All Forum Posts by: Tu Cao

I am a high salary earner. I make roughly $1.5 million a year. Over the past year and a half, I invested in fuor rental investment properties with the mortgage rates of 6.3-6.8 for each of the property over 30 years. For each property, I have roughly $500,000-700,000 Mortgage so technically about 2.3 million in loan. My down payment is roughly 50% of the properties value. Hence, I have a positive Cash flow. All my houses currently have good tenants that pay on time. I was wondering if I should use my salary to pay off the mortgage loan so I don't have to pay too much of the interest Or let the tenants pay my mortgages over the 30 years and use my salary to invest in other ventures such as ETFs, stocks or buy more houses.

At this time, I have 5 properties. I do not really have the desire to buy more unless there is a really good deal that comes along.

Some people tell me that if I pay off my mortgage early then I will be able to leverage the tax benefit of owning and paying mortgages properties. I wonder if it is worth it.

Please comment

The adu was built in 2019.  It is in Garden Grove California.  I need to look into this ordinance.  Also, I buy as a personal property under my name and not an investment property under an llc

 Yes, I got the deposit from the previous seller.  The tenant is in month to month.

Hi everyone, 

I just bought a new home with an ADU (2beds and 2 bath with big separated gated driveway for 2-3 cars parking) in Garden Grove, CA. The ADU has a tenant living in it. He pays rent on-time every month. His rent is currently $2100. The previous do not have any current lease agreement or refuse to give me one (I found this weird). I ran the rental analysis in the area, and the rental range for comparable unit is $2500-$2800 without the big gated driveway. I am meeting him this Sunday. What steps should I take? I plan to use Avail for the lease and plan to increase the rent to $2450. Your inputs would be much appreciate it.

Newbie Real-estate Investor

Tu

So my friend and I are planning to partner on an 800k property (my friend found the property).  My friend doesn't have the money to go half and half, but I have the money to buy the property outright.  I am thinking of two scenarios:

1. I just buy it, and let him manage the property and pay 10% of whatever fee (he doesn't like this route much).

2. Pay for it outright, but maintain the partnership, but I become the banker and charge him interest on the loan I give him (2% lower than the market)

What do you guys think?  Please comment.

Hi all,

I am an Interventional Cardiologist with a decent salary and a very stable job. I love what I do and do not plan to quit. I have a friend that I want to collaborate with for real estate residential investments. I will be the principal money contributor to the deal. I have little expertise in the housing market, and I prefer just to be passive in the endeavor. My friend has some experience. He owns two properties and is renting them out. He proposed 50/50 deal. We have drafted a preliminary proposal. What do you think?

1. Proposed Ownership type:
   1. Title to the property will be Joint Tenancy between Ben and Jerry. After one month of ownership, the title will be transferred to an LLC. This way it is still possible for us to utilize conventional loan. If we open LLC first, lenders will require us to use commercial loan which carries high interest, short duration, and a balloon payment. Ideally each LLC should hold no more than two properties to better protect ourselves from potential frivolous lawsuits.
   2. Percent ownership will generally be 50% each. However, this is individually decided on each deal/property. If both partners have equal amount of cash up front to pay for the down payment, then this will be a 50%-50% deal. However, if both partners do not have equal amount of cash up front, ownership percentage will be discussed and decided separately before purchasing.
      1. Exception: For the first deal/property. Jerry is proposing the following deal strucBenre:
         1. Percent ownership will be 50%-50%.
         2. Ben will pay the entire down payment up front.
         3. Jerry will obtain a 5-year, 0% interest loan from Ben for 50% of the down payment. For example, if the total down payment that Ben pays is $250,000, Jerry will carry a loan balance of $125,000, due within 5 years at 0% interest. Each year Jerry will pay back into the business account 1/5 of the amount owed ($25,000) so that by the end of fifth year Jerry will owe $0.
            1. When Ben offers Jerry the 5-year 0% interest, he is essentially losing out on a total of $11,136 ($2,227 per year, $186 per month, see breakdown below to see calculations). This amount is based on the fact that Ben can just find a risk free investment that pays him 3.41% (rate is based on latest 5 year treasury bill rate).
            2. Why is this still a good deal for Ben and Jerry? For Ben, the cost of doing business for him is $186 per month. When comparing this to a property management company that charges 6% - 12% on gross rent income, this amount is reasonably small. For example, if gross rent income is $6000 per month, and if property management fee is 10% (10% is typical when you only have a couple properties), Ben would have to pay $600 per month. Comparing that to the $186 per month cost for Jerry to manage the property, Ben saves over 2/3 while feeling rest assured that Jerry takes much better care of the property than a property management company, since it is Jerry’s best interest to do so as he is also an owner.
            3. Here’s the breakdown of the amortizing loan of the 5-year $125,000 loan at the current risk-free interest (3.41%) that Ben can get if he buys treasury bill or loans to someone else:

Any thought?

Ben