All Forum Posts by: Timothy Howdeshell

Hey James, 

As long as you are complying with the law, and providing a way for recipients to easily and quickly opt out of further communication I think that you're doing your part. 

Sure, not everything illegal is immoral, and not everything immoral is illegal. That is where you will need to make a judgement call whether you're personally okay with the feedback you're getting (are you dealing with many annoyed respondents?), and how you feel this is building your brand. 

I also believe that it is incumbent on you as the business owner to ensure your success and if you need to use outbound marketing initially to generate enough leads to sustain and grow your business, then you have a moral obligation to your family to do so. Sure, some may not like this (every marketing channel has detractors), but you're ultimately not hurting anyone so don't stress yourself out too much. It sounds like you're considering the experience of your prospects which is more than many (most?). 

 Side note, you have one of the best post/like ratios I've seen on here! You must know what you're talking about :-D

I also have family members who operate rental properties <10 units. A couple do well relative to scale, and a couple others have really struggled and spun their wheels for years. It's easy to see why both sides are where they are, especially the struggling ones which gives me optimism. 

My personal opinion on "how we got here" is a confluence of decreasing economic opportunity (perceived or otherwise) for the middle class and the information age. There is a feeling that it is harder than ever to get ahead, and you can log onto the internet/social media/television and immediately see others living a better life. This creates a sense of "being behind" and desperation among individuals who then turn to progressively risky strategies to make up this perceived shortfall and "make it". 

I've heard that 80% of investor-owned properties are owned by people with 1-3 properties. I don't have any legit stats, but that sounds right. This business is not for everyone and can take a lot longer than originally thought to make meaningful progress. 

But it is very easy to "fall into" a rental property out of necessity or convenience when one moves or upgrades their house. 

What is the definition of success? If these people are adding some amount of positive net worth growth monthly (even if cashflow is neutral) are they not successful? Perhaps the problem is with the expectation that success means being able to advance your spending or live a life of leisure in short order. 

Among persistent buy and hold investors? I would guess the success rate to be over 50%. For other strategies (wholesaling, agent, syndication) I agree that the success rate is <5%. 

 You're going to get a lot of advice about price/rent ratios, wage and employment growth, etc. These are all great things to consider. No one should invest in a declining market as a beginner. However the biggest factor in your success is competitive advantage, knowledge and relationships. Where do you have those things, or where do you want to focus your time building them. Local market knowledge is a huge factor, otherwise you're liable to buy a great looking property on paper that's actually in a war zone. 

@Ryan Sun

Seconded what @Jake Andronico stated above. He is also correct on the tax law (source: https://www.ftb.ca.gov/file/personal/income-types/income-fro...). This also applies to federal taxes (https://www.irs.gov/taxtopics/tc701). 

From your post you have enough cash to move forward in your journey. While the return on equity in your old primary may be low. I would wait to sell until you have a game for the incoming cash. Treasuries and HYSA are paying well now, but if and when the FED starts reducing rates this will decrease the yield on those investments while simultaneously increasing property values (low rates = increased demand = increased prices). 

The only thing that gives me pause is the ARM, but you've still got 7 years left before it adjusts.

The 1 year of rental will still allow you to sell, not pay taxes, and get landlord/investment experience. If you hate it, then sell after the first lease is up. Just make sure it isn't longer than 18 month lease to give yourself time. 

Ultimately, you're caught between 2 pretty good options. Given your interest in real estate, I would go for the hold personally. I did this exact thing on my first house. 

@Juan David Maldonado

As with so many things may answer is, it depends. DSCR loans have certain advantages and maybe required depending on which strategy you're going to do. If you are attempting a BRRRR, for example, you'll likely need a DSCR loan for the refinance. Conventional loans have 12 month seasoning requirements now and so you would be stuck with your original loan for at least that long. If you purchased it a hard money loan initially, then it's likely more cost effective to refi with a DSCR loan.

However, if you are just getting into your first property and looking to do a traditional buy and hold, it is hard for me to imagine a situation in which the DSCR loan will be more favorable for you. Conventional loans have lower down payment requirements (if you are an owner occupant), and lower interest rates and fees.

The best thing to do is to find an investment friendly mortgage broker. Explain your situation to them and have them guide you towards the best loan product for you. " Who, not how" is the answer to a great majority of real estate related questions.

@Rodney Sums

As with many (most?) things in human nature, we only notice the extremes. In this case we only noticed those that have exceptionally great tenants and heartwarming stories or those who have absolutely terrible experiences with bad actors.

In fact, though, there are tens of millions of renters and the vast majority of them are fairly low maintenance. The government provides great tax incentives for real estate investors, aka housing providers. City and local governments work with investors as they are a great economic driver and provide stability and housing. And on and on.

Are there people that look to take advantage of a system? Yes. And is there a narrative among certain groups that landlords or anybody on the ownership side of the capitalist system deserves to be taken advantage of? Of course. But this isn't some conspiracy.

I think the issue is expecting that 100% of things will go correctly. That leads to disappointment and feeling jaded. We should do everything in our control to enforce standards, select great tenants, invest in landlord-friendly cities etc. But no amount of careful planning can prevent all bad situations. Instead, prepare for the worst and if things are better, you'll be pleasantly surprised. It is ultimately the cost of doing business and a bit of stoicism can go a long way towards peace of mind in any business endeavor.

Hi @Hannah Simpson. Great question! This is some of the technicals that are not always discussed on the motivational podcasts. The answer to your question as a first time investor would be to try and find an "investment savy/friendly" realtor. They will be able to benchmark rehab costs for you, take a look at the property, do some basic, rough, back-of-the-knapkin underwriting (this house will need $40k, is selling for $200k and will be worth $300 afterwards). 

An investment friendly agent will also understand this process and be able to help you navigate this as a first timer. 

Here's how the pro's do it. Find a lead (on or off market), get photos and/or videos of the property, if they are local they or someone they know will walk the property to get a rehab estimate, if not they use those photos to estimate rehab costs using their knowledge of local rehab costs (varies greatly depending on skill, experience, and relationships; find another local investor to provide a rehab cost sheet), put the property under contract at their desired price with an inspection period (pros can waive this as they are providing their own rehab bid on the walkthrough, not waiting on a 3rd party), get the GC(s) out to the property during the inspection period to verify assumptions, and then re-negotiate or close. 

Hope that helps and good luck! 

Just heard about this today! Fantastic news for house hackers. It will probably take a bit of time for this knowledge to become more widespread, but I imagine that this will increase demand on these assets in the medium term, especially if rates start to decrease! 

@Ryan Edwards Welcome to BP! This community is very helpful and you'll find a ton of free information here to get you started on your journey. There will never be a time when you're not busy most likely, so getting started building your dreams today is the only real path forward!

My one piece of advice as you start, focus on JIT (Just-In-Time) knowledge and less on Just-In-Case knowledge. This business can feel and be overwhelming. Pick a direction and start down the path. Focus on the next most important step to move the ball down the field, get 1 piece of education, and take action. You'll learn more by doing than by passively absorbing information, and you can always pivot down the road. 

Now get after it and good luck!