All Forum Posts by: Ash Hegde

@Evan Linder no problem! If you can put at least 10% down the mortgage insurance can come off after 11 years. Most will refinance by then anyway and will take the 3.5% down option even though the MI is for the life of the loan.

FHA has a one year occupancy requirement, but conventional does as well if you take the loan out as a primary (lower down payment possibilities). FHA is usually going to be the best for a first loan to get started.

To truly scale, you will eventually need to get into investor commercial products like DSCR loans. FHA has a one loan limit, conventional has a ten loan limit, and even before that most people will have too high of a DTI at some point to qualify. DSCR will use the income of the rental property vs the mortgage payment and ignore personal DTI.

Plenty of investment opportunity in Florida. Wherever you land, you'll probably be in a good market. FHA house hack with a 4 unit property is a great way to get started without too much down.

A local agent will know the rental income numbers better, but Vero Beach will certainly have a more attractive price point than the bigger coastal cities in Florida. 

A couple of items to consider:

Does that cash flow number include the increase in property taxes that will happen when you lose your homestead exemption? 

If you sell you can avoid capital gains taxes since it was your primary for more than 2 years. 

Just playing devils advocate, getting a HELOC and renting may still be the best bet.

Thank you for the correction, a zero 1065 is not required. 

If you didn't move the rental properties into the LLC then their income and expenses should be on your individual 1040's on schedule E. If the LLC is a partnership owned by both of you, I think you still have to file a zero return though.

50k is a good amount to get started. If you wanted to BRRRR, you could use it as a down payment for hard money to get a rehab done and refinance later. If you aren't comfortable with that, you could look for a deal that doesn't need rehab (or has minimal). The BRRRR method lets you accelerate faster but there is nothing wrong with starting with a move-in ready deal that you can put a renter in.

@Omar Jarrah since you've been reporting it on tax returns, they should be able to use actual rents and expenses reported rather than 75% of an estimate. They could be doing this incorrectly (there are tax deductible items that they can add back and make your net profits higher), or as you mentioned, make an assumption from lack of understanding. 

In your scenario it looks like you will be paying the income tax either way, either in your w-2 if you pay a bonus or pass through income if you do an owner distribution. The main difference, and the reason why many use an S-Corp, is that a distribution avoids the payroll taxes. Check with your CPA to make sure the salary you pay yourself is "reasonable" if you are doing it as a distribution.

One of the factors would be your mortgage balance and rate. If you have a large balance at a low rate, a HELOC is likely a better option since you'll only be paying interest on what you draw.

As for strategy, if you have enough in the HELOC (or cash after a refi) to buy and rehab properties outright so you can BRRRR, that will let you grow the fastest since you will be able to recycle that money over and over.