All Forum Posts by: Bill B.

One more free hint Matt. 

You can make one post with all your comments to save time @Matt Hilliard

So you can thank @user1 for their help

Tell @user2 that they had a good idea

Then tell @user3 you’ll reach out to them

While telling @user4 their comment doesn’t really help. :-)

I don’t think you want to try the fund sites. Their plan is to sell in 3-5-7 years and capture the gains so they can cash in. Then you’ll be forced to start over. 

Try a different market or property type? Are you using a PM? I only have a dozen properties but I spend less than an hour a month and half of that is accounting because I like doing it. I might have 4-5 repairs per year. (1 every couple years per property.) But 2-3 of them are under $250 and I never even hear about them other than the fact they are fixed. Most tenants stay 5-10 years so there’s almost zero vacancy. 

I bought SFR under 20 years old in a market with no damaging weather, stucco siding, and tile roofs for basically zero exterior maintenance. Then I picked a solid PM. I think that's key to being a landlord long term. I've only got 25 years in so far. But I find it more boring than tiresome. There's nothing to do.

I can’t sell them, my life wouldn’t become any easier. I’d just be giving up my freedom and a boatload of tax deductions. 

Sometimes the base value of the land is high. There are properties that would appraise HIGHER if they were torn down pre-appraisal. I’ve seen Million dollar homes purchased and bulldozed day one, IN MN. Not Hawaii, LA or NYC. These properties literally would have sold for more if the seller had torn down the property before listing it. 

Most appraisers are not inspectors. They aren’t going to test any appliances, HVAC, electrical or plumbing. They measure beds/baths, square feet, construction type and age. Then compare to neighbors within a mile or two. 

Please don’t forget. ANY property that was a rental first, before it was your primary residence will NEVER be 100% tax free unless you die and leave it to someone else. Obviously that means all 1031 exchnages. There is some advantage but not as much as you’re hoping. 

So you have a rental property with $100k in appreciation and do a 1031 in to a new RENTAL (can’t be your primary right away.). You rent it out for 3 years, move in for 2 years to satisfy your 5 year requirement and your 2 of 5 year requirement. 

Assume it goes up another $50k so you have $150k gain AFTER  all selling costs. You get get 40% of that gain (2 out of 5 years) tax free($60k) but you still owe taxes on the other $90k PLUS all the depreciation recapture. (Assuming you didn’t pay that when you converted it to non-rental.

Your advantage is making some of the rental appreciation tax free. The downside is you making some of the primary home appreciation taxable. So the more the property appreciates after you make it the primary the worse you do vs just buying it as a primary  

The only 100% win is 1031 all your rentals in to one massive property. A few years later make it your primary. Live there until you die. Of course you get the same tax savings by just owning the rentals when you die. 

Ps. In your 20 year owned don’t bother to 1031. After you lived there only 2/22nd’s of the gain would be tax free. (9%). Probably not worth it unless the gain is well over $1M and you absolutely don’t want to do a 1031. They are truly an unbeatable gift to real estate investors. 

Rates are at 10 month lows how long ago did you lock in? Find out what your lenders current rates are and how low they would have to go for a cash free refi. Ask how far away from removing PMI you are and how much you would save when you get under that amount. You can hope the appraisal comes back the same and you get under 80% or kick in additional downpayment. (You would earn your current interest rate plus the PMI savings on that amount, combine that's more than you're likely to earn risk free in any other investment.)

If you’re not worried about the cashflow but instead your true income. You could look at a 15 year mortgage. This will lower your cashflow even further but also reduce your interest expense a couple thousand per year. (1/2 percent times $400k). This is real money even if it’s not cash flow. 

Is you think you might sell in the next 5 years make sure to stay 2 years so you have 3 years to sell tax free. Either way you’re certainly better off than if you were still paying rent. 

You can't see it going the other way? Every level of government is so greedy and desperate for every dollar they can squeeze out of the economy. You've certainly seen what they've done with the STR economy. Sure some banned it, but others just reached out to have their palm's greased. License fee, inspection fee, this tax, that tax, etc etc.

I could EASILY see the government say “in order to protect the people” you must pay us to take this class, and then pay us to get your license, and then pay us every year to keep it. Like a contractor’s license. They’d come in to protect us from the “Realtor’s monopoly” and just coincidently collect more money to spend on pet projects. Heck, maybe require all dels be done on a state authorized contract they either charge for or require your state issued number be printed on. 

Unfortunately my long/detailed response didn’t post. 

The abbreviated version is if they are a “real” lender they do 100’s if not 1000’s of deals per year. That means they should EASILY have a list of 10+ insurance companies that meet their requirement. If they can’t provide at least 5 flee to another lender. Good luck. 

1) I like the renters and I don’t hate the deal. One of my first deals was house hacking with a bunch of friends back in the 90’s and it was good deal with no cash flow. One of my best deals was negative $800/mo the first year I owned it. 

2) is the appraisal “ real”? Can you list it for $485k and clear $455k after closing costs? Making $55k in a few months on $15k would be a great deal. 

3) Any first deal that’s cheaper than paying for education is a better deal. I assume you’re living in the property. Plus you need to add your saved living expenses to your “income” side of the balance sheet, and it’s added tax free. (Please tell me you are living there (or lived there for a year before renting it out.) and not committing mortgage fraud.)   If still living there do you plan to move out in a year a repeat? (This is how I built my portfolio, a new primary home every year. Mostly for the lower rate not the lower downpayment.)

TLDR: I kinda like it, especially for a first deal, especially if you’re still living there and forgot to add your saved living expenses as additional tax free income, plus you get to help some friends out. My. Only caveat would be if it was a primary before you rented it out and lived there two plus years. Don’t forget you’re going to turn that $55k gain from tax free to taxable.  Make sure you get a CPA involved for depreciation and expense deductions and keep at it. Good luck. 

I don’t believe most “clawbacks” are due until you eventually sell the property you 1031’d in to. I’m 90% sure you wouldn’t owe the $34k the day you sell the Oregon property but rather the day you sell the new property without doing another 1031. Just keep doing 1031’s until you die and I don’t BELIEVE you will ever owe the $34k. @Dave Foster would know the answer…

What do most MTR not include that STR does? Do you pay for utilities, household supplies, cleaning, I assume towels/linens and bedding? I was assuming your provided the same as STR but then wasn't sure about utilities. I've seen people talk about getting $400/mo more in rent not considering that utilities might run that much. Thanks.