All Forum Posts by: Erik Kubec

Okay, have to say it.

Does anyone else think this looks like scam?:

Brand new to BP poster, foreign, 'cute girl' avatar and draws attention to herself in the title post as being a 'girl that needs your help'?

Call me cynical. But really? A 28 year old woman inherits a 200k pounds and her first instinct is to seek out a foreign real estate investing board for advice and tell everyone she has 200k pounds?

My suspicion could be over heightened because I just watched that Samuel J. Jackson movie "The Samaritan" and some dude from Nigeria wants to connect with me through Bigger Pockets.

There is saying about investing "Don't get emotional."

But I think that is BS to a degree. I think the trick is to season yourself emotionally around investing. Meaning: if you never have taken a financial risk at all in your life, the first time you do it, you are going to go on an emotional roller coaster ride and it will impact your decision making. And all of your agents, brokers, etc. who are around you and earning money off of this decision will key on this emotion to close you.

So I think the key is to take a bit of that money and gamble it--just to see your emotional response.

When we closed on our first investment property I couldn't sleep. I was so incredibly nervous. I had done the math 1000 times, researched oodles of data and theory, and made conservative 25% down purchase. When we close and took possession of the first property and put the key in the door for the first time as owners--there was this sense of euphoria and unstoppable-ness: "Wow!! how brilliant are we!!! can't wait to do 10 of these properties!!!" When we collected our first rent--which was paid in cash--I literally carried around the 'net over PITI'--about $650 in my wallet for a month.

Now, we are about to close on our 4th property and the excitement is gone. Once we close, there will be a little bit of excitement as our goal is 10 properties over the next 3 years total, but that crazy buzz / fear has been moderated--which is a good thing.

You want to hear a 'how stupid is our credit rating system' story?:

My wife and I went under contract on our first investment property about a year ago. Combined income for us is over $200k. My credit score was about 790 or so at the time. Her's was lower and she had a bankruptcy and foreclosure on in from a previous marriage about 7-10 years ago (not sure about the exact dates of BK and foreclosure.

So we went to get a loan, thinking that any bank would rather have to signors on a loan--especially since we both earn over $100k. We are going over the details and it turns out that my wifes lower credit score cost us a bout a 1/4 point on the interest rate on the loan.

So we just removed her and put only me, and my rate dropped.

Can't see how that makes sense. Isn't having her (and her income) be additionally accountable for the loan better than having only me?

Thanks @Steven Hamilton II @Hellen_R
It is a rental.

Can I issue a 1099 on the IRA's behalf by merely putting in their tax ID #, the full name of account: "Equity Trust Company FBO [my name] traditional IRA" ?

Obviously I don't want it to look (inaccurately) like I personally paid the contractor.

-Erik

Completely anecdotal with a political angle as well to boot:

I was working on a property I had just closed on here in Denver and next door to it was a similar property in really bad disrepair. A couple of investors were looking at it, so I went over and chatted them up.

They told me they had a bunch of rentals in AZ, but when the anti immigration law passed, it killed their rental business and vacancies sky rocketed. They sold a bunch of their properties.

Again, completely anecdotal.

I really thought with a bit of love from Google, I could find an answer to this... but I didn't.

In 2012 I created a self direct IRA (no LLC) and had it purchase one condo all in cash. I hired a contractor to do about $3k worth of work and directed the IRA to pay said contractor that amount.

The contractor just called me to find out if i would be issuing a 1099. I can't find any form or info on Equity Trust Company's website about how to do this, and what I have found on the interwebs is a bit conflicting.

Anyone out there in BP land with a SDIRA who has paid a contractor and had to answer this question?

-e

Hello Andrew T.,

You sound like you have a similar profile to my wife and I. We bought our first rental property in Dec of 2011, and we will close on our 4th in about 3 weeks. Technically, one of those properties is in my IRA.

Anyway, the lenders have been 'doing the math' and with each successive purchase, they will require more in reserve. Our first couple of properties, I wasn't terribly concerned as my wife and I both have day jobs. However, with each successive property, the risk-impact goes up, so likely we will have to set aside more and more in our bank account. In fact, this is already impacting our financing choice as we have elected to go with 20% down versus 25% down on this next one so as to have $5k extra in reserves.

-e

Is everyone using the same definitions of terms?

Some of you folks who have been doing this for a while can look in the past and use actual data so that you can incorporate actual repairs and actual vacancies.

Really good replies!

I have an unproven theory that MFR are more susceptible to inventory glut / overbuilding from money rushing into these spaces to fill the need /demand for apartments. Here in Denver I read somewhere that there has been a rush on permits for MFRs. That hasn't happened yet for SFRs. Additionally, condo projects can be converted to rental apartments.

It also appears that a lot of new renters in the market are people that previously owned homes--SFR's-- and lost them. It is likely that they will want to rent SFRs rather than apartments.

Finally, the amenity of the garage is likely easier to get with an SFR than a MFR. This piece ties into the the one directly above. But if you want to live in a home with a garage, pets, and a yard, I think you will be more likely to want an SFR.

Again, I don't have any data to prove any of the above (except for the unlinked piece about a rush to build apartments in Denver), so fire away.

Whoops ,that didn't render quite right. :(

If I buy down the rate to 4%, it will cost me $920 that will need to bring additionally to closing. This will make my monthly PITI $598. It saves $26/mo or $312 / yr. Which is a pay back of 2.95 years thus making the effective Rate of return %28.70. (if my math is correct)