All Forum Posts by: Ellie Narie

Quote from @Mohammed Rahman:

Hey @Ellie Narie - your post had a lot of questions so I just jotted down some of my responses: 

- Not sure why you'd need to do 1031 for 3 units... even if you used an FHA loan it was your primary residence for 2+ years so you're entitled to the tax free gains.

- For 1031, it's 180 days. I believe you need to "identify" a property within 45 days. 

- I recommend not purchasing 10+ homes... for your own peace of mind. 10 roofs, 10 basements, 10 set of appliances, etc. You should look into a cluster of multifamily homes, or even invest into a platform/fund so you can get exposure without the headache of being a landlord (unless you actually enjoy it)

- I'm not sure what you're referring to interms of property needing to be 2x your current value... was that in reference to 1031? I haven't heard anything like that and am only aware that it needs to be a "like kind" property/properties. 

- Strongly recommend using a local lender as they will better understand the market you're investing in. Larger banks are great... but they just don't have the same flexibility that local lenders will be able to work with. 

Good luck on the next chapter of your journey and great job on the equity you've built in your current home! 

I will definitely take a look at multi family properties, but another hurdle I'm thinking about is financing. I assume I would need to get some kind of commercial financing for buildings with 5+ apartments instead of getting fannie mae loans. I would think commercial financing has worse terms which could ear into the cash flow. 

And I was referring to the rules for a 1031 exchange. Since I only lived in one unit of the fourplex, I would assume I can only claim 25% of the profit tax free. The other 75% would have to go towards a 1031 exchange. Is this right? 

Quote from @Basit Siddiqi:

Expensive or cheap properties are irrelevant characteristics when it comes to investing.

I would moreso analyze homes whether they cash-flow or have the ability to appreciate.

If you have one property that is cash-flow poor but appreciation rich and want to change it for 10 properties that are cash-flow rich but appreciation poor - just be mindful that 10 properties may be more work than having 1 property.
is the extra cash-flow you are getting worth all extra work.

I also do not think purchase price has a correleation with the ability to appreciate(or lack thereof).

I would look at a low-cost market that has properties currently cash-flowing that also has new jobs/people coming into the city.

best of luck

 I currently manage my one property myself and barely get $1000 a month cash flow, but if I were to buy 10+ houses in a different state, they would be under property management. What kind of hurdles might I run into? Would a property manager be able to handle renovations if there's a bad tenant? 

Quote from @Alex Olson:

How much equity do you have stored up and what is your current return on equity? I would use this to do a 1031 exchange in a cash flowing market like KC. There are some great case studios of improving your return on equity here. Happy to chat through how this works. 

I have around 200-300k stored up in one property, and my current cash flow from that property is $1000 a month. I hope to increase that to $4000-$5000 a month by investing into a lower cost market. Is it possible to buy a lot of properties via a 1031 exchange? 

Quote from @Marshall Leipprandt:

@Ellie Narie Why buy 10 separate houses? I would look for a multifamily property in those markets that can match your cash flow goals. Having one property makes everything so much easier. One property manager, one handyman, one set of books, one address/property to maintain, etc. I don't think the time commitment on your end stepping from 1 property to 10 would be worth it. This isn't even factoring in the difficulty of trying a 1031 from one property into 10 - if it is even possible.

Doing a 1031 from 1 property to another property will be simpler. Plus you should have the equity for the 20-25% down payment on a commercial loan and can value the property as a multifamily instead of 10 single families. Lastly, the areas that you mentioned in Ohio may look affordable but if you were to acquire 10 SFHs, I would imagine that the turnover and repairs alone would be quite the headache.

 I have looked at how the cash flow would work for multi family properties, and I think it would be much less. They require a 25% down as opposed to 20% for SFRs, and usually the landlord has to pay for water and sewer which eats into the cash flow. 

