All Forum Posts by: Charles Moore

I'm late to the game in this post, but having grown up in Texas, I decided not to invest there because: 1) it has some of the highest property taxes in the country 2) it has some of the highest closing costs in the country 3) it has issues with cracked foundations due to the composition of the Texas clay 4) comparing it with other cash-flow markets, you get more bang for your buck elsewhere - Texas is better for appreciation compared to them 5) if you use an llc you get hit with business taxes on that, as opposed to no state income  taxes holding in your own name.

try looking at Memphis Invest - they're regarded as having the top reputation in the entire turnkey industry nationwide and are frequent contributors of advice on BP without trying to hard sell their product. Several other BP members invest with them and have great reviews of them. I have been researching them myself for several months and am thinking of taking the plunge as well.

Hi, Nick!

What areas and pricing have you been finding your properties? Are they fixers or ready to rent? Sounds like you've got an impressive portfolio already!

maybe buy and hold some rental properties with that extra income and take a paper loss on them through depreciation? Invest in some green upgrades (solar panels, solar water heater, skylights, windows) to your primary residence to claim federal tax credits? Make more charitable cash/goods donations up to the allowable amount? Sell off some underperforming stocks/bonds at a loss? Open/keep funding a traditional IRA? Direct more W-2 income to your company's 401K?

if it were me in your shoes, I would make it a vacation rental. Those vacationers pay  for your mortgage, insurance, property taxes, maintenance, rehabbing, and your own vacations out there. Since they pay more on a daily basis than long-term renters do, it works to your advantage. Plus tax benefits.

Is each unit a 2BD 1BA? Would you have any family living with you? If not, you could also rent out a spare bedroom in your unit on a nightly basis on Airbnb.com for a few nights a month. The income you get from that could pay that monthly $255 amount toward your principal.

from the way I understand it, the things that would worry me about the brrrr strategy given your situation are these:

1) need to include closing costs on top of 20% dp, let's estimate $3500 just to be safe.

2) how to make absolutely certain your remaining funds would increase the value of the $100k rental to $138k. At 75% ltv this would pay off the $80k mortgage and recoup your initial $23,500 (dp + closing costs). Plus would neighborhood comps support your new value if you're only doing less than $10k in rehab?

If the factors above work in your favor, with a minimum of a 6-month seasoning period, it seems you could do this twice a year.

3) is $100/month cashflow per property enough to to build up a cash reserves cushion?

Turn-key would spare a lot of this hassle and net you more cash-flow every month, though you might only be able to save up down payments for one purchase/year. 

I had a similar situation 5 years ago when I tried to break into real estate investing through wholesaling, then mobile home flipping. My wife was doubtful about them, but resigned herself to possible loss and agreed to let me go for it. Both were like 2nd jobs on top of my W-2 job. In the end I failed at both because I didn't know what I was doing even though I had done a ton of reading, but I had no network or mentor. I learned a lot, though. I later succeeded in renting out a property we moved out of and learned the benefits of buy-and-hold over other methods. And because it's steadier and not like a 2nd job taking me away from my family, my wife was onboard. 

Here are some ideas: 1) maybe see if you can apprentice under an experienced local investor first without committing any money at that point? 2) go to a few REIA meetings, then once you know some encouraging people invite your wife to one. 3) consider altering your real estate strategy - I learned taking the path of supposed quick profits through active strategies like wholesaling and flipping has pitfalls for newbies - do you have the funds to purchase distressed properties? And to pay for materials and supplies? And to pay contractors? And pay holding costs? Then later will you have the funds to pay the irs the capital gains on your profits? If you need funds, your bankruptcy may affect your ability to get a loan. And are you willing to lose all the time away from your family this 2nd job would require?

St. Louis is a great cash-flow rental market with lower purchase prices than many other cities. You could capitalize on that. Plus as a buy-and-hold investor, your tax situation is more favorable, making the strategy more attractive. 

You could also sit down with your wife and have a heart-to-heart with her to explain why having your own business means so much to you and highlight how in the w-2 world, everyone is expendable if it's convenient for the employer. Having some real estate assets in your portfolio is a way to diversify away some of the risk of losing a job - it's always best to have options.

No, not otherwise judgment proof. Does a trust have asset protection? What other options are there? I suppose I could tap into my home's equity for further investments to lower the equity someone can get at.

Hi, all!

I am looking at  acquiring 3-4 properties through a 1031 exchange from an appreciated rental that I have in my own name - I already have that part figured out.

What I am still researching is whether or not to put these in LLCs.

I will most likely be using a turn-key provider to attain more cash flow, hence the new rentals will come with little or no equity. As such, they offer no incentive for a tenant's lawyer to sue me since the banks would get first dibs on anything if the courts forced me to sell. As many BP members point out, that argues for avoiding an LLC at this time and waiting until later in life when more net worth has built up. An umbrella insurance policy should be enough to protect me from tenant slips and falls, the argument goes.

However, I have a lot of equity in my primary residence which I also have in my name, and a tenant's attorney could find that out easily and go after that.

You can't put your primary residence in an LLC, but you can put it in a Trust.

So my question is, would this be the advisable route to go? Own my rentals with little equity in my own name, but keep my equity-heavy primary residence in a Trust to protect it?

As a bonus, I would certainly prefer not having to deal with setting up LLCs and transferring rentals into them and risking the lenders' due on sale clause.