All Forum Posts by: Ali Boone

Originally posted by @Joe Homs:

@Yoselin Pearce I still consider buying a principal home being your first purchase in your investment career.  If you had purchased a home in (2014) when @Ali Boone wrote her article it would probably be worth twice what you had paid for it.

There are many things in deciding to purchase a primary, but tax savings are big for me.

1.  Are you staying in California for 5 or more years?  Then buy.

2.  Are you able to write off the mortgage payments on your primary?  Yes, same as an investment to reduce your gross income.

3.  Are you able to write off the property taxes on your primary?  Yes, same as an investment to reduce your gross income. (However, right now your deductions are capped at $10,000 on primary, but look for that to change with new administration.)

4.  Are you able to sell that home you purchased in 2014 and not pay any capital gains taxes?  Yes, see Section 121 exclusion which lets you exclude $250,000 per person, $500,000 per couple.  Sell then invest with that money.

5.  Are you able to sell that investment you purchased in 2014 and not pay any capital gains taxes?  Only with a 1031 Tax Deferred Exchange.  However, if you had purchased that investment in 2014 I would tell you to hold on to it for the rest of your life and let your tenants pay the mortgage for you.  Then retire in style 30 years later with a free and clear property earning you passive income.

5.  Would I have purchased an income property in 2014?  Yes, I did.  Would I purchase an income property now in California?  No, not the right time to cash flow.

6.  Would I purchase a primary home in California with the information above?  Yes and enjoy the sunny weather, no winter, Oceans, local mountain skiing, deserts, Cruise ships, and almost anything else you enjoy.

7.  Lastly, how best to learn about investing when you have your own home to take care of.  Broken Garbage Disposal, painting, new flooring, all things you will need to learn if you have an investment.

Good Investing...

Yes, but we were also coming out of a crash in 2014 so prices have increased even more than usual. You're correct in that appreciation can be a big thing, but you have to actually know how much appreciation would be required for you to be profitable. The mortgage interest alone makes that number jump very quickly, and then adding in all improvements, repairs, etc. Buying in a crash, easy to make that happen. Buying a primary in a market like today... who knows. Appreciation, yes, but will it be enough to mean it's actually profitable.

I'm rarely, if ever, in support of going the primary home route. At least not over investing, and certainly not given the prices here in SoCal (I'm in Venice). Here's more on it-

https://www.biggerpockets.com/...

Hope that helps!

What's your budget? Inventory is low across the board right now. New construction turnkeys are starting to make a big play into the market and you definitely wouldn't have to worry about it not being "rent ready" in those cases. When you bought that property, did you have a full property inspection done on the property prior to buying? How extensive were the things you had to put money in for? And was there no scope-of-work warranty? I do run a turnkey rental properties Facebook group, you can search it by that name, and there are tons of discussions on different providers in there.

More hands-off than Roofstock? In what ways is Roofstock not hands-off as compared to normal turnkey providers?

There are pros and cons to turnkeys, which is what Roofstock primarily offers. They aren't for everyone, hence not everybody jumping all over them. But I do think turnkeys can be great for newbies. Here's why-

https://www.biggerpockets.com/...

But like I said, there are downfalls, and there are also a lot of turnkey companies out there and some are better than others.

It's not going to shut it down, no. It just limits their available loans for it, which is primarily just going to drive up interest rates on investment and second home properties. Nothing too much more dramatic than that. I'd say maybe it'll swamp the lenders with some chaos, but they're already swamped in chaos because of where the housing market's been lately.

Unfortunately, for 2021 (at least right now), the "top turnkey markets" are just about any market that has inventory. Inventory is at an all-time low across the board, so a lot of turnkey providers have run out or are running out. New construction is really taking over turnkey world right now because it's the only way to get properties, but those are more expensive than $80-100k. There are turnkey providers with some inventory, but it's not nearly the level of pickings that you would have in a normal year. Which totally sucks. I run a turnkey rental properties Facebook group you're welcome to search on there... lots of talks of different providers, etc.

I think a) it would be hard to quantify it that accurately anyway... just doing that, in any realistic capacity, would cost you a million of those hours you've valued. and b) like you said, it's not about the math as to why people go turnkey or local (the math of the deals matters, but not the preferences). It also depends on where your "local" area is... there's a big difference in living in somewhere like Los Angeles or the Midwest. Jackson Hole... not sure what options you have going there.

Welcome Tim! I used to be an Aerospace Engineer as well :) Left it in 2012. And I live in Venice Beach, so pretty close to you.

The last property I bought was a duplex here in Venice, but it was expensive, negative cash flow.. the whole thing. Other than that one, I've always bought out-of-state for rentals. A lot of SoCal folks do that-- easier entry prices, positive cash flow, etc. There is no cash flow here, and the ROI is really tough-- you'll be dependent on appreciation potential for profit. So you're not just not seeing the deals... they aren't here. And even worse now with the inventory shortage everywhere, LA is no exception.

For househacking, the big thing you want to consider is the numbers (if you're talking about LA). You want to make sure you know exactly how you plan to profit because you're going to be pretty highly negative cash flow for a while. Here's general househacking considerations-

https://www.biggerpockets.com/...

Hope that helps!

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