All Forum Posts by: Alan Rohrer

I see that you mentioned them giving you 30 days to change the title back to your name.

However, that doesn't seem to be what those paragraphs you quoted say. Couldn't they just require you to pay the money back in 30 days and not give you the option to change the title?

and lastly, it would be a bad idea for a mortgage company to call a performing note, but if we get to the scenario in the next year or two where mortgage rates are at 7% or 8%, it might make a lot of sense to call a note that was written out at 3%

this is a great explanation though! I'm just offering some thoughts, and would love to hear anyone's responses

Thanks Joe! A question I do have is wouldn't the mortgage company find out I transferred title when I send them the updated landlord insurance with the LLC as a covered individual?

I saw recently that Fannie Mae released new guidance on the due-on-sale clause where they are no longer enforcing when someone transfers ownership to an LLC owned by themselves.

The quote and link below:

"A limited liability company (LLC), provided that

• the mortgage loan was purchased or securitized by Fannie Mae on or after June 1, 2016, and the LLC is controlled by the original borrower or the original borrower owns a majority interest in the LLC, and if the transfer results in a permitted change of occupancy type to an investment property, such change does not violate the security instrument (for example, the 12 month occupancy requirement for a principal residence)."

https://servicing-guide.fannie...

Does this mean if I got my mortgage 2 years ago and it's owned by Fannie Mae, that I don't have to worry about due on sale?

I'm always looking for encouragement for myself and people I work with to show that financial freedom can and IS created through real estate.

Would anyone be able to post some links to some great financial freedom stories here on BP!?

@Eric Chang - I don't know of any CPAs in DFW, but as you could imagine, there are many CPAs here that work with clients remotely, including myself. Do a quick search, look at a few, and see if you connect with any based on their comments/answers. 

As far as 1031- check out @Dave Foster, he's very active in the forum and really knows his stuff.

@Fred Ewert - I'll add Elkhart to your list (which I assume you were including in the Goshen area).

I can't think of a better blue-collar population to invest in especially with all the booming RV factories up there. The biggest downfall is when the next recession hits, Elkhart will probably get hammered again as they are very focused on a few luxury industries.

Just make sure you buy for cash flow and not appreciation and you should be great!

@Enrique Gonzalez - There are many great CPAs on here that work with clients remotely, so you're definitely in the right place. I believe @Michael Plaks is based out of Houston and is very active on the forum with answering/helping with tax questions.

For CPAs, I'd recommend prioritizing someone who is an expert in real estate over someone local (and if you find one that's both- great!). Also, talk to a few an see who you work well with also. A relationship with a CPA should last many years, and they should have the capacity to advise you as you grow your business. So to sum it up - prioritize fit & expertise over location! 

For attorneys- it's best that you find one that's local however.

Best of luck as you continue your search!

@Mark Roberts - You're referring to the "2 of the last 5" rule, which you seem to understand correctly. You won't be subjected to capital gains taxes on the increase in value of your property.

A little tax theory here to help understand: There are many different types of income, and many ways those types are taxed. For instance, you have ordinary income (income from performing a service like flipping a home, selling inventory, or working a W-2 job). These are subjected to income taxes and social security + medicare taxes.

There is also capital gains (and many more). This is the increase in value of capital invested, and is taxed at the capital gains rates (assuming it's long term capital gains).

So to answer your question, the gain on your house that you've lived in for at least 2 of the last 5 years is a capital gain, but it won't be subjected to capital gains taxes because of the "2 of the last 5" rule. 

I will point out that you should (and probably have) taken depreciation on your house the last year you didn't live in it. You enjoyed a tax benefit because of that depreciation. When you sell the house, the government is going to make you pay back that benefit in the form of "depreciation recapture". The amount you took in depreciation will most likely be taxed at 25%.

Finally, you mentioned rolling money into another home- I'd look up "1031 Exchanges" on this forum, because if you plan on rolling money from deal to deal, it may help you defer the capital gains taxes in the future.

@Nick Causa

@David Hildebrandt is pointing you in the right direction. Even when rental property investing, you need to be thinking on a personal finance level as well- in this case, following the logic of an emergency fund. 

Most personal finance gurus like Dave Ramsey say to build that up before you start doing anything else. So along those lines- I would do exactly what David does. Determine what your emergency fund (CapX) number should be, then fully fund it before you start taking money out.

I know many in this forum don't go about it this way, which I also understand as well from a purely financial side. I just personally can sleep better at night with a fully funded emergency fund early on!

Congrats on the first purchase!

@Buu Lam - 

@Marie Tai has a great list of questions there. Certain questions about entity structure and tax strategies may not be able to be answered before they have an understanding of your full picture- but still a great list of questions.

I'll also add that you should pay attention to the questions they ask you.

If you are wanting to leverage your CPA to help grow your business, rather than just someone to handle the compliance side of things- the questions they ask you will reveal just as much.

-Do they work with clients that are CURRENTLY where you want to be in the future?

-Did they help them get there?

-What broader business strategy experience do they have and how can that help you get where you want to go?

-Can they help advise you on the tough decisions, or do they just know how to crunch numbers?

These are also questions you want answered when you are looking for an advisor/accountant. If you are looking for someone to just handle the compliance side of things, you don't have to be as extensive with the strategy questions.

Hope this helps!