All Forum Posts by: Matt Rosenbohm

Hey Everyone,

Thanks for taking the time to read and give input! Here is my scenario:

I want to make sure my rental portfolio is at its maximum potential without over-leveraging. I have been so focused on my flip business I have not taken serious time to evaluate my current portfolio performance (other than basic p&L's, etc)

When I first purchased my rentals they were performing at about 20%-25% Cash on Cash. BUT, now with all the equity growth an principle pay down they are performing around 6% cash on cash. In other words I have a ton of capital making a tiny 6% cash on cash return. Good problem, but just can not seem to make up my mind on how to proceed, would love your input... I have about 2 Million in equity and willing to leverage at 80% LTV

1. Refinance and Purchase More Properties 

*I am in the Northern Colorado Market and I can find new (off market deals) rentals for about 10-12% cash on cash in our current market. I have considered buying out of state to get better returns

2. Sell and 1031 into Large Multi Unit (apartments)

    *current properties are mostly 2-4 plex student housing and single family

3. Continue to Pay Down and Payoff Properties

I have gone over the pro's and con's of these (and others) options many times, rather than list all of that I would love to get any input you wise BP'ers have! 

(obviously I know all advice is market specific, but would just like to get your general input)

Thanks,

Matt

As others mentioned the profits from a flip owned for under 1 year will be taxed at your personal tax rate. But, it is very important to note that you will likely also have to pay self employment tax on that income as well around 15.3%... This is on top of whatever you pay for your standard tax bracket. If you only flip a house or two per year you may be able to get out of this, but once the IRS considers you a dealer (flipping multiple houses) you will pay SE tax. So if you are in the 15% tax bracket and you made 100k on a flip you would pay: (if you made 100k you wouldn't be in this bracket, this is just an example for easy numbers) $15,000 income tax $15,300 self employment tax And state income tax (whatever your state rate is) Matt

Thanks @Jeff B. I suppose I should have given some parameters:

Cash On Cash Returns based on 20% down and 30 Year fixed Loans 

Hey BP,

Would love to get some input from everyone about what kind of cash on cash returns you are finding for buy and hold residential real estate SFH or Multi-Family. I live in Colorado and have a good size portfolio of rentals, but have been unable to find anything that fits my cash on cash return goals for almost 2 years. I am considering looking out of state so I can continue to build my portfolio... here are a few questions:

1. I generally am looking for 20-25%+ Cash On Cash Return. Is this an unrealistic goal given the current market or are any of you finding places in the states that still can produce this kind of return? 

2. For any of you who have done so, how has your out of state buy and hold investing turned out? Everything I have is in my state, and I have direct control over the management, so I am a little unsure about out of state hands off investing.

Thanks for your input,

Matt

Hey Joseph, Are you planning to occupy the property or flip it for a profit? Either way, there is a loan called 203k. It is an FHA renovation loan that does exactly what your looking for. The only catch is that this loan is meant for owner occupants, people buying the home as their primary residence. If you're new to flipping, maybe the best way to start is to buy a primary residence with this type of loan and rehab it. The only thing you need to be aware of is that there are time restrictions. Since you will be buying it as your primary residence (the loan requires this) you are required to stay in the home for a certain period of time before you can resell it. You'll need to talk to a loan officer to get more details on the timeline and qualifications. If you're starting from scratch and do not have a lot of capital this could be a great option. Best of luck to you!

I send out a high volume of direct mail each month, and have tried a lot of formats. Honestly, Its hard to say what the silver bullet is in terms of response and format. What I have found to be most effective is following up the direct mail piece with phone calls.

ei, Hey John, my name is matt and I was just following up about a letter I sent you last week about your property located at 123 main street. (generally they may have glanced at it, but tossed it, but surprisingly remember seeing it) but its a great lead into a conversation rather than a traditional cold call. I found that most large companies (many different types of marketing) use this approach. It has been how I land most of my deals.

Hey Cynthia, 

@Cynthia Nina-SotoThat's awesome, congrats on the quick start, sounds like your well on your way! Would love to help anyway I can.

As mentioned in previous responses, I believe the best way to get started is buy your first investment as a primary residents and use the FHA or Conventional lending programs to minimize your down payment (cash out of pocket). You will need to live in the property for at least 6 months, but can then transition in into a rental and move somewhere else. Generally these types of programs allow you to put only 3-5% down. This is how may people get started.

Secondly, I would recommend looking into a portfolio lender ( a local bank in your area). These type of lenders often do not require the same strict guidelines as a national mortgage lender would. For example, I know that most local banks do not require you to have 6 moths reserves in order to buy your rental property. The other real advantage is that national lending companies will not give you credit for the rental income (towards your qualifying income to buy the property) unless it has been on your tax returns for 2 years or more. Local Banks will often allow you to use 75% of projected rents towards your qualifying income. 

Thanks Guys, looking forward to growing together.

Matt

Hey Bigger Pockets Family,

I have been in full time real estate investing for a little over 10 years. I currently Flip 15-20 Homes per year in the Northern Colorado Market. I am also very involved in buy and holds, single family, multi-family and student housing. 

Looking forward to connecting with other investors on BP,

Matt