am looking at a 4 plex that has 4 tenants all section 8 and all on month to month leases. The property is located in Texas. All the units are the exact same: 2 Bedroom 1 Bath 916 sq ft. Two of the tenants are paying $625/month; one is paying $600 and the other one is paying $525. I called the HUD office and asked them what are they currently allowing for a 2 Bedroom 1 Bath unit. I was told that they just approved a new rental rate and that they are approving a 2 Bedroom 1 Bath up to $700 month. Now for my question: How difficult will it be for me once I buy the duplex to get the tenants to agree to $700/mo? Are they able to go back to the HUD office and get their vouchers reassess? I am told by the selling realtor that the difference in rental rates are because some tenants have been there longer than others and the owner was slow to increase. I am going to upgrade each unit with a built in microwave to show that I am improving the units. Apparently, there is a big need for Section 8 in the community and not enough units to accommodate the need. The street this 4 plex is on is all section 8 and I am thinking I would be one of the 1st to try and get $700/unit. What obstacles should I expect, and what other questions should I be asking before i buy this Section 8 property. Again no experience with Section 8. I do own 7 duplexes so I have rental experience but no section 8. Thanks Joe.

Ultimately it is gut call.  If you like them after meeting them then I would seriously consider leasing to them.  They are willing to pay 15% above market rate.  Usually I find military personnel to be very responsible especially those from other counties stationed here in the USA.   I would get the name of the commander and even talk to him/her and address any concerns that you may have.  Also keep in mind that keeping a renter four years is a big plus and money maker that reduces transition cost from renter to renter.  Bottom line, if you think they will take good care of your property then I think I would go with them.

Welcome Austin,

I like your thoughts on Duplex Investing.  I happen to live in Austin, TX and have been investing in Duplexes since 2003 and I think they are absolutely one of the best if not the best ways to build wealth.  Your entry into duplex investing by being owner occupy is a no brainer and an excellent way to get started.  For me I am a buy and hold investor and it is all about CASH FLOW.  In Texas it is extremely easy to make them cash flow positive.  As an investor I put 20% down and then I am done investing my own money for each duplex I own.  However, with your first being owner occupied you can get by with a lot less down if that is your desire.  I don't mind putting money down as it will keep you more committed and focused on what you are wanting to achieve as well as make the cash flow more positive.  Good luck with your endeavors!

Joe

To piggy back on what David said; Since Texas is a community property state, the step up in basis will occur in the event of either parent's death. Some people get this confused and think that you only get 50% step up on first death but that is not correct, in a community property state your step up in basis occurs 100% in either death of one spouse. To avoid the gift limits your parents should put in each of their wills the inheritance of the home or property they want you to have and to make this happen on the death of the first spouse; that way you can receive the house at the then current value. If you receive the house through gifting you will also inherit the current cost basis of the house including depreciation if applicable and thus lose the step up in basis.

Too expensive for my taste.