All Forum Posts by: Clark Kirkpatrick

Hi Brian!

You could make an LLC and get a commercial loan on the property. That might allow you to put 20% down instead of 25% down, but the interest rate and terms would be worse.

Here's what I think you should do (and what I'm doing myself now, coming from a situation exactly like yours): house hack. Move into the building yourself. Maybe it's this place or maybe it's a different one. Put 3% down or 5% down or whatever the lender requires, and keep enough cash to buy another deal - maybe a SFR, row house or something like that.

If you house hack, you're always around when problems arise, you can watch your investment and do rehab yourself and gain a ton of knowledge - and save $20k on the down payment!!

Just my 2 cents - good luck!

Hi Cole!

In my opinion, more units are better (so long as you don't jump in too far over your head. Don't go buy a 100-unit for your first deal). Something between 2 and 4 units is ideal for a first go, I think. That way if you have vacancy, it's not 100% vacancy - if you have a triplex and one tenant moves out, it's no big deal. If you have a single family home and the family moves out, then you're stuck paying all the expenses till you can get it rented again.

I would seriously consider house hacking if I were you. That's what I'm doing now - I'm 26 and I live in a duplex where I rent out the other side. My tenant pays my mortgage, insurance and taxes each month, and I'm always close by if some problem comes up. Being an owner-occupant also has huge benefits for the financing you can get.

Cheers!

Hi Moshe!

I think that the rehab seems super worth it here.

If you want to get into bigger rehabs in the future, this seems like a low-risk opportunity to get started, since your numbers indicate that it would be difficult to lose money on this deal. I wouldn't worry too much about the time of year - prolific flippers don't stop just because the season changed.

The experience you get here could make you much more confident on future deals as well, because you'd be better at every part of it. So the payoff when you sell would be good, but the long-term payoff from that experience would be the really sweet stuff. You'd be able to do it over and over and build a whole business model that involves that strategy.

Just my 2 cents - good luck!!!

Hi Jef!

I am not a CPA and don't play one on the internet, so this is just my opinion.

I put my first rental into my own name, even though I had an LLC at the time that I could have put it into. The main reason for this was because of financing - if you put it into an LLC's name, then you will have to get a commercial loan instead of a residential loan. Residential loans are much better than commercial loans.

Lots of investors put all their properties into their own name, and just keep really good insurance. And this almost always works out just fine.

Almost being the operative word there - an LLC provides protection that can't be achieved with insurance alone.

The good news with taxes is that a single-member LLC (if you or you and your spouse own the whole LLC) is considered a pass-through entity. This means that the company's taxes are passed right through to you, so you file them along with your personal tax returns. The difference in taxes is not something to worry about. If you own the rental personally, its taxes will get paid along with your personal taxes. If your single-member LLC owns the rental, then its taxes will ALSO get paid along with your personal taxes. There is no special process for claiming that rental income, and you'll get taxed at the same rate.

You can claim the same deductions for repairs and improvement costs, although the bookkeeping is easier if your personal finances are separated from the business finances. This is often achieved through having an LLC with its own bank accounts.

Cheers!

Hi Bob!

Pugs are pretty low-key dogs. You will risk dog smells later, but to offset that risk you can charge a pet deposit on top of the security deposit and pet rent!

In my area, I'd do $25/month for pet rent and an extra $200 pet deposit. That's for a c-class neighborhood.

I would think about this from an opportunity cost perspective: let's say the unit rents for $1k/month. If you don't get it rented this month, maybe it'll sit for another month. Then you'll lose $1k from lost rent. What are the chances the dog will cause a thousand dollars in damages?

I'd rent to the dog, and collect the cash!

Cheers!

Hi Jackson!

I think about this in terms of opportunity cost.

Let's say you can either own a $60k home that breaks even as a rental, or you can have $60k cash that you can use to buy 2 homes in a better rental market that will cash-flow nicely.

Option 2 might take some more work, but then after a few years you'll have 2 homes with mortgages that are paid down enough to get a HELOC or cash-out refi. Then you might be able to buy 2-4 more houses with the equity and cash flow from the first 2.

I think it would be a mistake to keep that house since the same resources could be put toward something with a much better ROI.

Good luck!

Hey John, welcome to the forums!

Having a background in construction is VERY USEFUL in real estate, so that's awesome!

Have you read any books on the topic? BP has some great ones that can give you a good overview of the process of buying, rehabbing renting or flipping. How to Invest in Real Estate is a great book to read if you want a comprehensive overview so you can develop your strategy.

Good luck!

This looks good, and I'd love to see the ARV, refi or sale numbers, and how much you get for rent if that's your plan!

Hi Michael!

I live and invest in Pottstown PA, not too far from you, and I think it really depends on how hands-on you want to be with your investing.

You can add value to your investments by doing work yourself - finding and negotiating deals, raising additional money, learning about different strategies - and you can spend more or less time with those things, depending on your appetite for learning new things and being hands-on. In this case, you might buy a small multifamily property and have a go at being a landlord, or just find and negotiate the deal and hire a professional management company so that you don't have to take calls and handle maintenance. There's a direct relationship between your work and the additional payoff here, and some people are okay taking on a new job, while others prefer to spend their time in other ways.

If you prefer a more passive investment/hands-off approach, then you can invest in notes, if you know and understand that space. BP has a great book called The Book On Real Estate Note Investing, which provides great guidance for understanding that industry.

Another option would be for you to act as a private money lender for other people's real estate deals, which means that you're "the bank" and they do the work. For example, someone might find a house that they can buy for a great price but they don't have the funds for it. As a private lender, you would provide some or all of the money to buy and rehab the house. Then the investor who brought you the deal would either do a cash-out refinance and pay you back with the proceeds, or sell the house (as in a fix and flip) and pay you off with the sales proceeds. 

There are a lot of ways to put your money to work in this industry. Feel free to let me know if you want to know more about one of these strategies!

@Jaiden Cristobal

Check out Brandon Turner's book called How to Invest in Real Estate with No and Low Money down!

https://www.amazon.com/gp/product/0990711714/ref=as_li_qf_sp_asin_il_tl?ie=UTF8&camp=1789&creative=9325&creativeASIN=0990711714&linkCode=as2&tag=bigger0f-20&linkId=A6IANK4YOEM2BHKH

This is one of the first books I read and it'll open your eyes to possibilities you'd never considered before - and a lot of really young people get started with the strategies in this book!