All Forum Posts by: Brian Dudash

Thanks everyone for their input! I'll need to do a little more digging into this and go from there.

@Anthony Wick Yes, you are right, I shouldn't estimate taxes but what I'm trying to get a rough ballpark (or how to calculate it properly) for income tax (rental income). I already have the proper property taxes, insurance cost, etc.

-Brian

Does anyone have any good resources, tips, or ideas on how to roughly calculate/estimate income tax on rental properties?

I'm in the process of hopefully buying a rental very soon and while I have everything estimated for the property, the last little bit is the income tax situation - which honestly, I'm a bit lost. I did some googling around and had some ideas but I figured to see more "real" numbers from others, examples, resources you used, etc.

I understand that it can depend on a lot of different factors but I'm just trying to wrap my head around this and factor this number into my calculations. I'm considering putting it in an LLC rather than my personal name but I'm still trying review the pros/cons there too. Plus, I see a lot about the possible tax deductions too which a whole other discussion probably...

Thanks!

Thanks for the replies!

How do you, personally, factor in the CapEx for your properties? I know it can vary based on factors like the age of the house, location, etc but is there a rough percentage that you use or something like that? Is 10% a better number to go by?

Hi All! I apologize for the long post in advance :)

Anyways, it's been awhile since I've visited BP but over the past couple of years I've been looking into buying rental properties for passive income (but too "scared" to pull the trigger). In the last couple of weeks, I've been seriously looking into a few different potential rental properties in the Cleveland area (where I'm originally from).

Currently I have a local realtor who I'm working with, plus I've started the process of getting pre-approved from a couple of different lenders. Now the real questions:

When I'm trying to analyze a deal, which includes things the most common expenses (that I read about, at least), the net profit ranges around $120-$150 (max) per month.

The more I read/research, some places say the $150 per month is a good number to shoot for and others say $200+ but I don't see how people get to the ~200 range, unless I'm doing something completely wrong....

Keep in mind that this would be my very first rental and I've been looking mainly at "rent ready" properties that would need little to no work when purchased - thus the price is probably on the 'higher' side than most people would like on BP. The scenario below is an example of what I've been looking at (all estimated numbers):

Asking Price = $108,000 (located in Lake County area, in Ohio)

3bd, 2ba, 1324sqft, built in 1957

Rent = $1,200/month

Rehab = $0

Mortgage @ 30yrs = $4,860/yr

Insurance + Property tax = $3,000/yr

Repair = $1,440/yr

Vacancy = $1,200/yr

PM = $1,440/yr

Est CapEx = $720/yr

Without including possible utilities I would have to cover (like water, gas, and garbage), plus lawn/snow care, this only cash flows around $145/month - if my calculations were correct. The only way I can make these type of properties over 150 but possibly 200+ is without any PM. While this may be doable in the short term with a small amount of rentals, I want to include PM in all deals regardless if I use one or not - just in case. Am I doing something "wrong" here??

Is the only way to make close to $200+ (w/ including PM), is by buying very cheap, reno, then renting? I'm pretty confused right now...

Lastly, just some random questions:

1. Do most landlords of SFH rentals pay for lawn/snow care or do you have the tenants "cover" this?

2. How common is it for the tenant to pay for all utilities like I mentioned above? I'm currently a renter and I have to pay for everything but maybe I'm just getting screwed over lol

Thanks again!

I found the link below and I honestly have never heard of that before:

https://www.biggerpockets.com/blogs/5110/42824-all...

So does this mean I'd get 75k with delayed financing? Don't you usually want all of the money you put into a property in the BRRR strategy and not 75% of it?

Do you simply take that 75k and roll it into your next property but making sure it's not more than that amount? Then repeat?

Can you explain how this would work and help building up your portfolio in the long run? How does this help snowball your ability to gain more rental properties? Thanks again for your help!

I looked at a property earlier today that just went on the market (today), and it's a 3bd, 1 bath, finished basement, and detached 2 car garage. Plus my brother lives right next door so he can help keep an eye on it (but not manage it). I looked at a couple of "typical" BRRRR type of houses but they needed way, way too much work.

The previous owner passed away and the family is only asking $100k for it when the value is about $120k. I'm not exaggerating when I say this property does not need any major repairs (at least obvious) or even paint touch ups. Of course the inspector may disagree, so who knows and we'll see. The carpet was cleaned, fresh paint, all the appliances come with it, etc.

The house really looks to be move-in ready besides maybe some very minor work that shouldn't cost a lot of cash. With that said, it is a 100k house and I do have the cash for it. The rental market there is $1100-$1200 per month.

I was thinking about offering $95k but honestly, 100k seems like a good deal. The housing average in that area is around 120-125k and the elementary/junior high schools are right behind this property too. I don't think it will be difficult to find a tenant.

With all of that said, would you take the stab at this as your first rental property, considering it wont be able to follow the "real" BRRRR strategy since it's already ready to go with not major repairs to add true value? I'm not sure how I'd proceed though in gaining more properties down the road in a year or 2...

Do you go full cash, get a mortgage, or some other strategy out there? Sorry for the questions but I'm just trying to fully understand how to grow my portfolio faster. 

Thanks for the reply, Anthony! I've been looking into BRRRR but I'm a little confused on how this strategy works.

I understand the most important part is finding a property at or around 10-20% below market value and having the chance to fix it up to increase the value but what is a bit confusing to me is if you refi the first house and get like 80k or 85k back in a cash out -- how does the bank keep letting you do this over and over?

Won't your credit be worthless in a way since you technically do not own any of these properties? It will take you forever to own any of these but that is I guess that is the strategy in the long run anyways.

Does anyone else have any other examples on how they use the BRRRR strategy? How would you go about with ~$100-110k in available money to start off?

Thanks again!!

I've had a few discussions about the best way to create a plan in order to "snow ball" your way to owning many REI properties (buy and hold for rent).

After Googling around and even reading blogs on this site, I've thought about doing something like the following:

• Buy my first rental property (SFH) with cash (around $60-70k) where I'd expect about $500 cashflow per month
  • Currently I have about $105-110k available (after taking out an emergency fund)
• Then shortly after, buy my second rental property (SFH) but take out a mortgage and put down around 25% on a $60-70k house
  • The cash flow on this property specifically would likely break even (at or near 0) but this would be on a 15 year mortgage and I can use some (or most) of the cash flow from the first to help pay down that mortgage faster, along with my corporate job monthly savings too
  • I feel I could pay it off anywhere from 5 - 10 years depending on the exact strategy 
• If/When I get the 2nd one, then shortly after that, try and get a 3rd SFH rental property and continue this snow ball effect to build up by rental portfolio

Obviously this is easier said than done, along with risks and I honestly do not have any real experience with rental properties as this is my first time diving into this type of investing.

My main questions would be -- 

• Has anyone done a similar strategy to help build their portfolio quicker?
• What are some of the major pros / cons of this type of strategy?
• Has anyone taken the risk of buying a rental property with a mortgage (like 15 year), where your cash flow is at or close to break even?
• Any other tips / tricks / experiences are appreciated!

Thanks!

-Brian

Thank you everyone for the warm welcome!