All Forum Posts by: Ed L.

In real estate investing debt is a necessary evil.

My plan thus far has been to eliminate all personal non re debt. (Autos, Credit Cards, Payment plans, etc)

Purchase a primary residence with a 15 yr mortgage. A home is a necessity and not having a home doesn't eliminate monthly expense of housing.

My RE brokerage was having to lease space so we decided to purchase a office building with excess space. I consider this a primary residence also because it is necessary for my business. Thus far it has been a great investment and has allowed my RE brokerage to operate with virtually no overhead. The office building is a also on a 15 yr loan.

With regard to purchasing rental property I've taken a conservative route.

Goal is to flip 2-5 homes per year and reinvest part of the profits into single family rental homes that meet the 2% rule.

I did my first last year, and am supposed to close on my 2nd this coming week.

It's slower than I'd like to go at times, but I'm just leery of leveraging on a asset that is not a necessity and that I derive no benefit from other than cash flow. Rental rates fluctuate with supply and demand like everything else. If rates drop slightly it can quickly eat through cash flow, and value of multi family property.

Follow up question...

Say in the example given that the relinquished property is sold for 100K, basis is 70K.

Would it be possible to purchase two 50K homes or does it have to be a single transaction??

Just curious for future reference.

It gets even more complicated when you start analyzing prospective exchange properties because of the greater purchasing power of a property that qualifies for a 1031 vs a property that doesn't.

Not to be insulting, but real estate investing isn't for everyone. My Chem2 professor in college informed me that I wouldn't be the greatest chemist.

You are in too deep to quit. Find some decent contractors to finish the work. Do your best to check their references, and don't pay up front.

Next step is to sell the property as fast as possible. I would be extremely happy to break even and walk away if I were in your position.

Thanks Jon,
I was missing the part about greater than or equal to.. Every time I think I'm going to slip one by uncle sam there's some fine print lol...

Any other recommendations to reduce my taxable income when purchasing a new property?

For Example:
Purchase a $50,000 home spend $20,000 in rehab. Sell for $100,000

That results in a net gain of $30,000 of taxable income.

Would I be able to perform a 1031 exchange and buy a $30,000 rental home free and clear with no tax burden.

It's easy to buy into a house with a 30yr mortgage thinking you will own it free and clear....someday

But think about things for a moment. You will be paying the mortgage for 7 years longer than you have been on this earth...

That's quiet a long time just to pay them off. Not to mention with a 30yr mortgage you really aren't making any principal reduction until the last 10 years.

Along the way you will have maintenance, vacancies, substantial capitol improvements, etc.

Without a margin of cashflow you will be eating alot of this out of pocket.

It's not all doom and gloom. Hopefully the housing market will rebound and you will get to ride the next appreciation bubble.

I'm personally too chicken to do that.

I was in your exact position a year ago. Sold the house and made a decent profit.

I then re-invested the profits into a sfr that actually cashflows. It's not a super nice home in a A neighborhood, but it's a nice solid older home in a safe, high demand rental area near the local college.

I'm doing the same exact thing again this year if everything goes correctly with Fannie Mae.

Disclaimer: I am a conservative, and I don't want this to be political?

The question has been asked and I wonder how the bigger pockets community feels today as compared to 2008?

I personally felt the entire world was in free fall mode during 2008. My 2008 tax returns show that my clients were felling the same way lol...

I was glad to see the Mc Mansion fad pass by. There is a big hole in my market for new homes in the 2,500 sq/ft range. It's all sub 2000 or 3000+.

Thanks for the advice. I still have not received anyting from Fannie Mae. I'm hoping they are planning on clearing up the lis pendens prior to closing and that would explain the request for additional closing time.

Will keep the post updated as things progress.

I submitted a bid on a Fannie Mae property on Monday. It just came off the OO period and there were 5 investor offers. I overshot the listing price by $5,000 because the numbers still work out to slightly better than 2%.

Great little house in a B- Neighborhood.

Selling agent called to inform me that Fannie Mae was going to counter my offer with a few terms.

My offer was all cash.

They asked to extend the closing to 30 days instead of 15 that I offered.

They asked for $3,600 in earnest money instead of the 1000 I offered. Over 10%

Last bit the agent mentioned was that the property was subject to a list pendens?

The PO was a local builder who had 3 homes in the immediate area. According to the LA the PO filed some bogus claim trying to delay the foreclosure process. He explained how all 3 of the properties were affected by the lis pendens?

The LA did say the the seller would pay the closing cost and also furnish a owners title insurance policy.?????

I'm unfamiliar with a Lis Pendens. According to google it's a notice of a pending lawsuit.

How do I go about clearing the title?

& Does the owners title insurance policy actually protect me if the PO were to win a judgement by some odd chance???

I know this is some technical stuff that needs to be discussed with my attorney. Just looking for basic input before meeting with him tomorrow.