All Forum Posts by: Ty Coutts

Hey Steven,

You must consider a number of variables before making a decision. First, look at comparable rental properties on websites like Rentometer or Zillow to get a sense of the average rent you can charge. This will help you research the Scottsdale rental market. Next, figure out how much the entire rehab will cost and contrast it with the possible rental income. Make sure the renovation significantly increases value in order to support a higher rent. Subtract all costs (mortgage, property taxes, insurance, maintenance, property management fees, and HOA fees) from rental income to determine the estimated monthly cash flow. It takes positive cash flow to make a BRRRR investment profitable. Examine the post-rehab value (ARV) of the property to determine whether you can refinance and extract most or all of your original investment. Speak with lenders to learn about the conditions and criteria of refinancing. Examine the terms of financing. for keeping a rental property as opposed to selling, and take long-term investing objectives into account. For information about Scottsdale rental properties, check the HOA and municipal laws. Finally, in the event that the rental market underperforms, have a clear exit strategy in place, such as selling the property.

Hope this helps! Please feel free to reach out to me directly if you have any other questions or if you just want to discuss. 

P.S. I am a loan officer if you need assistance with any of the financing things I mentioned above!

Hello Carlos

It's fantastic that you can get help with your search from a local in New Orleans (NOLA). Properties in New Orleans often remain on the market for more than thirty to sixty days for a variety of reasons, some of which make the market distinct. Seasonal changes frequently impact the activity of both buyers and sellers, which causes variances in the speed at which properties sell. Demand in the local market and the state of the economy both have a big impact on how quickly transactions get through. Furthermore, sellers may price their houses higher than what the market will bear, which causes them to remain on the market for longer. Properties' length of time on the market may also be impacted by their condition, especially older or dilapidated properties that are typical in historic districts.

New Orleans presents a challenge when it comes to insurance rates because of its susceptibility to hurricanes and flooding. These hazards have the potential to dramatically raise insurance premiums, which could negatively impact rental properties' cash flow. Duplex or triplex insurance premiums can differ significantly depending on a number of variables, including building condition, coverage levels, and location. It's possible to anticipate paying between $1,500 and $3,000 annually for each unit, but to fully grasp the range of expenses, it's critical to obtain estimates from several insurance providers.

If you intend to keep one unit unoccupied for guests, a triplex could be a more practical and affordable choice. It will be essential to have precise estimates for prospective rental income and insurance expenses when determining whether or not your investment is feasible. I wish you luck in your hunt, and it will surely help to have a reliable local acquaintance act as your eyes and ears on the ground.

Feel free to reach out directly if you have any other questions/just want to discuss!

Hey Corey,

Here are some pros and cons of your options

Seller Financing + Separate Renovation Loan
Pros:
Low Down Payment & Interest Rate: This could significantly reduce your initial cash outlay and make monthly payments more manageable.
Cons:
Financing Rehab: You might consider a personal loan or a home equity line of credit (HELOC), though these often come with higher interest rates. Alternatively, look into renovation-specific loans like the Fannie Mae HomeStyle Renovation or FHA 203K loans as standalone products for rehab costs.

FHA 203K Loan
Pros:
Low Down Payment & Bundled Costs: This loan simplifies the process by combining the purchase and rehab costs into one mortgage.
Cons:
Interest Rate & Refinance Requirement: Higher interest rates and the need for refinancing could reduce your overall return on investment.

Fannie Mae HomeStyle Renovation Loan
Pros:
Bundled Costs: Like the FHA 203K, this loan combines purchase and renovation costs, simplifying the process.
Cons:
Interest Rate & Refinance Requirement: Similar to the FHA 203K loan, the need for refinancing to extract equity and convert to an investment property might add to your costs.

I am a loan officer so I have some expertise in this area. Let me know if you have any other questions, and please feel free to reach out to me directly. If you'd like to set up a call to discuss your options just let me know!

Hey Akash,

I am a loan officer in Co licensed in Colorado, Arizona, Arkansas, California, Florida, Kansas, North Carolina, Tennessee, Texas and Wyoming. I could give you some recommendations if you like and help with your financing. Reach out to me directly if that interests you at all!

