All Forum Posts by: Jon C.

All great advice above, but for me, it's work ethic. Your mentor wants to see your actions speak for you. Show your mentor that you are willing to figure things out without running back to him for every little thing. Act as if you already are the boss you want to be. Congrats to you for seizing your opportunities. 

@Cameron Tope at the end of the day you have to do what you are ready and willing to do. You need to be able to sleep at night. I totally understand it. Life is a constant growth process and I have no doubt you'll figure out what works for you. 

The new condos at the Waldorf Astoria in Manhattan are some of the highest $$ per SF costs ever seen in NYC. They remind me of the prices seen at the Plaza Hotel, when that was converted to condos. History has shown that those prices have not held, and while still very expensive, they have had little to no equity appreciation, and in some cases have lost value. Resales on ultra-luxury real estate is a limited market and a hard sale, especially in Manhattan where so much ultra-luxury inventory already exists.

The commercial world is all about finance and corporate structuring. It's very different from the residential world. It's like going to school textbook type reading and research. I have been doing commercial deals for so long that I couldn't even tell you what's currently available to newbies in the commercial sector. I would suggest you start with Udemy and a thorough search of Amazon to see what they have on topics like Commercial mortgage financing, debt leveraging, corporate and tax structuring, etc. Perhaps join some more advanced local meetups.

Let me know if you have specific questions I may be able to help guide you on.

Good Luck!

First, make sure the house is debt free. If there is a mortgage or any liens on the house then you will be the new owner of those liens and the lender on the mortgage will have the right to foreclose because it was a fraudulent conveyance. You also want to make sure there are no open permits on the property. Get a basic title search from a reputable title insurance company. It will cost a few hundred dollars. 

If there is a mortgage, you will need to get the lender's consent to assign the mortgage to you, or you will otherwise need to refinance the property and simultaneously convey the property from your Aunt to yourself by a "no consideration" deed. 

Speak to your accountant about the potential tax consequences of this transfer. If your Aunt remains on the deed with you then you will not be able to claim a stepped up basis and will be subject to larger capital gains taxes when you go to sell because the profit will be based on the value of the house at the time she originally took title.

In reality, all of the above is very minor stuff to work through in order to get a house for practically nothing. Potentially, you could do a cash out refinance while the rates are at record lows and either use the cash to fix up the property and get it rented (let the tenant pay that mortgage for you), and/or use the money toward a don payment on your 2nd rental property.

Good Luck!

@Ben Kniesly the deals make money through BRRR on the larger commercial side too. Do you plan to remain "unconnected," as you put it? I hope not. Make yourself into someone who is "connected." I have two mantras on my office wall: 1) Excuses never lead to success; and 2) Discipline never leads to failure.

A refinance will likely not go higher than 80% Loan-to-Value ration ("LTV") of current appraised value. A cash out refi will probably be at 70% of appraised value (70% of $450K = $315K). You will then owe payments on $315K, based on the terms of the loan (i.e., interest rate, length of amortization, required escrows, etc.). Either you, or a tenant, is going to cover those payments.

The refinance pays off the prior loan. You are not taking out a second mortgage that is subordinate in priority to the original loan (unless you like paying higher interest loans for no reason - which nobody does). A lender cannot foreclose on the collateral for the loan (the house) if there is another lender with a senior claim to that same collateral ahead of them. 

If you've only owned the house 4 years then you should be fine from a capital gains perspective, if you choose to sell. Speak with your accountant to confirm. 

So many variables here. 

If the property has been an investment property for at least 12-24 months you can probably sell it and do a 1031 exchange to avoid capital gains taxes and buy a new investment property while also paying off the lien and loan from your friend. You could also keep it as a rental and do a cash out refinance to payoff the lien and loan and still have enough to afford a down payment on another investment property. Part of the consideration depends on the capital gains basis value of the house when you inherited it. Have you conveyed title to your name or an entity you control? I'm assuming you've concluded the probate of your father's estate. 

As for your more basic questions, you can refinance whenever you want. I have properties I've refinanced 3-4 times over the last 7 years. the amount of the loan and the interest rate will determine your monthly debt service obligations to the lender (plus tax and insurance escrows, if required).

Speak with your CPA and keep educating yourself on Real Estate Investing. It's definitely a marathon, and not a sprint to the financial freedom finish line. 

By no means do I want to deter you, but I will speak honestly and bluntly. It is going to be incredibly hard for you to invest with no money, no knowledge, no experience, no work history and no credit history. I think it's wonderful that you have identified the positives of Real Estate Investing at such a young age, but there is no rush. You need to educate yourself on basic economics, debt leveraging, different real estate asset classes, market cycles, deal structuring, etc., etc. Rushing to do a deal with none of the aforementioned knowledge will have a higher likelihood of failure; and financial failure can take a long time to recover from. As tempting as the financial freedoms of REI seem, you cannot run in a competitive race before you've learned how to crawl.

I would recommend that you join a local REI meetup in your area, find a mentor in your area to tag along with and learn from, or get a job in the real estate field (mortgage lending, contractor work, etc.), and keep expanding your network. Get the experience and learn the industry. It will take time, but it is absolutely worth it. No one gets rich from real estate overnight. I've been at this for over a decade and I'm now finally at the level I wanted to be at 15 years ago. Of course now I am aiming for a new level.

If you stay devoted to constantly expanding your knowledge and seizing every opportunity to gain experience you will find success. The only people who fail at real estate investing are those who dive straight into the deep end before they take a swim lesson, and those who give up too easily because they don't have the stamina to keep going. Investing of any kind is a marathon, not a sprint. Hearing that someone made $50K from a flip in less than 6 months may seem cool, but learning the craft, putting in the blood, sweat and tears and making over $50K/month is even cooler. Trust me.

To expand on what @Joe Villeneuve posted above, you should form one ownership entity LLC to hold title to the property (if your Lender consents to an LLC owner of fee title) that is controlled by an operating agreement between two (2) separate LLCs as its members (one LLC for your interests, and one for your joint venture partner's interests). If two separate LLCs own the property as Tenants-In-Common then you will still need a Tenancy-In-Common agreement to control the relationship between these separate title holding entities.