All Forum Posts by: Timothy Howdeshell

 Just a caveat here. If you exclude the majority of your capital gains via the two out of the five-year exemption, then there's no need to do a 1031. I assume you have some repairs that will knock the basis down in the property from 1.3 to maybe close to a million and then you have the $500,000 in capital gains exemption. So you should be good to sell outright. You can then dump that money into rentals which will cash flow. You could even buy properties out riding cash with that much dry powder. That's what I would be doing if I was in your situation.

I feel bad for the LOs that lost money in this cycle where we're counting on the continued cash flows for living expenses. Hopefully everything works out and they can get their distributions at the exit.

This seems like a prime buying environment though over the next few years as these loans reach maturity.

 @Kevin S. this is the correct answer! The cheapest way to do this is to do it yourself. However, cheaper is not always better. And if you're dealing with legal matters, cheap is often more costly in the long run. I've set up llc's in two different states without using Google, zoom or anything else. However, I am not a lawyer and these structures have not been battle tested with lawsuits or anything like that. 

My question is if you're just starting out, why do you need an LLC at all? You can still take all of the tax write-offs running your business as a sole proprietorship.

an LLC is not about tax savings, but it is about limiting liability, showing legitimacy to other business partners, and committing to yourself that you're really going to do this business and take it seriously.

however, if this is your first house, there's really no need to worry about all that. Real estate is hard enough without worrying about setting up llc's filing, corporate tax documents, setting up business bank accounts and on and on. There's value and merit to all of those things, but real estate is about finding good deals, funding them and operating them. Not about the nuances of accounting and business filing.

Don't get too distracted with this sort of stuff is you won't really make money and you'll hate this business. I say do whatever is relatively cost effective like Benjamin mentioned. Get down quickly and move on to the actual business of investing.

You got this. Good luck!

 The cause is certainly noble, but I wonder why the focus on building an unprofitable venture first? Why not build a highly profitable business and then fund the charity work outside of your main income stream? I don't see how putting yourself at such a large financial disadvantage will support your mission at all. As others have noted, the fact that these people cannot afford a home today does not bode well for their ability to do so in the future unless you will be subsidizing them indefinitely. Nothing wrong with that, but it isn't very scalable by itself. 

I have done rent-to-own before, and the biggest hurdle is financial education and support for these people. They need to be clearly shown personal finance, credit, and have a plan to get there. Next, they need to want it and be actively making progress towards that goal. 

The mechanics of the deal are not too complicated, although as others have noted you can't advertise the property and then exclude people based on protected class including gender and family status....at least not legally. 

As with most financial concerns, education and accountability are the answers here. 

Best of luck! 

 That's definitely a rough start to the property, but not an unusual or uncommon circumstance. 

First step is to meet with the tenant. You''ll get a good feel for who you're dealing with. If the person seems violent, unhinged or uncooperative I would defer to normal channels, aka. formal eviction and having the sherrif remove them. They may be a tenant, but without a long term lease they're probably on month to month. You'll want to look up the tenant rights in your state/city to understand the timeline to vacate a month to month lease. 

If they seem agreeable and friendly, cash for keys is a tried and true strategy. It is probably cheaper and certainly faster than formal eviction. 

Best of luck! 

 Ooh, San Diego is tough for sure. I agree with @Nicholas L. that local house hacking is a great option. It's real estate investing on training wheels. I think you could get a 2-4 unit with your situation and 5% down. That way you only need to share walls, not living spaces with the kids.

forget about renting vs. buying though. Nothing wrong with renting if it frees up your monthly cashflow to invest more aggressively. 

Yes, use the "agent finder" at the top ribbon. Something smells fishy though. You claim that agents are hiding from you, and that you need agents, plural, in all 50 states. 

What's going on here?

 What is my exit strategy and 2 backup exit strategies?

Can I live with the worst of these exit strategies? 

Who can I ask for support if I get stuck?

Do I have cash reserves for a 50% increase to the rehab budget? 

Is there an experienced investor I can sanity check this deal with?

There has definitely been a migration to TX over the last 5 years, especially from CA. Texas home prices are expensive, but not nearly to CA levels. Combine this with a lack of state income tax, and a generally favorable business climate and it's no surprise companies are moving there. Unfortunately, as many others have noted, property taxes in TX are very high and are not capped as they are in CA where Prop 13 caps increases in assessed value to 2%/year. 

So there is obviously more nuance than just home values and interest rates when buying property. It seems TX is a great place to own a business, but perhaps a tougher place to own a real estate investment portfolio. 

 Hey James. That's awesome! I, and many other investors, got their start via house hacking. In my opinion it is the best way to learn the ropes of management and operations while de-risking things quite a bit (you're there every day). 

That's a sensible question, but the wrong way to look at things. Consider this: you can get 50% of your mortgage and other housing expense covered by house hacking, but your housing costs are $5k/month and you can rent locally for $1,800 all in (utilities, etc.). Is this a good deal? Probably not. The house likely won't cash flow as a long-term rental once you move out, and you're spending more money upfront in both monthly costs + downpayments and closing costs. 

A better question to ask here is, how does house hacking in my market compare to the cost or renting? And do I have a good exit strategy for this house once/if I move out? 

It becomes "worth it" when you can improve your monthly cashflows and/or you have a good investment thesis for the medium to long term on the property. Ideally you get both: cover most of your housing costs today, and it will cash-flow once you move out under your desired strategy (short-term rental, long term rental, etc.). 

You're on the right path! Good luck.