Bought the book by mistake, but now I am fiercely dedicated

Bought the book by mistake, but now I am fiercely dedicated

New to Real Estate · Chandler, AZ · Member since 2019 · 25 posts · 16 votes

Hi everyone! My name is Jessie and I live in Arizona. I was looking to educate myself in house flipping, so I went on Amazon and looked at the top rated books on real estate investing, not noticing the Bigger Pocket books was on rentals. I have been a landlord twice before and it was an ok experience, but I didn't think that would help me reach my financial goals. I read the book anyways, and was so inspired I am having my mom and best friend read it as well, and I changed my WHOLE investing strategy. 

I realized I have a great cashflow opportunity in my primary home, so right now I am watching the forums and listening to the podcasts to help me decide to either rent out my primary and purchase another home, or stay in my primary and purchase a rental. I do have money for the next home through savings and an open HELOC on my primary (which is currently at a $0 balance).

I most struggle with the idea of delaying the purchase of my own personal property. My original plan was to sell this house and dump the equity into my next home (I am dying to have a pool). However, I realize that my bigger goal is to have income replacement, and rentals might be the better strategy to get there. 

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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
7y

you want to talk to your CPA before you do anything..  you don't want to turn your primary and its take free equity into a rental .. the tax free sale of a primary is the number one best tax treatment in my mind.. if you want to move on sell it take your money tax free then go shopping for rentals or house hack or whatever.

now if there has been no run up in value that creates a tax free situation vis a vi equity.. then probably does not matter

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  • Rental Property Investor · MN · Member since 2017 · 864 posts · 555 votes
    7y

    @Jessie Keating Welcome!

    So the numbers line up in your Primary residence, to where if you rented it out, it would cash flow still? If you like where you live, I'd just stay there and find another property to rent out

    So if you want a pool, build up a enough cash flow so that it will pay for it. Delaying a few liabilities to build up cash flowing assets is definitely the optimal route to take 

  • New to Real Estate · Chandler, AZ · Member since 2019 · 25 posts · 16 votes
    7y

    Thank you for the tips @Jake S.! Yes if I rented it out today, after PITI, HOA and landscaping I would have $700/month (which of course some I would need to put aside for future repairs and such). I am not sure if I can get that much right out of the gate if I purchased a new property because I can only put 20% down. But I still need a place to live, and moving every time I get a new rental doesn't seem ideal (or am I being a baby??)

  • Rental Property Investor · MN · Member since 2017 · 864 posts · 555 votes
    7y

    @Jessie Keating I'm on your side about it. I have become accustom to my standard of living and where I live, and I wouldn't want to downgrade if I really don't have to.

    Some are HUGE proponents of doing so, so it your case, theyd rent the home, then move into, say a duplex and do the househacking method. This is totally fine and I do see the power of it, it's just not for me (and my wife for that matter)

    It depends on how fast you want to achieve your goal and what you actually want to give up to get it.

    You can still hit your goal over the course of a few years by starting with just 1 property with a 20% down payment!! If that is what makes you happy, go that route for sure!!

  • Shiloh LundahlPro Member
    Rental Property Investor · Gilbert, AZ · Member since 2016 · 3k+ posts · 4k+ votes
    7y

    @Jessie Keating Welcome to BiggerPockets.  I'm also an investor located in Gilbert, Arizona.  I run a local meetup group in Mesa, just off of Baseline and Val Vista once a month.  I would say we have probably had over 200 local investors attend the meetup.  

    Let me know if there is anything that I can do to be of help as you pursue your investing goals.

  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    7y

    you want to talk to your CPA before you do anything..  you don't want to turn your primary and its take free equity into a rental .. the tax free sale of a primary is the number one best tax treatment in my mind.. if you want to move on sell it take your money tax free then go shopping for rentals or house hack or whatever.

    now if there has been no run up in value that creates a tax free situation vis a vi equity.. then probably does not matter

  • New to Real Estate · Chandler, AZ · Member since 2019 · 25 posts · 16 votes
    7y

    @Shiloh Lundahl so very nice to meet you! I would be interested in more information about your meetups, I am not far from there! I am very grateful I found some fellow Gilbert-arians! 

  • New to Real Estate · Chandler, AZ · Member since 2019 · 25 posts · 16 votes
    7y

    That is a really good point @Jay Hinrichs - There is so much equity in the home I know I could do something great with it, and tax free makes it much more appealing. 

  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    7y
    Originally posted by @Jessie Keating:

    That is a really good point @Jay Hinrichs - There is so much equity in the home I know I could do something great with it, and tax free makes it much more appealing. 

    If you ever wonder why builders of higher end homes end up with such nice homes.. its not that they build them so much cheaper its that they build one live in it for 2 years then pocket their profit as tax free.. instead of ordinaty income.  depending on your marital status you can get 250k for single and 500k for married .. its the I have done it 5 times in the last 25 years.. its a game changer let me tell you 

  • Los Angeles, CA · Member since 2017 · 16 posts · 11 votes
    7y

    Thanks for sharing, which book exactly did you pick up?

  • Real Estate Agent · Phoenix, AZ · Member since 2016 · 738 posts · 1k+ votes
    7y
    Originally posted by @Jessie Keating:

    Thank you for the tips @Jake S.! Yes if I rented it out today, after PITI, HOA and landscaping I would have $700/month (which of course some I would need to put aside for future repairs and such). I am not sure if I can get that much right out of the gate if I purchased a new property because I can only put 20% down. But I still need a place to live, and moving every time I get a new rental doesn't seem ideal (or am I being a baby??)

    Talk to your CPA to understand the tax ramifications of all your options, and then talk with a lender to understand all of your financing options. If you have more than 20% in your current property, if you move out to purchase another primary residence you may only need 5% down. You're basically trading places with properties, almost like you already put 20% on the current one that will soon be a rental, and now you're only putting 5% down on your primary residence. I have a great local lender I can refer you to if needed. Once you understand all your financing, then you'll have a much better plan for your investment strategy :-)

  • Shiloh LundahlPro Member
    Rental Property Investor · Gilbert, AZ · Member since 2016 · 3k+ posts · 4k+ votes
    7y

    @Jessie Keating I just posted a meetup in Mesa, Arizona in 2 weeks.  Here is the link: https://www.biggerpockets.com/forums/521/topics/71...

  • New to Real Estate · Chandler, AZ · Member since 2019 · 25 posts · 16 votes
    7y

    @Jeremiah Pangan I got "The Book On Rental Property Investing" - so amazing and eye opening!

  • Real Estate Agent · Scottsdale, AZ · Member since 2011 · 471 posts · 296 votes
    7y

    @Jessie Keating Short-term pain = Long-term gain. ;)

  • New to Real Estate · Chandler, AZ · Member since 2019 · 25 posts · 16 votes
    7y

    Yessss @Bevla Reeves - I need to try and focus on that! Delayed gratification is SO tough! 

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