All Forum Posts by: James Denon

I am new to real estate investment. I am located in Connecticut. The markets I am interested in are New Haven, East Haven, Wethersfield, Hartford, West Hartford, Middletown, Glastonbury, Cromwell, Rocky Hill areas.

I have been indecisive between smaller 3-4 unit houses and 20 unit apartments.

I need some advice.

I have ~200K to invest. I would like to go in with significant leverage and target 800K-1M worth of properties.

I am looking around 9-12CAP deals in B+, B- or C+ properties.

I am trying to decide between buying 5 separate 3-4 unit properties or a single 15-20 unit property.

I plan on holding the properties as long as they remain positive cash flow.

Financing seems to be more risky with 5+ properties since in 5 or 10 years, the loan is called back and you need to refinance at the market rate.

Lets say I bought a $1M property with 20% down, if the interest rates become 8-9% in 5 years, the property price would drop 25% yet I would still owe ~$700K. The property will appraise at 750K.

I would not be able to get financing without putting down more money out of pocket. Even if I get the financing, I would be getting it from 8-9% rate. The property may become cash flow negative because of the high mortgage payments.

On the other hand,  3-4 unit house, I can finance it for 30yr fixed rate. Even if the market fluctuates, I am safe with my original financing terms. I can exit or refinance when it is favorable during the loan term. Also, the residential loan conditions are more favorable. Lower rate and 30 yr amortization instead of 25 yr.

What am I missing about financing? If everyone thought like me the smaller multis would be on demand and larger properties would be dirt cheap.

Also, being new and not having a network, I am less likely to get the premium properties for larger multifamily since the commercial brokers float the good deals to their long term clients first. I would probably end up with scraps from loopnet. The smaller multi is more open to public through mls.

Any feedback would be appreciated.

Joe, Thanks. Please provide more insight. why wouldnt you offer more than 75%? Is that the limit? Why dont you focus on getting the property and why dont you think it is important?

You're right there is an owner involved. The bank doesn't own it.

Thanks Wayne.

Is this the Freddy Mac and Fannie Mae rules you are citing? 

If so, does anyone have any experience with getting a loan based on appraised amount shortly after the all cash sale from a local credit union or a local bank?

I am looking to buy a short sale property. The bank that owns the house, claims the house appraised at 90K. They listed it 75K. My realtor tells me they already have a 75K all cash offer. 

I am willing to put 75.2K to beat it only if I can refinance for 90K and essentially get it for free since I would be getting around 78K back based on 20% downpayment and 90K appraised value.

Can I agree to offer 75.2K cash and get it appraised before closing and cash out re-finance the deal?

Maybe I tell the lender that I  will close with all cash at the closing. The next day, I turn around and refinance it for 90K.

Thoughts?

Thanks @Ned Carey and @Dave Toelkes  

So in this scenario, the taxable income is $13,569. Correct?

(NOI-mortgage interest-depreciation)=13,569 positive

The actual cash flow is $16,334.

If the 13.569 was a negative number, I would not have been able to use that to offset my tax liability from my day job income since I make >150K. Correct?

Hello everyone I am new to this forum and the income property investing.

I am trying to figure out the income tax situation.

I make more than 150K a year on my day job on a W2.

However, if I get a positive cash flowing property, meaning I don't report any losses, it should still provide me some tax advantages. Please check my math down here:

I assumed that the depreciation base of the dwelling is $200K.

Based on the math below, I would have $16,334 positive cash flow but I will pay taxes on NOI-mortgage interest-Depreciation=$13,569

OR since my income is >150K, will I still pay taxes on the NOI=31,000?

Feedback from experienced investors and CPAs appreciated.

Also, based on the cash and cash return, do you think this is a good property to invest in? It is all section 8 folks renting it. So, every 2 years, I should probably account for 10K of trashing the place per tenant which I have to pay for.