All Forum Posts by: Craig Jeppesen

Guys, I am 34 years old. I will be selling my ownership in one of my companies for $300k. With this sale, I’m losing $40k per year in salary. I’m trying to see how you would invest the $300k. Here’s my breakdown. I have 2 rental properties. I owe $64k and $86k respectively. I own a home and 2 vehicles. Those payoffs are $440k, $30k and $30k. No other notable debt exists. My question is, should I use the $300k to buy as many rental properties as I can to replace as much of the $40k as possible? Or, should I pay off as much debt as I can which will save money. Both options will increase my net worth, but both options have their pros and cons. Paying off the debt will save 6% interest while buying the condos will produce about a 10% return. Thanks everyone!

If you pay off the 2 cars and the 2 rentals and use the rest of the funds ($90 k) to buy a 4pmex or other properties I would guess you would get about $2500 depending on debt pmt amounts in cash flow that would be pretty close to your net pay on $40k salary.

That is what I would do, but I would also get a new job so I could keep investing the $2500 each month but that is just me.

1 Vote

It’s okay to have a bad day every once in a while. I like to think of the big picture or my long term goals on days like this. Always remember these crazy people giving you a bad day are creating a lot of wealth for you.. Congrats on the 5 mortgage free properties. tomorrow is going to be a great day!

2 Votes

A couple thing I noticed:

Lack of curb appeal, front needs grass

Missing carpet transition between rooms

Missing interior door knobs

Missing outlet cover in kitchen

I would put in kitchen backsplash

Burnt out and inconsistent light bulbs

Painted wood panel looks cheap

Gold door knob on exterior French door

No cabinet pulls

Laundry room is how you get to deck? Can you frame in closet there?

I would whitewash the ugly stone fireplace.

Corner trim in laundry looks messed up.

Needs cleaned

Looks like vacation area, homes might take longer to sell there?

Zillow has a lot of recent sales closer to $115 per sf for similar homes. I would fix the little things so buyers see you did a good job and drop the price a little.

0 Votes

Originally posted by @Jess White:

I am currently still a W2 employee while building my real estate business out of

My question is this, what can I write off on my taxes while I am still a W2 employee and not considered a "Real Estate Profressional"? I currently have one new construction SFR and I am currently building two more.

How does this play into my standard deduction on 24k annually on my personal return? If my expenses don't exceed that amount, do I not get any deductions? Can I write off my mileage, cell phone bill, travel expenses, etc.

A few insight facts:

1. I have an LLC

2. I frequently travel to my properties

3. I am a full time W2 employee but work only part time on my rental business - I am still fairly new.

Thanks everyone!

If you will sell the homes, you report your income and expenses on schedule c and if you will rent them out it will be on schedule e. Yes you get to write off your expenses. Also, these expenses have nothing to do with your $24,000 standard deduction. Talk to your CPA about how this works.

0 Votes

Originally posted by @Svetlana Kleinhenz:

@Richard Sherman Thank you so much for such detailed practical advice!!! I am going to follow it and I will tell you the results.

The one thing I did not get is why should I cash out the whole one only after the term is in place?

Follow his advice, you don’t cancel the policy in effect unti you have the new term policy in place in case something happens in between or in case you find out they won’t insure you from the blood work.

Insurance in general is very important so don’t put your family at risk so you can save up for investing. You can look for better deals to save a few bucks and use your cash value for a down payment. If you are not able to save much I would look at your big ticket items like downsizing your house or selling a car.

2 Votes

Originally posted by @Josh Splawn:

Thanks everybody for the tips.

@Craig Jeppesen Caldwell

BOISE is hot right now so if it would be a nice family home to sell as a primary you might try listing it on Zillow first for a few weeks before you lust with an agent.

0 Votes

Originally posted by @Gabriel Cardus:

@Craig Jeppesen not according to my mortgage statements. I am paying significantly less in interest, the statement balance in which my interest is calculated is far less than what I really owe (since at the end of the month I take money out to pay all my bills). I also get an immediate return on my money by not paying what I do not owe (variable interest while my money is sitting in the heloc, instead of it sitting in a checking account collecting 0). Maybe your terms are different?

If your lender uses average daily balance you are lucky. Banks are usually smarter than that. Mine accrues daily. The calc is today’s ending balance times rate divided by 365.. I have done the calculation in excel with my terms and my normal cashflow and spending habits and it doesn’t work for me. You also might have a better rate than me asi still have a mortgage and my heloc is in 2nd position. 4 more years and no more payments for me.

0 Votes

In Idaho it will be about 7% of sales price if you don’t pay for sellers closing costs and 10% if you do. 6% is for commission and 1% is for title fees and property taxes. In Idaho you pay property taxes in arrears. You might get an agent to drop their commission by up to a percent but probably not more than that. Where is the property? I am in Pocatello.

0 Votes

Originally posted by @Gabriel Cardus:

@Justin Jacobs, I currently have my HELOC in the first position. I have an 85% loan to value on it and can use all the equity up to 85% of its appraised value with a Key Bank.

One would say that's crazy why pay all that interest, well there is a unique method I use to pay off my mortgage my simply deposit all my pay into the HELOC pushing the principle down on a daily basis. In short, interest is calculated differently in a HELOC than a traditional mortgage. There is a book written by Harj Gil and he called this equity acceleration. It is a unique and super cool way to pay your mortgage. In essence, I am using the banks money (my credit card) to buy all of my every day items and simply paying my balance statement every month. I deposit my paychecks in the heloc which records as a payment and satisfied that requirement. It is interest only (prime rate and variable). Interest is the average daily balance, so if you have income streams coming in the average daily balance will be from the day the billing cycle starts (what your principle balance is) to the day the cycle ends (what that principle balance is). Take every day, see what your balance is, all 31 days and add them up. Divide it by 31 and you are paying interest on whatever that average balance is for that billing cycle. Saves you a fortune. Lastly, every dollar you pay in excess of your interest goes straight to principle. It is genius. Check it out.

This isn’t quite right. Average daily balance is how banks pay interest on deposit accounts not helocs. Loans accrue interest daily (per diem) based on the end of day balance. Also usually interest on heloc are variable rate and much higher than traditional mortgages. I have ran the calculation with my heloc vs mortgage and the mortgage wins.

0 Votes

First make sure the lender knows you have rental income. Sometimes the underwriter does not know. if they don’t use rental income in your calculation you might need to look for a new lender. If they are including your net rental income you have too much personal debt and probably don’t want to leverage any more. If this is the case I would focus on paying off the consumer debt before you grow any more. This is how investors get in trouble if you have any issues such as a vacancy or major repair. Dti is usually calculated by adding up all your monthly pmts including the new loan divided by your gross monthly income. For your rental income part they will usually take your average of the last two schedule e tax returns and add back the depreciation expense.

0 Votes

All Forum Posts by: Craig Jeppesen

Craig Jeppesen has started 1 posts and replied 526 times.

Post: I sold a business. Do I invest or pay off debt?

Post: Do you let frustration over tenants get to you?

Post: My flip isn't selling

Post: What rental REI expenses can I deduct while still a W2 employee?

Post: Cut off life and medical insurance to save money for investing?

Post: Should it cost 8 -10% to sell my rental property?

Post: HELOC and Refiance Options

Post: Should it cost 8 -10% to sell my rental property?

Post: HELOC and Refiance Options

Post: HELOC and Refiance Options