All Forum Posts by: Michael B.

My advice would be to not own real estate while in the Army. Sell what you have in the next year and rent during your Army time.

Doing things like long distance landlording can end really badly. And the 'friction' of buying and selling a house (realtor fees, closing costs, etc) can eat up all of the appreciation over such a short time period.

Your main goal for now is to get the dental degree and then learn your Army job. You'll have plenty of time as a dentist to buy property after your Army time is done (as I did after my Air Force time). Way too many Army guys end up with assets scattered across the country from moves.

My basic rule now is that if you're not going to live there at least 5 years you don't need to buy real estate. Too much risk of not being able to sell and too little reward. Wait until you're filling cavities for civilian kids to get your real estate.

Originally posted by Jon Holdman:

Do your mortgage companies send you gifts at Christmas? Insurance, utility, handyman? This is a business. They're your customers. A card perhaps. Cheap tablets, though?

But that's the point of giving a small gift. I don't want to be thought of as a faceless mortgage or insurance company. People feel little compunction against cheating corporation if the mood hits them. I always want to be a human being to the tenants. A person who asks how their daughter in college is doing and knows what their issues are before things get out of hand.

I'm a local service provider to the tenants. One who can remember their birthdays, but one who can also tell them it's time to move on if things aren't working. Mortgage companies don't do that nearly as well.

Here are my thoughts, though I may be in the minority on this board with this advice:

Don't set up an LLC or anything else at this point. Wait until you're ready to buy your 2nd or even 3rd investment. Here's my reasoning:

I mean no disrespect in this, but most would-be real estate investors never buy their 2nd property. Either they never find the right property to begin with, or the whole buying / financing / fixing / renting ordeal is too much to consider a 2nd. Or maybe life happens somewhere here and suddenly other things take priority.

Wait until you have a purchase under your belt, and know that this is for you. It's not that big of risk early with only a single property, assuming you've got your liability insurance in place. And it's not hard to move your current properties into the LLC afterwards.

So, for now focus on getting the right deal for your first purchase. One that will be financially lucrative and not a lot of hassle. Once that's in place and rented (or flipped) then you will be able to make the decision to go forward and buy another. That would be a good time to put the LLC in place to hold your investment.

I don't doubt that you'll probably go through with buying investment properties. But many people don't. And creating and then shutting down an LLC (or s-corp) is just an additional set of expenses if you decide this life isn't for you in the long term.

I realize this is really old thread, but the first time I'v'e seen it.

You have to be really careful in this type of situation. Like someone mentioned before you can get your house seized. It happened to my Father-in-Law.

It was in West Virginia in the early '90's. He was renting out an old farm house to a young couple that seemed very nice -- clean, always payed on time, etc.

And then one day the tenants were in jail and the house was gone. They were growing about 20 plants in a cold frame in the yard. The state put a padlock on the house and began preparations to auction it. The good thing was that although it was seized my Father-in-Law was seen as having an ownership interest. If somebody else wanted to bid it would have to be at least the tax appraisal value which would go to my Father-in-Law.

In the end nobody else was interested and he got it back. The state of WV took a 10% cut of the appraised value, the county took enough to get caught up on taxes and it was given back.

But this took 2 years to work out. In that time it was empty and he wasn't even allowed to enter for maintenance. Thankfully he had no mortgage on it. But it cost about $7,000 in fees to the government and another $2,000 in legal fees to get it back, not to mention 2 years loss of use.

States handle this sort of thing differently, but this is something to seek professional advice on and be VERY careful. This type of thing can be a real nightmare, especially when states need cash.

Hey Keith Blazek.

Looking at your linkedin page, quite a coincidence that a "Marketing Intern at Equity Trust Company" decides to urinate on the idea of checkbook control. I'm guessing that if ET offered them you'd be more comfortable with them.

