All Forum Posts by: Guy Yoes

@Basit Siddiqi

Thank you for the info. I currently hold some notes in a SDIRA. The company is well known and I have a good history with them. These notes would not be in a SDIRA just cash from taking equity out of my properties.

What is the difference between passive and portfolio? Are you implying the notes would be capital gains same as stocks, bonds, etc? If it is capital gains, The tax rate is 20% correct? That would be lower than my current tax bracket.

In a nutshell: I have 3 properties with no debt on them. The current value of them is about 260K. 

After doing taxes I notice all my income is passive (not an RE pro) and while I can take some losses I don't have any interest to deduct from my earnings. Would it be advisable to borrow against the value of the properties (about 150K in loans) and put that into notes? Say the loan is at 5% and the notes pay 10%. 

By holding the properties (now with debt) I would have less cash flow from them, but still, have some deductions (repairs, prop tax and ins. and interest). I would make a little more income from the notes which would be taxed.

I am retired but still work part-time and can easily manage the 3 properties but don't want to leverage into 3 more. We travel often spending time with family and I  currently spend less than 20 hours a month on the properties I have now.

Is anyone else doing this? 

Thank you in advance for your comments.

Brian Eastwood - a pro member on here can answer all your questions.

I use my funds in my SDIRA for buying notes. I had bought properties with my SDIRA but sold them and moved to notes. I found there were too many situations that could be flagged if I managed my SDIRA properties while managing my non-SDIRA properties. There are people who are doing this (buying property) but I don't know anyone who is using SDIRA funds to flip.  Good Luck

@Michael Blank

Michael, thank you for that explanation. I am very interested in the quad concept. I think that would be very doable for us.  That said, what if I did 1031 on my properties (about 250K) on a B+/- quad that would use my equity to upscale (defer taxes), use it as my residence for tax purposes, maintain some cash flow and then refi if another deal came along? I could live with some debt as it would be like making mortgage payments on a personal property. Thanks for your time and consideration!

@Llewelyn

Why would I take out 100K loan and pay $5K a year? If it set in the bank I could lose 10K-15K waiting for a possible drop. I would be paying the principal and interest on the loan. Using the rents to pay the HELOC /loan would reduce my cash flow. Why not use my good cash flow now to hold notes paying 10-12%.

The markets in Tulsa dropped about 18% not 50%. 

I do understand the reasoning of leveraging equity and I know rates are good now. I was just raised being told that any debt is bad debt. 

If I leveraged my properties at 60%-70%, it would scare the hell of me. Wife and I worked hard to buy them with cash. The thought of losing all we worked for....

I asked for advice and I truly appreciate all the comments. You have given me much to consider. I will keep running the numbers and perhaps find a solution where I can feel comfortable taking on the risk.

@Michael Rutkowski

Please help me understand...

In your post you said "I am stockpiling cash, and paying down debts, to buy land at auctions"

 Your comment to me was "if you've got equity, use it before it's gone"

I have 3 properties and am totally debt free.

cost of all properties is 214K ARV is 297K

Cash flow 28,200 per yr before taxes and ins.

If I leverage those properties to buy more at higher valuations, am I not risking more devaluation if the market drops?

If one of my 3 is vacant, I'm still cash flowing and no worries. If I leverage 3 into 9 or more and then lose value to a drop in prices (as you see coming) and experience a few vacancies then I have:

raised my debt to credit ratio ( reducing the ability to buy more at lower prices)

lowered my ROI by increasing expenses

and "will immediately get underwater"

Why would I not stay debt free, convert my cash to notes and have coffee with you at the courthouse?

The consensus on this post seems to be that it is likely a pullback of some sort may occur in the not too distant future. 

I thank everyone for their comments and feel blessed to have access to a forum such as BP. 

@Thomas S.

Thanks for your input. I like being debt free and my ROI is averaging 10+. However, I am considering leveraging into a small MF. I'm just not sure if my timing is right to buy at today's higher prices.

I paid cash for the property. I just want to know if there are legal concerns placing the property in an out of state LLC. I am planning on moving to that state in a year or so and would probably start a new LLC there.

I was concerned about waiting up to 2 years to place it in a new LLC or go ahead and use my current one.

Hate to say this but....

If you can't manage your properties, hire someone to do it for you. I think this will be a costly lesson in many ways.  

Wow! it appears this post has pulled in some big fish in RE. I've only been in RE for about 5 years and self-manage my 4 properties.  Three are 100% equity and the 4th is about 60% (paid off in 6 mo.) Our only debt is 30K on property #4 and we have 360K equity total. 

My question is:

I'll be looking to add another property by the end of this year. I've noticed the dollar dropping in value about 11% over the past year, and some talk of FED raising .25 to .50 bp over the next year.

Considering the overheated market, weaker dollar and potential rate increase, should I grow and hold my cash, add another SFR or 1031 into MF?

Should I leverage my equity for a bigger piece of property and would this be a good market time to make a move?

I know this is off topic, but I can't resit this great audience.

Thanks,