All Forum Posts by: William Gordon

Howdy,

I would use borrowed money vs. cash, for a couple of reasons.
1. As you gain experience on what you really couldn’t learn from books or podcasts, you will have the fallback of the annuities to bail you out. Books and podcasts are full of survivorship bias, since we don’t hear about the folks who, with hard work, effort, and grit, failed and left, only the survivors get to tell their story. The annuities could be a life line that could bail you out if you didn’t do your due diligence well enough.

2. The annuities could be used for your second or third investment property, if you can’t get a second loan. Because of age/job history/whatever criteria a lender will use to not lend you money. By using borrowed money first, you free future you to have the option to use the annuities for your next purchase.

Lastly, if a bank is willing to consider loaning you money, with your age/job history, at even a slight reasonable rate, pounce on it. Also, for your consideration, instead of cashing out the annuities, can you use them as a collateral for future loans?

Howdy Irina,

I would personally be cautious linking my primary residence to an investment AND participating in (what I assume would be your first) syndication deal. There is not enough information to run the numbers, but I feel this isn’t a numbers question.

Here are questions I would ask myself:

1. Am I comfortable with the risk of the syndication deal and I am informed enough about the risk that if all the money disappeared, it wouldn’t be a deal breaker financially for me and my family? If the syndication deal was without significant risk, they wouldn’t be attempting to offer/providing 17% return. Who do I know that has done a syndication deal before and what lessons can they share?
2. Did I properly estimate the cash not only to buy the property but also the six month reserve funds that some lenders are requiring for non owner occupied units? Can I update my cash flow estimates with my recent experience buying a triplex and find a local investor to double check them.

3. Do I understand the interest rates and terms for the home equity line of credit? If I am buying a property within three months of getting the home equity line of credit, will my lender consider the money seasoned enough that I could invest it? Will the source of the money cause me to get a higher interest rate than what I otherwise could qualify for?

Last thoughts. Money is fungible. If someone truly believe that the 17% is real and they could borrow money at a smaller interest rate, using the fungible nature of money, the person would take a loan to get into that deal, but a feel most people would not risk there primary residence on a deal like that. 

Personally, I would take the cash and buy an investment property and ensure I also had enough cash to cover all expenses for six months. If it didn’t take a long time to generate that cash(1 year or less), I would consider doing syndication and wait and see how it went, while continuing to educate myself on local market conditions for an investment property. I would also ensure my family has a six month emergency fund for ourselves that is not part of the investment money, since buying your first property puts yourself in a more risky situation initially. I mistakenly included some of the emergency fund for our first investment property purchase and I didn’t realize how comfortable it made me feel to have that.

Much appreciated.

-BIll

Hi,

I am looking for CPA recommendations with experience with new investors and New Mexico taxes. We have a triplex in Albuquerque that we obtained this year. I am a little reserved about using remote accountants, have others had favorable experience with accountants in other states, who own rentals in New Mexico?

Welcome!

I bought a triplex in Albuquerque that the prior owner had removed the mailboxes at. Two of the current tenants all use paid for mailboxes, the other unit is vacant. I have verified with USPS that each triplex address is in their database and that there are no issues with the location and height that I would install it at. I am having trouble finding options for a pre-made triplex mailbox. I plan to install new locking mailboxes, that would also allow for secure package delivery.

Option 1: https://mailboxempire.com/products/mail-boss-triple-security... , which would work for my purposes.

Option 2: https://www.uspostcompany.com/verticals1250/standard-3-door-..., which would not work, since we don't have the wall or a flat surface in the location that we would want to install it at.

Option 3: https://www.mailcase.com/about/ , which could also work if I purchase the spreader bar.

Questions:

1. Are there other options for a triplex mailbox that I hadn't considered?

2. Are there other considerations that I should look into before I buy and install a mailbox?

Howdy @Jeff Stevenson

While I don't have experience yet with that specific strategy and do not know anything about your business organization, I also am just starting out and this is very similar but not exactly identical to advice I recently received from a qualified professional.

Other things to consider,

1. LLCs are cheap in New Mexico ($50, plus registered agent fees)

2. This would then allow you to start establishing a business identity (obtaining an EIN, business checking account, et al.)

3. Depending on your future lender (assuming you are buying more than just one property) some required multiple years of the business operating before that income can be credited towards your income, others will credit the income the property gets at a discount (70% of the rental take, the day the property was bought.)

Now for stuff I don't have personal experience with, yet.

1. I have heard anecdotes about how doing a quick claim deed later, the county might consider that a sale, and re-evaluate your property taxes. At the moment, I believe it is limited to a 3% increase per year by the county. There is a potential risk, that if you do the transfer years after buying the property, you will be at a disadvantage on property taxes.

2. Small business owners that I am aware of (not real estate), who didn’t have business accounts, EIN, and such set up prior to the COVID relief funds weren’t eligible to even apply.

Please let us know what you ended up doing.

Also, thank you @David M. for posting that link.

I had an excellent recent experience with Old Republic Title, however I do not know how they do with wholesaling and such.

I can concur regarding most locations in Albuquerque that are on the MLS. You could also look into equity paydown or appreciation instead of cash flow.