All Forum Posts by: Chris Coleman

First of all, do whatever allows you to sleep better at night. And if that's paying a few extra bucks to have an attorney confirm for you that everything looks legit, then do it. But here's a question to consider...did you get your Lender yourself, or are you using a Lender that the Turnkey company lined up? The Lender will order the Appraisal. And choose the Settlement company. Who is ordering the Inspection...you or the Turnkey company? Bottom line, make sure that your Lender and Inspector are working for YOU, not the Turnkey seller.

While just driving around, I have noticed some duplexes in closer-in areas like Arlington/Alexandria. But nothing ever for sale. And if it were, it would easily be upward of $1M or more. I believe Investors have owned most of these for probably decades!!!!

I purchased a Condo for the first time last year. I've owned SFR's for about 5 years, and this was my first Condo purchase. Just for information, here are a few things I learned: 1. If you go conventional lending, expect to put 25% down. Lenders consider Condos a higher risk (actually Fannie Mae considers Condos riskier than SFRs, and passes that risk on to the Lenders) 2. Taxes and Insurance were both lower. 3. At least 50% of the units in the entire complex must be owner-occupied...not investors. Thus, you (your realtor) has to verify that the complex meets this requirement and is allowed to take on more Investor-owned units. Your Lender will require this. 4. The Condo association is required to keep a certain percentage of funds in reserve. Again, your Lender will require this and it will need to be verified before they will approve your purchase. Overall, it required more hurdles to manage on the Lending side.

Zak, first, I'm not an accountant, so yes please consult a good tax account to better understand your tax situation. But speaking from rental property experience, and talking A LOT with my tax accountant over the years to better understand this... I think you may be confusing your Schedule A deductions with Schedule E deductions. What you describe is basically correct for your Schedule A deductions, such as the mortgage interest and property taxes on your primary home or a second home. But rental property Income/Expenses are recorded on Schedule E, and are subject to Passive Activity rules. This makes the calculations different than just the straight percentage of your marginal rate (like on Schedule A). Your tax accountant can explain this in detail.

@Amahl Miller, if you are trying to stay local, I know George Mason Mortgage in Gainesville, VA is a portfolio lender.

I have never worked with them, so I can't comment on their service, etc...  But if you look at their website you will see that they offer portfolio loans.  They have an office on Wellington, just down the road from Jiffy Lube Live.

@David Zheng - by the way...my wife and I lived in St Louis for a few years...I went to grad school at SLU. Lived in the West End for a while and then on the Hill. We loved it. I've been seriously thinking about researching Rentals in St Louis, as I remember a lot of MFR's in the West and South inner suburbs.

I would be interested in your assessment of the market there.  PM me at your convenience.

Thanks

@David Zheng in response to your question on why worry about equity, the one thing I would say is that you never know when you might need to liquidate for some reason.  I know this post is about managing through a recession or downturn.  But life happens!  Things happen that have nothing to do with market factors...and you may end up needing to exit some of your investments unexpectedly sooner than you originally planned.  

Don't get me wrong...I also love using the power of leverage.  I think most investors here do.  But too deeply leveraged (in anything), and exiting/liquidating can prove much more difficult, complicated, etc...and potentially cause significant losses.

I think about this somewhat often, and every time I purchase a new property. Maybe not in terms of "recession proof". But definitely from the perspective of recession risk management. I try to manage the following things: 1. Not being over-leveraged, so I could technically handle a 20-30 percent drop in property values, and still exit if needed. 2. Having enough margin in rents, such that again, I could handle having to decrease rents if necessary. 3. Owning rentals in areas that will (hopefully) always be a draw for middle class families. What am I missing? A similar way I like to look at it...what were the mistakes that many investors made which caused them to lose it all in 2007-2008? Over leverage? Significant speculation?

Michael, in my experience, and I think you'll hear and read this from the majority of investors, the key is getting into a network of people that you trust and can work with you to help you take steps and be successful. I am, by nature, a deep dive research, analysis, and due diligence person. Just the way my brain is wired. And all that is great and necessary. But RE investing is very much a hands-on, learn-by-doing activity. You have to get with good people who have good experience and who want to help you succeed as well...and start moving forward. Hope it helps!

So you basically just took a portion of your gross rents and relabeled it as a "management fee". Maybe even transferred it to a different checking account? Right? That doesn't create any additional income nor expense. Your just moving around your own existing money. Assuming you don't have a separate LLC or something that you own to which the "management fees" are going. I recommend taking a look at the Form Schedule E. You can see how it categorizes various Income/Expenses, and may give you a better idea of how and where things go for tax purposes, and how it all rolls up to your 1040.