All Forum Posts by: Ali Boone

I really feel encouraged here to say- check with an accountant (one who is familiar with real estate investments)! Take ideas from non-accountant folks, but don't ever take the final advice from them (them, as in, including me too).

Just a side thought- I tried TurboTax one year when I had rental properties and I eventually took what I came up with in TurboTax and had an experienced accountant look over it and he found a TON of adjustments that needed to be made, and a lot of them got me a heck of a lot more money in returns than what I had come up with. What I got back in returns well-justified what I had to spend to have the professionals do it. So not only did I get more money back, I didn't have any stress, and I didn't do anything I was unsure of that could have triggered an audit.

I tell every investor I work with- even if you are good with taxes and/or like doing it, as soon as you own rental properties go with an experienced accountant! Tax benefits are one of the biggest reasons to invest in rentals so if you aren't maximizing your returns, you're missing out.

You can definitely get loans with better terms, as in 100% financing up to 70% ARV, if I understand correctly. I've never done it because I don't flip, but I see them all the time. I recommend talking to Mike LaCava. He's the flipping king. You can find him under Contributors on the blogs. As far as I can tell, he can give you all the skivvy on flipping, including the financing. Flipping as in flip to sell or hold, either way.

Karen Margrave is totally right...600 days is a HUGE red flag! I'd say run away from that one and don't look back. Doesn't even matter the reason. No good deal is on the MLS more than a day, much less 600.

Quality of that property aside, my recommendation is to dodge the strategy you mention completely. First of all, if it won't cash flow later on, why buy it to rent it out at all? I'm also opposed to the idea that buying a single-family home for yourself is an investment at all. I don't buy the houses I live in, but I own tons of rental properties. Owning a house on your own, unless you got it at a total steal, is not an investment and a total liability. So buying a house for yourself and buying investment properties should be treated as two totally different things, unless you take the advice above and do the duplex/triplex thing, which isn't a bad idea. Either go that route, or choose buying a house or buying rental properties as your focus to study and research. Don't go into it without more knowledge than you have right now or you're going to be in trouble.

If it were me, and only because I'm opposed to buying a house for myself, I'd rent a place to live and learn and research rental properties and pursue those.

My recommendation is to always call local property managers and ask their opinions. More than the MLS, than agents, than anyone, they will be (should be) very familiar with actual rental values.

I love Zillow, but never rely on it! MLS is better, but even then, may not be perfectly realistic. The difference with those is those numbers are typically what an agent thinks it will go for or better yet, hopes it will go for. It's the property managers who are more familiar with the reality of what it can go for.

James, I would talk to two people- 1. a RE attorney and 2. your lender on both those properties.

I just went through this last year. I wanted to quitclaim my properties into an LLC and both the lenders and the attorney said that while the chances of it happening are very slim, it is possible that the due-on-sale clause could be triggered if I do this. (and make sure you talk to an attorney in the state where the properties are too, it varies with states). That is not a risk I was willing to take, so for the asset protection side of things, I got an umbrella insurance policy that covers all my properties to the same extent an LLC would and then I just keep those finances in a checking account I named "Rental Properties". While I would love for the LLC to own them, the chance of that happening was slim, it wasn't a risk I wanted to take.

There are definitely ways to avoid doing it. I definitely wouldn't rely on being able to pay the loans off through creative means, unless you only owe a couple ten thousand on it or something. I'd owe way more than I could conjur up on a whim so not worth the risk.

I've gotten 30 year fixed mortgages for my properties with no problem. The last interest rate I got about a year ago was 4.75%, and I believe I've seen a couple down in the 4% range. The key is telling your lender you are buying investment properties. It makes a difference on the interest rates, and yes, they will be slightly higher than for an owner-occupied home. Those 2.75%s are doubtfully available for investments. Fixed rates are though, and I recommend those over ARMs any day.

Make sure you shop around, and work with lenders who are specifically familiar with investment properties. Wells Fargo and all those big lenders don't do a lot of investment properties so a) you will confuse them easily and b) they won't give you the best options.

My vote is:

If your goal is to learn the most about real estate, stick with rental properties.

If your goal is to create capital, you can wholesale, flip, work on referral fees, or start a business.

I heard one time that the risk with wholesaling is that you can make a ton of money and then not be educated on how to be smart with that money and burn it. That's where learning rental properties comes in. I learned that first, so now any money I make I know how to use smartly.

If you are just wanting to find what best resonates with you, start researching, going to seminars, reading books, talking to people, etc. and you will end up finding what best fits you. It may not be wholesaling as everyone swears is the best place to start! It wasn't for me.

If a property has been listed for 79 days, you probably want to run from it! Active experienced investors are searching the MLS every day and most of those grab the good properties within 24 hours of them being posted. 79 days? Run.

Hi Caleb,

If it helps at all, I did exactly that- got the engineering degree, worked as an engineer for almost 5 years before I left it for RE full-time, the whole time dabbling in RE on the side. I hated doing the engineering and would have preferred being RE, but there were some MAJOR advantages to doing the engineering while I did it:

- Had a steady paycheck while I 'figured out' real estate and where I fit in with it, and benefits of course
- The company was contributing to my 401K while I was there which ended up being free money I used later to buy real estate
- It gave me time to really figure out my niche in real estate. Wholesaling is the obvious, but it's not just for everybody and there are other ways to do it. This way you have time to figure that out.
- If you dive head-first into RE, you may miss out on critical study time learning about it and reading about it.
- The W2 job will help you qualify for a mortgage, which while interest rates are like they are, you want as many as you can! I can't get a mortgage now since I left my engineering job.
- I learned so much from that engineering job, and being in corporate, that I apply every day now working in RE. Invaluable experience that applies very much to RE. Engineering teaches you problem solving, and problem solving is the key to succeeding in real estate.

With all that said, I'm also an advocate of doing what you love and just diving it. But there are some serious perks to finishing that degree and working there for a bit. If it was any other degree, I wouldn't be so supportive of sticking it out, but engineering really will help you.

Omg, I think I just sounded like my mother. Stay in school! Oh, yep, shoot me.

Ali

Hi Vish, I work with some killer rental properties in Chicago. If you want to check out some inventory, feel free to email me and I'll send some over!