All Forum Posts by: Christine Bellish

Hey @Jacob Setzer! Congrats on all your success in the crypto space!! So exciting. Definitely smart for you to diversify into some hard assets too for more long term stability. As everyone on this thread has already mentioned - you need to spend a lot of time educating yourself before diving in - being here on BP is a great way to get started. You should be listening to podcasts, watching YouTube videos, going to meetups, attending virtual webinars, following other investors on social, join FB groups, and networking like hell :)

Like @Collin Chan and @Lori Williams mentioned - definitely talk to a CPA immediately and figure out what you tax burden is so you can figure out the best way to shield. A lot of syndications do cost segregation analyses which accelerate depreciation and allow you to take more write-offs sooner...that combined with the fact that bonus depreciation is still in play can lead to some hefty write-offs in year 1 - think 50% paper loss (if you invest $100K you get a $50K write off in year 1).

Like @Brock Mogensen mentioned, syndication may be something for you to consider if you are looking for more passive ways to invest. In summary, syndication is when people pool capital and resources to purchase assets and everyone shares in the profits. There are two groups: GPs (general partners), who are experienced real estate investors and handle all the work - finding the deal, coming up with the strategy, implementing it, etc - and there are LPs (limited partners), who are passive investors that contribute capital to fund the down payment, closing cost, renovation and reserves, and get paid a return in exchange for their investment. So basically you would need to find and vet an experienced real estate investor who has a track record of success and trust them to make you a return, but you wouldn't be doing any of the heavy lifting yourself (besides making sure the person you are investing with is legit and making sure the deal/s you are investing in meet your investing goals) - no finding deals, being a landlord, managing construction projects, filling properties with tenants, handling maintenance issues - all that falls on the GP team. Even if you do want to be an active real estate investor, investing passively can be a great way to learn from other experienced investors. You will learn a ton by attending their investment webinars, digging into the underwriting, asking them lots of questions, getting access to their financials and management reports. Just one avenue for you to consider - and it doesn't have to be all or nothing - you can invest in syndication and also buy rental properties yourself...that's what I personally do!

Hi @Josie W. - everyone on this thread has already mentioned a lot of great points for you to consider. This is probably obvious, but just in case, I want to add that when considering using your retirement account to invest in real estate you have to keep in mind that you won't personally get access to the cash flow or appreciation from the properties you purchase without penalty until you are 59 1/2 - those profits will go back into the retirement account, but of course you can use them to reinvest in something else through the retirement account as it (hopefully) grows.

If using cash or a HELOC is an option I always lean towards that as the first choice, since you can keep the profits to use as you wish now, but leveraging your retirement is a great way to keep the train moving even if you aren't very liquid currently.

When you use your retirement account to invest you don't get the depreciation write offs as you hold the property, but as @Alex Sylvia mentioned - it can help with capital gains on the backend. 

I have personally opened a SD-IRA and helped a bunch of my family members do the same, but we used ours to invest in real estate syndication opportunities as opposed to buying rental properties - another option for you to consider!

 Hi @Julia Beresfoes - personally, if I had $300K in equity, I would definitely tap into it to invest in something else! Piggybacking off of what David said: we have a bunch of passive investors who recently took out HELOCs and used them to invest in syndication opportunities with us. These investors felt it was less risky than trying to undertake a project on their own because they are trusting professionals with a successful track record to do what they are good at versus trying to go it alone. That being said of course if you decide to go this route you need to get to know and trust whoever you invest with and make sure the deal you are investing in meets your investing goals. 

If you had put a lot of money into your property and wanted to recoup your costs a cash out refi might make more sense, but in this circumstance I think the HELOC may be a better fit. Here are a few other things to consider as you weigh your options:

1. Besides the higher monthly payment associated with a cash out refi, there are also probably higher closing costs associated with that option too. 

2. What type of HELOC options are you seeing in the market right now? Many HELOCs I've seen have low intro rates for a year or so and then they become variable, so you also need to consider the fact that the interest rate for the HELOC could rise.

3. Like @Will Barnard said, the most important thing to consider is the underwriting of the new deal you are getting into. If you go the HELOC route you have to make sure that you will CONSERVATIVELY make enough to AT LEAST cover the interest for the HELOC (hopefully more of course) since you are leveraging your personal home you want to lower the risk as much as possible with conservative underwriting.

 Hey Ron - based on this part of your post: "for passive income with less involvement what would you do or suggest as a next step ?" Have you considered investing passively in real estate syndications? Once you wire your money to invest it's completely passive - the work you need to do is all done upfront evaluating the syndicator and the deal (finding someone with a track record of success that you trust, and an opportunity that meets your investing objectives). Some deals are more cash flow heavy, some more appreciation focused - some longer term holds - some take longer to start receiving distributions and some are more turnkey so you start getting returns from cashflow pretty immediately.

