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All Forum Posts by: Tim Swierczek

Tim Swierczek has started 13 posts and replied 1467 times.

Post: Creative Financing - Pivoting In Life

Tim Swierczek
Posted
  • Lender
  • Saint Paul, MN
  • Posts 1,531
  • Votes 1,624

Thanks for having me @LeAnn Riley

Post: Rent drop in the Twin Cities?

Tim Swierczek
Posted
  • Lender
  • Saint Paul, MN
  • Posts 1,531
  • Votes 1,624

I'm hearing of rent drops in South Minneapolis, the biggest being Uptown, but I have very little data to support it.  Also, when you look at rent-o-meter pro reports you will see there was a rent drop as COVID ended and it rebounded a few months later so I think that it's soft and mostly flat with a few high-rent areas dropping.

Post: We Are Gonna Find Out if Wholesaling Is Legal in MN...

Tim Swierczek
Posted
  • Lender
  • Saint Paul, MN
  • Posts 1,531
  • Votes 1,624

I think the real issue is the assignment of contracts; if you can close on the property and therefore do a double close, you are a principal.  I buy from wholesalers and see it as a service, but it is questionable if it's legal in assignment cases where the wholesaler had no intention or ability to close.

Post: Minneapolis Credit Union Recommendation

Tim Swierczek
Posted
  • Lender
  • Saint Paul, MN
  • Posts 1,531
  • Votes 1,624

@Steve Sorensen If you still need a HELOC on an investment property, my wife brokers them. She's not on BP but I can connect you if you PM me.

Post: Important decision: Rental real estate vs stocks

Tim Swierczek
Posted
  • Lender
  • Saint Paul, MN
  • Posts 1,531
  • Votes 1,624

Hey Marek,

It sounds like you have done much better than your giving yourself credit for.  I think all investment decisions are personal so if you want to do SP500 investing go for it, but that being said I disagree with your fundamental analysis of your returns.  My reply in bold

- The first house was purchased in 2013 for $145K. That house is now worth $280K.
- If I was to invest $145K in SP500 in 2013, I would have about $500K 

~ You stated, "we put very little down," and later stated you put down 5% or $7,250.  In order to invest $145K into the stock market in 2013, you would have needed to put $145K down on the SP500. If you invested $7,250 into the stock market in 2013 how much would you have now? My guess is your analysis can stop here, and you can stay invested in Real Estate. Note, please read to the end because I don't think this means you must keep this property.


I know that the past is not the prologue, but I also know that historically housing trails the SP500.

~This is not true; you have been convinced of this by financial planners and companies that are listed on the stock market rig the game.  They compare COC returns and ignore all the other benefits and profit centers of rental Real Estate. They ignore leverage and assume that owning $100K of Real Estate requires the same investment as owning $100K of stock.  For simple math, if you use $100K to purchase stock and you get a 10% annualized return, you get 10% on 100K, but if you purchase rental real estate, you can commonly get 80% leverage.  In other words, you would own $500K in non-owner occupied real estate with $100K. If you get a 5% appreciation, you will get $25K per year if you ignore the compounding effect, but stocks compound as well, so I think it's fair to ignore that for easy math's sake.  This means you get a 25% return on appreciation alone, and you have not yet factored in the other three ways you make money on rental real estate.

Your second area of profit that is not considered is loan paydown or amortization.  I ran an online calculator at 
https://www.calculator.net/amo... and the results show your 15-year mortgage if at 7% has paid down from $137,750 to $62,528 or an additional $75,225 in profit in addition to your $280K in appreciation.

Your Third area of profit is tax deductions.  Clearly, this varies per person, but if we can take some assumptions, we can see that it matters even if the amount calculated is not correct. The IRS lets you deprecate the building but not the land on a schedule of 27.5 years.  If the property was worth 145K, the land was likely worth 25K or less. On a 120K value, you would have received a 4,363.63 deduction per year, multiplied by 10 years, which is a cumulative deduction of $43,636.30. Your tax bracket would have changed over the years, but if you own three properties and have two incomes, it's likely your combined tax rate between Federal and State exceeded 25%.  Since I don't know, we will assume it's 25%. This gives you an additional $10,909.09 in tax savings.

Lastly, you have cash flow.  In your case, you mentioned you have very little cash flow due to the 15-year mortgages. You didn't mention if you have enough cash flow to cover repairs and cap ex over the years, but sake of this post, let's assume your cash flow covered the money invested in repairs over the years. If that's the case, you made no less than:

280+75=355K on a 7.25K investment, and you likely were able to write off some of the depreciation and you can carry it forward to the future.

As stated above, investing is personal, and the SP is truly passive, whereas real estate is not.  That being said, you have options not mentioned. You could get a HELOC and tap some equity to purchase more real estate to put it in the SP. You could sell all three rentals and level up into some apartments. This would benefit you by repositioning and allow you to purchase a value add asset you can force appreciation, or you can sell and invest in the SP or sell and invest in a passive real estate deal.  My wife and I have sold most of our Minneapolis and St Paul properties and invested in apartments in both Louisville, KY, and, more recently Chattanooga, TN. We are the sponsors of those deals, but our partners are passive, and you can find passive deals in any market.

If you want passive investments I would look to apartment syndication.  If you want to grow your wealth more and you don't mind putting in the work I would recommend you level up, sell all three houses and use the equity to purchase a 
small apartment in TX.  @Jordan Moorhead is a great investor and Realtor working in Texas.  He would be a great person to jump on a call with.  He both invests actively and passively and can help you with your specifics.

Good Luck!


Post: Minneapolis rent stabilization working group

Tim Swierczek
Posted
  • Lender
  • Saint Paul, MN
  • Posts 1,531
  • Votes 1,624

@Wendy Man I know a landlord on the working group, and the groups were stacked with advocates for rent control.  This was not an even or fair vote. Luckily the city council and the mayor are not likely to follow the recommendation.

Post: What is the best city to invest in Multifamily?

Tim Swierczek
Posted
  • Lender
  • Saint Paul, MN
  • Posts 1,531
  • Votes 1,624

As @John Mathew noted, Minneapolis/St Paul is a great market. Like most areas, it's difficult to find cash flow with the current rates. That being said I have clients find workable deals every month.

Post: How do I start House Flipping???

Tim Swierczek
Posted
  • Lender
  • Saint Paul, MN
  • Posts 1,531
  • Votes 1,624

Flipping requires much more skill than STR, which requires more than rentals, which requires more than House Hack. Partner with a flipper local to your school, learn and then start flipping locally or house hack.

Post: First Multifamily Purchase

Tim Swierczek
Posted
  • Lender
  • Saint Paul, MN
  • Posts 1,531
  • Votes 1,624

@Jeremy Host great job. I love it.

Post: Looking for advice - bought a property and roof leaks

Tim Swierczek
Posted
  • Lender
  • Saint Paul, MN
  • Posts 1,531
  • Votes 1,624
Quote from @Jeff Rogers:

Hey friends,

I recently purchased a property off market and worked directly with the seller to learn about the property and negotiate the deal. They gave a property disclosure statement and stated there were no known roof leaks but in the past there were some and it was remedied with liquid rubber. Lo and behold after I closed on the property, the tenants let me know there is evidence of a leak still existing and it's getting worse as time goes on.  I did have a property inspection but the inspector was unable to get on the roof to inspect.   Do I have any recourse with the seller to get any money back or have them contribute to replacing the roof??


 It's very unlikely you would win. You would need to prove they knew the leak was happening at the time of disclosure and if the tenant had not reported the leak after the last repair, then the seller would not know and have no responsibility.  I doubt its worth your time to pursue it.