All Forum Posts by: Brett Sorenson

Originally posted by @Gage Halverson:

Brett Sorenson
Is there a reason you didn't buy during college? I'm currently taking a gap year between high school and college and I have become very interested in real estate. Would you recommend buying duplex or quad plex during college or waiting until after?

 It really depends on the financing. I played college basketball and did not have enough income to support such a purchase. Buying in college would work assuming you have financial backing in case something happened and dollars were needed. I also had friends living with me in my duplex and I wouldn't recommend doing that while in college. Friends and business don't always go hand in hand. Rates are going up so sooner the better most likely. 

Originally posted by @Todd Hensy:

Owning rental property seems too risky. Read this article and tell me your thoughts....

http://www.interest.com/refinance/advice/owning-re...

That article is back from 2012.

I would say the current stock market is very "expensive" given the most recent highs that have been hit.

In the end stocks vs rental properties are apples vs oranges. Do you want to have an investment that you have no control over, has less of an upside, is less involved, and has minimal tax advantages? Pick stocks.

If you want an investment that is more involved, provides tax benefits, has multiple avenues for growth, and you have some control over? Pick rentals.

You could write a book on the differences in these two investment strategies. If you want less work...pick stocks and ride the stock market roller coaster. 

Hard without an accurate trailing 12 which you likely won't get (since he isn't motivated).

Disclaimer - I am a CPA. I would report your taxes correctly. Income, depreciation utilities etc. You should have plenty of expenses to apply to your rental income from your closing statement. Prorated real estate taxes, fees, and potentially amortization of expenses over the life of the loan. I would get into a habit of reporting everything correctly and keeping good records. It will also help you track profitability of your investment and becomes second nature before long. Turbo tax works solid but always consult a CPA you trust if there are concepts that you are struggling with. When in doubt, ask.

As a CPA I would highly recommend having a five year plan prior to contemplating accelerated depreciation. It will all he recouped upon the sale of the property. It also depends on what tax bracket you fall into whether all of the benefits can be used.

Couldn't agree more. First year out of college I bought a duplex for 175k. Brought in 1,700 in rent and mortgage was 1,400. Throw in utilities and I was living for free. Three years later it rents for 2,400 and I refinanced out of FHA loan making my payment 1,200. Not to mention I am up on the property over 100k. I would highly recommend making this purchase your first couple years out of college instead of going for the fancy apartment. It isn't rocket science and can be intimidating at times but is very doable.

2,500 isn't high for my market. 

350k mortgage at 4% is already at nearly 1,700. Add in real estate taxes of 400 a month and insurance of over 150 and you are at 2,250 assuming you had a down payment of 20% and not paying PMI. All in all with utilities you are looking at wel over 2,500 a month.

Contrast that with renting and you can see the interest by a millennial. Especially since they likely could apply the 1,000 they are saving monthly to student debt that carries a higher interest rate than a mortgage would. 

Rents have gone up sure but housing prices have gone up just as steadily without even factoring in the interest rate hikes to come over next 4 quarters. 

Minneapolis is also over saturated with luxury rentals making that option increasingly affordable. In Minneapolis some large development companies are getting crushed on luxury apartment builds. 

Originally posted by @Dawn Brenengen:

@Brett Sorenson

That's a high payment for a $350k home.  I paid $330k for mine, put 10% down and my payments are $1700/month, and that includes taxes. 

Also, while I'm perfectly happy to have a generation of people propping up rents and filling my vacancies, I think they are doing themselves a disservice.  If you rented a home for $2500/month, that rent would go up over time, where your mortgage payment is relatively fixed. Also, after 30 years, the house is yours, and you no longer have to pay rent.  When my house is paid off at 60 years old, I'll be able to live the next 20 years "rent" free.  That is a huge factor in my early retirement planning and ability to be financially free.  

If you think you don't want to be in your town forever, I would buy a less expensive home that could one day be another rental property if you decide to move elsewhere. 

It all depends on alternative investments. If you are going to put that money in a savings account then yes...pay down principal.

If you have other purchasing opportunities worth taking advantage of then take advantage of those.

It is likely we will have interest rate increases followed by inflation so holding debt at less than 4% is a very strong investment strategy. As inflation goes up the "real debt" goes down because you are paying it back with inflated dollars. Of course this involves speculating on future inflation, however holding debt is definitely a strong strategy in the near term.

I am a millennial (27 years old) and I purchased a duplex 3 years ago in Minneapolis. It is now fully rented out and has a strong cash return. My fiancé and I now rent and have evaluated purchasing a home to find that we can rent for much less and receive much more.

I am a strong advocate of acquiring assets and making good decisions however in our market it was hard to justify purchasing a 350k home and having payments come to 2,500 a month. For 2,500 a month and no risk we can rent pretty much anything we want in the Minneapolis area. Sure...there is no equity being built however the mobility and lack of repair risk is well worth giving up the $400 a month in principal reduction.

We will likely rent until we see our dollar going farther in the single home market. If not...I will continue to buy duplexes which isn't the end of the world.