All Forum Posts by: Mike M.

Hi all,

I got my real estate license to facilitate personal transactions, but haven’t derived any income from it for the past two years. I have a full time w2 job in Commercial Real Estate but have my real estate license on the side. Can I continue showing a loss every year on my schedule C? I.e I have been deducting my licenses, fees, association dues etc to the tune of 2k a year  

my 2 cents-

i think that putting each property in its own llc is excessive, unless said property is a commercial property. If you are just buying SFR maybe stick to 3 or 4 properties in each LLC. I think basic umbrella insurance would cover everything you are looking for without the additional tax filings and costs associated with each LLC.

i dont know why investors preach to have each property in its own llc when discussing SFRs

Oscar - sure why not. In fact I would think I could do better. As previously stated most times buyers are humans and work too. If necessary I could leave as early as 3pm or take longer lunches. Why would someone let the description of part time dissuade someone from working with me? Let’s be honest, in today’s digital age the majority of buyers are the ones creating their searches and identifying what properties they want to see. I would be available to show homes any day of the week, with weekdays after 3pm and anytime on the weekends. That doesn’t seem too limited to me. Your thoughts? 

Jake - here’s the good thing: I already have my real estate salesperson license. I originally got it to focus on my own purchases on rental properties.  

Do you think a prospective buyer/seller would mind working with a part time realtor?

My main job is a relationship manager for a commercial investor real estate group at a large bank so there is a good amount of overlap with what I do currently. My schedule is very flexible in terms of lunches and getting off work, and getting in touch would not be an issue whatsoever (I always have my phone by me). 

So I have a commercial real estate lending job I currently work at an institution. To supplement my income do you think it would be possible to work as a realtor after 5pm and on the weekends? 

This is one of the down sides to investing in a market for which you do not live

Curious how you all have you accounts set up. Right now I have a rental account where the deposit is made from the renter, then every month i pay my mortgage payment from my general bills account manually. I would like to find a way to automate some of this though. For example, I am contemplating having 50% of my mortgage payment ($400) come out of my direct deposit from my W2 employer, twice a month, into the rental account. Then the due date of the mortgage payment just have it automatically debit my rental account. Your thoughts?

Hey Ryan,

Thanks for the response, let me see if i can answer some of these questions for you:

1) I would self-manage, in my management fee of X% that really was going to be a write-off for myself for tax purposes. 

2) I am including property taxes and insurance in yearly debt service, as this would be financed like a conventional mortgage where Principal, Interest, Taxes and Insurance are all in one payment. Had this been through a commercial lender on a commercial property i would have included taxes and insurance "above the line" in Operating Expenses(OE) as those are the standard on traditional RE term loan. Either way DSC would remain the same, but Debt Yield would decrease had i included taxes and insurance in OE. 

Can you talk more about condo's as an investment option? And do you have any examples (Are you talking about 1 bed, 2 bed)? I have always been hesitant of condo's as i feel that a townhome attracts a broader audience - people that would consider a home, or consider an apartment. That being said, I am very open to hearing other success stories and ideas! Appreciate your time and thanks for joining the discussion!

So I currently own my 3 bedroom townhouse in Scottsdale, which requires monthly debt service of $750 a month, not including a $150/month HOA fee. Given the location and market conditions I believe I can rent it out for $1,800 to $2,000 /month. That being the case I would like to find another townhome in Scottsdale, or Tempe area (by ASU) that can duplicate this process with.

I have $30k saved up but am finding in my calculations that the margins are very thin if non existent...

Based on a proforma estimate of a new property that I would purchase for $250k, of which I would finance $220k, with $30k down:

$1800 rent/month or $21,600/year

Revenues

+ Gross Income $21,600

_ Less (10% Vacancy) $2,160

= Effective Gross Income of $19,440

Operating Expenses

-Management fee (5% of EGI) of $972

-Replacement Reserves of $1000

-Home Warranty of $500

-HOA fee of $150

=Total Operating Expenses of $2,622

NOI  = $16,818 ($19,440-$2,622)

Debt Service = $16,752

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Cash Flow After Debt Service = $66

DSC @ 1.00x with a 7.64% DY. 

Debt Yield while being low, would be mitigated by property location and asset type.

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How can I find a way to make sense of a deal like this? Without collecting higher rents my only way to increase cash flow would be to put more capital into the deal. How would i know what average market rents would be in my area? Looking online I see numbers all over the board, from $1,400 to over $2,000/month. My goal would be essentially to 'rinse and repeat' what I have done now: buy a property, live in it for a year or two then rent it out after purchasing a third property.

Thanks Jonathan. I assume you are using your rental account as a savings for not only property reserves but also savings for another purchase? I was curious if having the rental income deposited into the same account that the rental mortgage comes from is a smart idea.