All Forum Posts by: Brian Lacey

Not really an emotional issue, which your last sentence hints at, as much as it is an economic issue. There is a deeper cost outside of just the difference between current and market rents. The cost that you seem to have left out of the original post is that you didn't account for time, and the cost of finding a new tenant.

Lets say they don't agree to a raise in rent. For simplicity, they walk away peacefully. You then would have to prepare the units for prospective tenants. Advertise and find those tenants. Do that whole process, and then get them in, and then hope that things go smoothly.

That is a lot of moving and unknown variables to account for.

I can't tell you what the right thing to do. I wanted to make sure before anyone jumps on this thread, and point out the obvious numeric differences in what your cashflow could be, that all of the variables had been accounted for, and that your most important resource your time is unknowingly overlooked in this process.

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Originally posted by @Scott Lymburner:

Brian,

I keep seeing responses about how to do it. The real question is ,"should you do it?". You stated that you don't have an IRA yet. I think many people already have money in IRA/Roth/401k so looking at investing in real estate with that money vs other investment options is a good idea. However, if you don't already have money in these retirement accounts I think it is better to invest with after tax money not in a retirement account. When you invest inside an IRA the cash flow goes back into the IRA so you don't have complete control of the cash flow. If you purchase investment property properly using leverage then the cash flow is tax free. An IRA doesn't add any benefit and could be worse if the distributions are taxed at your ordinary income tax rates. If you have capital gains outside an IRA you can use the 1031 exchange to defer taxes indefinitely. Inside the IRA you could also use the 1031 exchange, but if you don't then again it is taxed as ordinary income when taken out and you have to wait until 59 1/2 to take it out. I guess it depends on what your goals are. My opinion is to do it outside an IRA since it has tax advantages already and you can use the cash flow without any restrictions.

Scott Lymburner

That's what I ended up deciding to do.

Since I posted this, my research, and what/who I deem reliable sources of information, I decided to do exactly what you proposed.

Seems redundant at best, and almost a double negative in a sense to use IRA for real estate.

I prefer the liquidity, and what not over the tax deferral which done right, as you stated, is possibly forever.

For me the big deal breaker was the introduction and advocation of the new MyRA. I knew once I saw that, that it was most definitely something I wanted nothing to do with.

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Originally posted by @Cole Schlack:

I suggest everyone fight the city/county state codes, this whole thing is an infringement on property rights. Cities can not "outlaw" short term rentals. You can't say they are a business but long term rental is not. Every city in the country allows Daycares and other home based business but they are excluding short term rentals? They can regulate it, they can tax it but they cant stop it. Airbnb and Homeaway need to step up and fight for their customers. I guarantee you the cost for cities to fight this if everyone stands together will be to great. I own 5 rentals homes and plan to do more, I just ignore the cities and find that unless your neighbors are complaining they don't really care. These cities have 100s of ordinances on the books that people are breaking and most don't have time to deal the issue.( I do however stay away from HOA's they do have the power to restrict and you cant win that fight) On a side note, I would never buy a property unless it was a good under-valued property, every rental could be rented long term or sold if needed. Never get tricked into over paying by the cash flow on vacation rentals.

I would advocate those do not jump in front of this. Let AirBnB do the fighting. Any attacks/resistance that gain any social movement will probably be swiftly followed with harassment and audits from the IRS.

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Originally posted by @Jay Hinrichs:

here is the St. Helena story from the Napa Valley Register

http://napavalleyregister.com/news/local/owners-of-illegal-st-helena-rental-will-pay-in-penalties/article_a08d6527-5253-5b2c-8261-e737f0acc508.html

Napa valley of course has a HUGE multi billion dollar tourist industry.. and its always been highly regulated.

along with some cities on the Oregon coast.. Lincoln City requires a permit for SFR short term and they give out very few...

This is something I think Air BnB will probably need to tackle head on.. I have personally never used one..

Sounds like an attempt at protecting their monopoly. No different than what Uber is facing.

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I would use the BP Rental calculator.

Then look at comps about what I can expect.

Keep in mind you're not buying a property, you're buying the tenants that will rent it.

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May be of some help.

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If I were investing in SC, it'd be Charleston, Columbia and Clemson, the latter two simply for the university exposure. Built in tenants. Could even rent/room, and increase income.

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You're clearly better off going to a nicer neighborhood. If you don't have the 20% down payment, then go FHA, and 3.5% down on a duplex or triplex in a decent area. Still will definitely be paying less than your current, I imagine.

5-10k anywhere is bad. 5-10k in Chicago sounds like its in a war zone.

5 Votes

In a vacuum, 30 year fixed rate. Lots of caveats that go into that answer as well.

Like @Chris Mason said, need some more info. Most importantly, the deal better be cash flowing, or else it's not sustainable.

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Lesson of the day:

Buy CA props in a downturn. The appreciation will make the deal right over time.

3 Votes

All Forum Posts by: Brian Lacey

Brian Lacey has started 5 posts and replied 213 times.

Post: How to raise rents on new purchase when they are 60% of CMR?

Post: Why have a Self-Directed Roth IRA and invest in Real Estate?

Post: Air BnB and short term rentals being attacked by cities

Post: Air BnB and short term rentals being attacked by cities

Post: SFR rental in C class. Good deal?

Post: Price for architects drawing?

Post: 2016 Trends to Watch

Post: 4k-10k Homes. Go or No Go?!

Post: What type of mortgage

Post: Is Appreciation better than CF? CA Cities Historical Appreciation