All Forum Posts by: Chris Coleman

Reade Milner another thing you need to be sure of is the rental marketability for the house. You ask, what could "bust" the deal? If you can't keep it rented, or it ends up renting for much less than expected... I would check with a local realtor or property manager and confirm that it can confidently be rented for the $1,500-$1,600 you estimate, based on the property and location.

Reade Milner you should really try to get some accurate numbers on any rehab CapEx that may need to be done. That will tell you if this is truly a good opportunity. Based on your numbers here, if you can get $1,200 - $2,000 per year Cash Flow on a B/B+ property that was built in 2000, and you're only putting in $3,000-$4,000....then yes that sounds very good. But in order to asses that, you need to really know if that $3K-$4K is accurate.

I own SFRs, town homes, and condos. Fortunately I do not have any horror stories and have not had any issues with the HOAs, they've all well managed. However, if you are new to RE investing I would not recommend starting off with condos. There are more hurdles to jump through in the financing and the high HOA fees can really eat up your cash flow.

Natalie Kolodij Ahhhh...great! Thanks again!

David Dachtera Your step #3 says, "Make your LLC another owner of the S-Corp." It has always been my understanding that the S-Corp rules require all shareholders in an S-Corp to be Individuals, or a Trust. Are you referring to something different? How do you make an LLC a shareholder of your S-Corp? Can someone please explain? Or correct me if I'm wrong and please explain? Thanks

Okay, @Lance Lvovsky & @Brandon Hall, thanks for the clarification.  Very helpful!

So, for this existing SFR, assuming the new total refinanced loan amount is $200K, and of that total amount I took cash out of $40K, then going forward for this SFR, I can deduct (as usual on Sched E) the Interest for only $160,000 of the new loan...correct?

But what is the method to calculate the Interest on only a portion of the loan (i.e., $160,000), when my mortgage payment P&I is now based on a total loan of $200,000?  Should this be done mothly as I track expenses, or just wait until the end of the year and make the adjustment?

Thanks again

@Brandon Hall

Does all of the cash from a Cash-Out Refinance on a Rental Property have to be re-invested in order for the Interest on the new loan to be fully tax deductible?

Or can you do something else with some or all of the cash, (e.g., payoff an unrelated debt, purchase a car, etc…), would the Interest still be tax deductible?

If the answer is "yes" it must be re-invested, then does the cash have to be invested towards another RE property, or can the investment simply be in something RE related, such as a Note, Hard Money, or Crowdfunding? Or can the investment be in something completely outside of RE, such as a new business venture, stocks, etc?

Also, again if the answer is “yes” it must be invested, is there a time limit within which it must be re-invested?

Steven Hamilton II, Linda Weygant, Brandon Hall, and others…thank you for your contributions, your expertise is greatly helpful and appreciated!

Thanks

A major factor in the Houston market has been lack of inventory...very low supply. This has kept the multi family market strong and also contributed to SF appreciation...in spite of the hit to the oil industry.

I have a property in Crosby and use Bradley Grimes at grimesinsurancegroup.com He is experienced and knowledgeable about rentals and offers several options at reasonable prices.

Run the numbers, conservatively, and see if it makes sense. On a condo (and especially an investment), you will not get more than 75% LTV. So, if it appraises for $425K, that means you can hopefully get a loan of up to $318K. 425 x .75 = 318 You owe 265K. So a cash-out refi would get you 53K. 318-265 = 53 Deduct about $5K for Closing Costs, and you should hopefully net about $48K. So two questions to answer: 1. Does the new loan of $318K at the new Interest Rate still allow a safe Cash Flow on the property? 2. How best to use/invest the $48K?