All Forum Posts by: Taylor White

Thanks @Nicole Heasley Beitenman and @Mitchell Zoll for the responses! I appreciate your input.

I recently met with an estate planning attorney and talked about setting up a living trust and a will. The attorney would obviously help guide us through the process and help us change the title of our 5 properties into the trust and provide ongoing support in the future, etc... She told us the cost would be about $4000. I don't mind paying that much if this is what will make things easy for my family after I'm gone, however...

I have also read some things online about being able to setup a trust with some basic software and self-education for less than a couple hundred dollars. And then, presumably, the other main cost would just be recording fees to transfer titles into the trust. 

Is DIYing a foolish idea and if so, why?

Is the attorney option worth $4000, or does that seem high?

(I'm 30 and married, in case that's relevant. So hopefully we have a long time to plan, but would love to sort all of this out sooner rather than later.)

hey @Adri Jusczak, I'd agree with Dave G here. Set your search criteria for a 4-plex that works for you, but still keep an eye out for a SFH that could work, too. Whichever comes up first should be the one that you go with. Just make sure you are hard on your numbers. Eventually your equity in your SFRs will be a huge help, but if you put off buying them because you're waiting for the perfect 4-plex, then you are losing out on equity and appreciation. And buying a house (or a new house) for yourself could be a great option too. Only putting 5% down and getting a rate that should still be less than 4% while still keeping a lot of your cash free for another rental would be a great move. Repeat that once a year if your lifestyle allows for it. Or better yet, do a house hack with whatever 4-plex you find and live there for a year. Hopefully that would still leave you with cash to do another deal while you live there.

I'm trying to work through some investing thoughts and would love to hear other people’s thoughts/opinions!

Theoretically, right now, I could sell one of my rent houses and not have to pay capital gains on it (because I lived in it for 2 of the last 5 years.) I think I could sell it for $175,000 or so. I owe ~$76,000. So after selling fees and repairs, I should end up with at least 75,000. So here is what I'm seeing in "keeping" vs "selling"

Keep: cash flow 5-6k per year. After 25 more years the house will be paid off and worth probably $400k. I will also probably have spent ~50k on repairs and renovations in that time. So house value + 25yr cash flow - expenses should be about 500k give or take...

Sell: Put the 75k into something safe (probably just a mix of index funds) assuming an average of 8% per year for 25 years, should come out to over $500k. And I won't have to deal with clogged toilet phone calls for the next 25 years haha

Am I missing something? Even keeping the house after it's paid off and cash flowing $20k/year doesn't compare to the average gains of the $500k in the s&p. Also, I haven't factored in the tax benefits of keeping it, but that gets complex and hurts my brain.

I always lean toward holding my properties, but the recent surge in DFW prices and the closing window of being able to sell this one without CG taxes has me re-thinking..

Hey Jack, house hacking in Fort Worth was awesome for me. That's how I did my first couple of houses (just renting out bedrooms.) If you have some money saved up, I'd highly recommend jumping into it as soon as you can, and if you can save up enough to buy a new house hack once a year, you really can't beat 5% down and interest rates under 4%. I'm married now, which makes all of the moving much more difficult (my wife loves our current house, and would be very sad to leave!) So the earlier you start and the more house hacks you can do, the better.

Message me if you need any contacts, such as an agent or anything else!

Thanks everyone for the responses! I have told them that I would like to stop the process for now, an I will likely look into a less expensive option. They are a fairly large law firm here in town and I'm sure they are more accustomed to working with much larger companies and/or residential real estate investors.

I may use the BiggerPockets lease or continue with my existing lease and add a little bit based on suggestions that the attorney had made.

I have 2 (soon to be 3) SFH rentals and am planning to continue building my portfolio, so I decided to reach out to a lawyer to review and beef up my lease agreement. The attorney I reached out to, from a reference, specializes in real estate and after doing some initial review and going over changes that need to be made, he said that total billable hours will end up being 4-6 hours at $340/hr. So the total may be as high as $2000.

That's a decent chunk of money for my little rental business and I'm wondering if this is pretty standard, or is it overkill for me to spend this much on this particular thing?

As a side note, my current lease is already 12 pages, and decently thorough, but my attorney did have some good suggestions for better wording and some extra sections that would be helpful for me to have.

Thanks,

Taylor

Thanks for the replies,@John Corey and @Amy Wan! Spreading out this cost over several deals makes a lot of sense.

So if I understand correctly, each person's loan agreement with me would be a security in this common enterprise... if I did 1 deal or even a few deals, then returned their investment with interest and then came back the next day and said I found another deal for us.... would that then require a brand new SEC filing? Once I return their investment is that the expiration of my right to use those funds under that SEC filing?

Also, I'm sure the legal costs just depend on who you use, but is there a set cost for the SEC filing fee? I've heard people say the total cost could be anywhere from $5-20k. Is that about right?

How does syndication work with an even smaller amount than this? I'm trying to figure out how to pool family/friend money together to purchase inexpensive BRRRR properties. As in, less than $100,000 total capital invested. Is this not feasible? Do I just have to go with hard money, if I can't find one investor willing to cover the whole of the expenses?

For example...
ARV: $100,000
Repairs: $20,000
Purchase Price: $50,000

I need to borrow money for purchase and repairs, so I need $70,000. I have friends and family who could contribute smaller amounts, such as $10,000 or $20,000 or $30,000. If I pool their money together, then I'm creating securities by default, right? So now, in addition to paying them interest, I also have to pay for SEC filings? It seems crazy to not be able to pool together money without incurring such a large cost. Am I missing something?

Hey @Steven Sturman, you just have to factor the interest into your calculations to determine your purchase price. I like to divide my refi amount (75% ARV) by the interest rate. You'll need to convert your 12% interest rate to 1.12 for your calculation. For example...

ARV: $160,000
Refi amount @75% LTV: (.75 x 160,000) = $120,000
Repairs: $20,000
Hard money loan for purchase + repairs: 120,000/1.12 = 107,142

Max purchase amount: 107,142(HML loan) - 20,000(repairs budget) = $87,142

So you would purchase this home for $87,142 put $20,000 into it for repairs, rent it out, and refinance, which will get you $120,000. now you have to pay back your HML with interest, which will be the principal (107,142) + interest (107,142 x .12 = 12,857) which equals....$120,000

Don't forget that even these numbers are over-simplified, as you'll need to also consider other fees your HML might charge, holding costs while you are doing the renovations, and potential closing costs on the refi (unless your bank is willing to roll those into your loan.) I hope this helps!