Originally posted by Anthony Ferguson:

I'm 20 yrs old and just finished attending my first REI seminar today and plan to start investing ASAP. Because it was a cheap basics seminar, A LOT of info was thrown at me. Among all the info, the instructor mentioned that one of the best ways to start in the business when you don't have a lot of cash is to either A. Wholesale or B. Invest in mobile homes.

I'll disagree with most of the advice thus far. I'd say right now -- do neither. Neither wholesaling nor mobile home investing is likely to be a good idea right now.

I'm making a couple of really big, unwarranted assumptions. That assumption is that you don't have large assets nor a long term, 'career' type job. Most guys at 20 don't. But if I'm wrong then scratch this response.

What's your job status right now? Do you have a decent stream of disposable income? If not, getting a good job is where to start, or go to school to position yourself to get a good stream after college or training. Your ability to establish yourself as a good credit risk with the ability to absorb as unexpected shock is the first step.

Then learn the industry. Real estate is way bigger than these 2 fairly raggedy areas mentioned. Get your real estate license, or get a job with a property management company. Or with a mortgage originator. Understand some of the potential, and the warts, that combine to create the industry.

After those things are done, you'll be ready to invest in real estate. Way too many people decide to get rich investing in real estate, only to find their time would have been better spent delivering pizzas. It's a very competitive field where easy money just isn't laying around waiting to be picked up. Make sure you're ready before you join that competition.

Originally posted by Patrick H.:

Interesting thoughts so far... I personally think income is better than appreciation. Was expecting some more thoughts and insights around investing for appreciation.

I guess my thoughts on this is slightly different than what's been expressed here. But not a lot.

Taking this to the stock market: Investing in cash flow is a lot like investing in safe stocks -- utilities and the like. They give decent, dependable returns. But you're not likely to get really great returns on them. Investing for appreciation is more like the growth stocks -- uncertain, but could be a good deal better in the long run.

I think your question ignores this. Positing a 10K safe return vs a 10k riskier return is an easy choice. Always take the safety if the return is likely to be the same. But houses that are likely to appreciate have the potential to bring greater yields than income property.

Appreciation has a lower likelihood of happening than cash flow, but can be much larger than the cash flow. And just like stocks, both income and growth assets have a place in a portfolio.

No, Amber, you can't lend to your own company. Self dealing like that will run afoul of the IRS and can end the favorable tax status of your IRA.

Big NO - NO.

Hey Michael, a couple of thoughts:

There are basically 2 types of real estate IRA -- with an LLC and without. It's important that you make that decision before going to what company you would work with. Most companies offer only 1 type. Of the ones you listed, IIRC Guidant only does the LLC version ; Equity Trust and Entrust only do the non-LLC version.

The way the IRA LLC works is the LLC is owned by the IRA. All transactions are done by the LLC, whether that transaction is buying a house, collecting rent, or getting a window repaired. At some point in the future you may start liquidating assets in the LLC and withdrawing money for retirement.

Without an LLC it the company you're working with holds the assets and disburses the funds at your request. You need approval to remove cash for purchases or maintenance and it usually takes a day or so to get it.

The advantages of having an LLC is that you can move much faster when you need to and the ongoing expenses tend to be lower but the initial setup fees are much higher. Without an LLC the advantages low initial setup fees but higher ongoing expenses as you get charged for approval of expenses.

Another possible advantage of not using the LLC -- It's easier to run afoul of IRS rules if you're controlling the money yourself. It would be a calamity if bad things happen to the tax status of your retirement funds because you forgot which debit card you were using while on vacation.

I think I'm probably going to open an IRA with LLC with Guidant, but I the decision isn't in stone. Good luck with your decision.

I doubt it, unless there's a virtual club of some type.

The reality is that in most cities it's pretty hard to get enough investors involved in a club to keep it viable. Sure, there's enough people wanting to sell services to investors (real estate, prop managers, etc.). The investors themselves are too few and usually too busy to hang out a day a month.

Therefore it just doesn't make sense to limit a local club to an even smaller group of investors. So if one exists it's probably a Facebook group, a Yahoo club, or the like.