I have a house hack FHA fourplex that I'm thinking about selling. I don't currently live there but have lived there for 2 years. If I sell it, I might make around 200k+. My goal is to get a lot of cash flow so that I can live off of it. Currently, I live in a very expensive area where properties appreciate a lot but don't cash flow. My property doesn't cash flow all that much (maybe 1k a month). So, I'm contemplating selling my one property to invest into 10+ cheap properties. For the market, I'm thinking Ohio. Maybe Cleveland/Akron, because it seems like a good cash-flowing market, which is what I'm looking for.

What are some nuances that I could run into with this? I would assume I'd need to do a 1031 exchange on the 3/4 units that I didn't live in, and I can take the other 1/4 profit tax free because it was my primary residence. I read that you need to buy properties within 45 days for the 1031 exchange. What are your suggestions about how to do this? Should I just go on zillow and find 10+ houses that I want to buy? Or do you recommend looking for an investor portfolio? I would like to do this myself without using 3rd party re-sell companies. 

I also heard that the value of the properties I buy needs to be no more than 2x the value of my current property. Does that mean if my current property is valued at 700k, the other properties can't be valued more than 1.4 million total? Is that how you count it, or do you have to take mortgages into account somehow? 

What lender should I use? I assume I would do 20% down plus closing, and I'd probably buy turn-key houses that don't need rehab since I can't be there in person to remodel anything. Should I just use a well-known bank like Wells Fargo and go with Fannie Mae investment mortgages? 

Any other thoughts are appreciated. Thanks. 

Does the number of tax dependents have to increase? What if you don't claim some of them but they're still your legal dependents? 

What if your kids just get bigger and you need an extra bedroom so that they don't share a room anymore? Would this count? What about adding a live-in nanny or au pair to the household who needs their own bedroom? 

If any of the above count, is it possible to get another multi-family property, where at least one unit has more bedrooms than your previous multi-family apartment? Such as, let's say you have an FHA fourplex where each unit is 2 bedrooms. You want to get another fourplex where at least one unit has 3 bedrooms.

Quote from @Nicholas L.:

@Ellie Narie

Got it and understood.  But I'm not talking 30 minutes away - I'm talking up to 2, 3, 4 hours.  There's nothing?

And why not do both?  Pick a market 3 hours away and an OOS market, and start researching / networking in both. 

Things get a little better in smaller towns, but still not cash flow positive and inventory is very low. Basically, anything within a 4 hour drive of me is either an expensive city, or it's a dessert/small town with very little population and inventory. 

Quote from @Nicholas L.:

@Ellie Narie are there any markets within driving distance of you in OR that are lower cost than Portland, that you're interested in?

This question is asked all the time on BP and plenty of folks will throw out cities in the midwest (Cleveland! Milwaukee! Indianapolis! Detroit!)  

But if possible, I'd recommend finding a market you can drive to.  That way you can go to REIAs in person, network in person, visit properties in person, oversee rehabs in person, etc.  Even if it's a few hours away, you can spend the weekends doing it.  

And, you probably know this, but generating 100K in net income entirely on small properties in the midwest is going to be really, really hard.

Anything within driving distance is either Oregon or California, which isn't any better. I currently own a fourplex which I house hacked, plus a SFH. But all the properties I analyze around here are cash flow negative. In fact, my fourplex started as a cash flow negative, but it was still the best deal I could find back a couple years ago.

Quote from @Charity Aslin:

Any updates on Loanbud? Did you end up using them? I'm checking them out too.

Update: I ended up using them and they turned out legit. 

I live in a state with high real estate prices where the cash on cash return isn't any good, it's more of an appreciation game here. My goal is to make 100k a year "passively" (or at least achieve financial independence). 

If I start investing say 40-60k a year into real estate in a low cost area (looking at Cleveland or Indianapolis), get a 20% cash on cash, it'll take me around 6-7 years to achieve that 100k yearly passive income. 

I would prefer to do my own research and use zillow to buy properties instead of turn-key companies, since I think the cash-on-cash would be much greater. I would use property management companies to manage the properties. 

Does anyone have experience with this type of goal? How do you settle on which market to buy in? I don't have any relatives or friends in any of the low cost markets. 

I have landlord experience in my own market and have been able to achieve good appreciation, but the little cash flow just doesn't make sense for my goals.