The syndicator raises money from passive investors to cover the costs associated with purchasing and managing real estate properties (down payment, closing costs, renovation, reserves), and the syndicator/General Partnership team is the one who evaluates and identifies the market and the deal, comes up with and implements the business plan, they hire property management, manage construction projects, stay on top of occupancy, and everything else related to the day-to-day operations. They ultimately decide when to sell or refinance, and as a passive investor in this type of opportunity you are often an equity partner who is paid your relative portion of the profits from cash flow during the hold period and appreciation when the property is refinanced or sold. 

Passive investors get tax benefits the same way you would if you owned investment properties personally (sometimes they're even better because of accelerated depreciation thanks to cost segregation analysis - cost seg is expensive so it's not worth it on smaller properties but is worth it on properties worth multi millions).

You can use the write-offs you get from syndication against the returns you get from the syndication and also against the income you collect on your other rental home in the bay area (unless you are a real estate professional or married to one in which case you can use the write offs against regular income too).

My husband and I started out buying small multifamily properties locally in NJ where we live it's - also super expensive, high taxes, not landlord friendly here. We did a BRRRR that was a nightmare project - turned out to be a good investment on paper but we have PTSD, so we were looking for more TRULY passive investing opportunities and found syndication. We completely changed our investing strategy and leaned way more into syndication because we love that it is actually passive.

 Hey Bruny - not sure how much time/effort/energy you are open to putting into an investment project, but if you have no experience and aren't sure where to get started it might be a good idea for you to consider investing passively to get some experience under your belt first. With $100K you could easily invest in a real estate syndication or two (minimums vary depending on the opportunity, but I know plenty that have $50K minimums).

By investing passively you can get inside access to the way more experienced investors identify markets, underwrite deals, develop and implement business strategies, etc. Depending on the deal, you could be making 10%+ annually in cash flow during the hold and more on the backend when a sale/refi happens, and you can get similar if not better tax benefits than you would get for owning a property yourself. If you are an equity partner in a syndication you get depreciation write-offs and often times they are substantial because these assets are expensive enough to justify doing a cost-segregation analysis which allows accelerated depreciation write off in earlier years...cost-segs are expensive so they are not always worth it on smaller multifamily properties, but when you are talking about properties that are worth millions it makes sense.

 Hi Christina! Brian is absolutely right. When you use your retirement account to invest you can't take the money out without penalty unless you are of retirement age. If you own the property in the retirement account and you make money from the cash flow and/or refi/sale proceeds, the profits have to go back into the retirement account. You can use that additional money in the retirement account to invest in more deals, but it's delayed gratification unless you are 59 1/2.

The only option I can think of is that some retirement accounts allow you to take loans against them. If you have an account that allows you to take a loan against it, you may want to look into that...if you use the loan money to invest in something that makes a better return than whatever "interest" you owe on the loan, then you can keep the difference to use right now. I say "interest" because it's not really interest - you are actually paying the "interest" to yourself - this money goes back into your account.

We have an investor who used this strategy to invest in a recent syndication opportunity with us.

I also personally looked into this option recently for my husband's employer-sponsored 401K with Fidelity - our account allows up to a $50K loan with a 4% "interest" rate and it has to be repaid in 5 years. For this particular option that we looked into, we may have to pay the entire loan in full if my husband stops working for his employer before the 5 year period, so that's something to consider too.

So using the example above, if we took the loan at 4% for an opportunity that made 10% we would keep the 6% to use today, pay the 4% "interest" back into our account.

PS - I'm not a financial advisor, so don't hold me to it, but I did want to share my first-hand experience :)

Hi Ruben! That's great to hear. Congrats on your current portfolio.

Have you invested passively in any syndications before? I would definitely recommend getting some experience as an LP before taking on the responsibility as a GP. Investing passively is a great way to learn the ropes, since you can see how other GPs operate, what you like and don't like, how they structure their deals, evaluate markets, handle legal, underwrite opportunities, communicate with investors, etc.

Not to mention, the GP you invest with passively may be someone you can partner with in the future if you build a great relationship with them. They are going to be more likely to pay you attention and mentor you if you are invested in one of their deals - getting this inside access to these experienced operators is super valuable!

Happy to chat with you more about this if you're interested. Feel free to send me a DM to set up some time.

Absolutely Paul! I'll PM you to set up some time to chat 1x1. I was just in Cleveland with Kenny a few weeks ago :)

 Hey Tyler! Very exciting stuff! The best way to get a mentor is to add value in some way. You have to figure out what that means to you, depending on what you are good at/what you have to offer. In this case it sounds like you are looking to bring a deal to the table (which is valuable!). It may make the most sense to offer this mentor a piece of the GP stake in whatever deal you decide to move forward on - they will definitely be a lot more attentive and involved if they are a part of the deal. These people are busy, and their time is money, so it needs to be worth it for them to help you out - most people aren't just going to do it out of the kindness of their hearts because they just don't have the time to spare (and they get asked to be mentors all the time).

It probably makes sense to work with someone who already has assets in the area, since they will be familiar with rents, comps, etc. and can best advise you. You should do some research to see who owns what - one way to figure it out could be speaking to the property management teams that manage these assets - then you can get in touch with the owners and start to build a relationship.

My partners actually have some properties in Columbus, and I'm happy to share their info if you want to try to connect. Just message me :)