Hey Terry,

Great to have you here! I am a loan officer in CO licensed in Colorado, Arizona, Arkansas, California, Florida, Kansas, North Carolina, Tennessee, Texas and Wyoming. Feel free to reach out to me directly with any questions or if you'd like to connect!

For a beginner investor, the choice between using maximum leverage or putting more cash upfront to build equity depends on several factors including risk tolerance, financial stability, and long-term investment goals. Consulting with a financial advisor or real estate mentor can also provide tailored guidance for your specific circumstances.

Hello Nicholas, there are a few drawbacks: 

-Complexity and Scrutiny: This approach could attract scrutiny from the IRS, as it's not a typical way to manage rental properties. Ensuring that you meet all criteria for substantial services and properly reporting on Schedule C can be complex.

-Self-Employment Tax: While you anticipate the net gain to be zero after expenses and depreciation, any net income would be subject to self-employment tax, which can be significant.

-Recharacterization Risk: The IRS may recharacterize the activity if they do not agree with your classification of the services provided, potentially leading to penalties and back taxes.

-Administrative Burden: Managing substantial services may require more administrative work and potentially higher costs in terms of time and resources.

Some investors do use creative strategies to maximize tax benefits, but this particular approach of converting long-term rentals into an active business reported on Schedule C while providing substantial services is less common. Most investors either qualify as Real Estate Professionals or use short-term rentals to achieve similar goals. It’s advisable to consult with a tax professional who has experience with real estate investments to ensure that this strategy aligns with IRS regulations and your financial goals. I hope this helped!

This general log gives an overview of your activities, but it might not be detailed enough for IRS purposes.

Example 2: Detailed Log

Monday, 7/1/24

7 AM - 7:30 AM: Monitored security cameras

1:30 PM - 2:15 PM: Responded to tenant question regarding parking

3:00 PM - 3:30 PM: Monitored security cameras

4 PM - 4:15 PM: Checked mail and delivered to tenants, as necessary

7 PM - 7:30 PM: Monitored security cameras

10:30 PM - 11 PM: Monitored security cameras

7 AM - 11 PM: Remained on standby all day for tenant needs/emergencies

This detailed log breaks down your activities into specific time slots, which can provide a more precise account of how your time was spent.

Best Practices for Record-Keeping

Be Specific: Break down your activities into smaller time intervals, as shown in the detailed log example.

Use a Logbook or App: Consider using a time-tracking app or a dedicated logbook to keep daily records.

Document Standby Time: Clearly note the hours you are on standby for emergencies, but also separate it from active tasks.

Include All Activities: Document everything from advertising to maintenance and tenant interactions.

Consulting with a Tax Professional

Given the complexity of qualifying for REPS, it's always a good idea to consult with a tax professional. They can provide specific advice tailored to your situation and ensure you're meeting all IRS requirements.

Additional Resources

If you're looking to expand your real estate portfolio or need financing options, let me know. I'd be happy to discuss mortgage solutions that can help you grow your business and achieve your investment goals.

Feel free to reach out if you have any more questions or need further assistance.

Best regards,

Ty

Hello Francis,

Skip tracing services charge fees because they aggregate data from multiple sources, often including private databases, public records, and proprietary data, to provide accurate and up-to-date contact information, including phone numbers associated with a property. These services invest in technology, data acquisition, and maintenance to ensure the quality and reliability of their information, which is why they charge for access. I hope this helps!

Hello Ethan,

Turning your old home into a 5-bed, 2-bath Airbnb while having a conventional loan is generally permissible, but there are important considerations. First, you should inform your lender, as converting the property into a short-term rental can affect the terms of your mortgage and may require a change to an investment property loan. Additionally, you must notify your insurance company to adjust your policy to cover short-term rentals, ensuring you have appropriate coverage for liability and property damage specific to Airbnb operations. Failure to inform your lender and insurance could lead to complications, including potential policy voiding or loan default. Properly addressing these aspects will help you avoid any legal or financial issues. Please let me know if this doesn't make sense or you have any other questions. Good luck!