All Forum Posts by: James Triano

@Dustin Hasan

Talk with your bank.  If you've purchased the home, added value through repairs/rehab, and have it rented out for ~2 years (called the seasoning period), you should be able to obtain a loan for your equity.  Keep in mind that you will not be able to take out 100% of the equity and will likely only be able to take out up to 80% of the equity on the home.  Again, talk with your bank or multiple banks in your area and see what their requirements are on re-fi's and how to go through the process to see if you're eligible.  

@Jon Mason

If you're doing any of the work yourself, it may make sense to create a serparate LLC that does your "contracting" work and pay that LLC with your rental property LLC to keep from piercing the corporate veil if you're worried about it. Generally speaking, if your work is done well and you're not creating a fire hazard or flood hazard, I am sure you will be okay. If there is really gross negligence on your part in any activity, sure someone will sue you but like @Natalie Kolodij mentions, have a solid umbrella insurance policy and you will be fine. 

According to a new article in the Wall Street Journal today, the number of investors flipping homes has reached a level not yet seen since 2007.   The article also goes to state that the average profit for a flip is now $61,000 vs. a low of $19,000 in 2009.  Funding for this activity is also being supported by bigger and bigger banks which have started lending in the flipping sphere again. 

These kind of numbers are giving me pause about plans for 2017/2018 as I've begun to flip houses.  This sort of "mainstream" coverage is exactly what got folks into over-leveraged and under-analyzed deals that led to the financial crisis of 2008 & 2009.  I know the market in my area has picked up slightly but it's not necessarily the boom and bust type of market like many of the Atlantic and Pacific coastal cities.  

As we approach the new year, it may be a good time for all of us to take pause and re-evaluate the macro environment and ensure we're really digging into our numbers and get after it while the "gettin' is good."

Link to the article

@Joshua Lane

The benefits are the market intelligence you can obtain from the MLS, the savings on commissions (if you're doing enough deals), and the ability to list/sell/buy homes for others in your network. As with anything though, there are downsides.

@Mark F.

I think the conclusion of "the latte theory" has less to do with actually going to Starbucks and more to do with a conscious thought of how you're spending money.  Many people go to Starbucks, or wherever, because "that's their thing" and "they deserve it" just like they deserve their big house, fancy car, etc.  However, they're unconsciously just buying things and allocating their resources (money and time spent making money) to items that are really draining their net worth.  

If someone wants to go to Starbucks because they enjoy their cup of coffee everyday, fine.  Life is meant to be enjoyed and should be some 80 year sacrifice.  As long as they're allocating their resources consciously and have another plan besides blaming everyone else for why they are broke and can't retire, then I'm all for the green mermaid.  

As @Scott Trench mentioned, it's not the Starbucks and the $150 per month that's going to be the difference in your life.  However, in my opinion, it's going to be the consciousness of spending, savings, and investing that will be the difference. 

@Laura H.

While your DTI would only improve slightly, your credit score is adversely affected by "high balances on revolving consumer credit" as well. I've seen my credit score shoot up as I paid off balances on credit cards a few years ago.

The pre-tax benefit is nice from your 401k. However, you can get the exact same benefit by contributing to a Traditional IRA and will have many, many more investment choices. Of course, there is a $5,500 maximum annual contribution to an IRA (either Traditional or Roth). Personally, I contribute only that minimum to my 401k to get the full employer match and then max out my Roth IRA. My theory is that, while I am younger (and likely earning less than I will in the future) I should just suck it up and pay the taxes on my earnings and contribute it to a Roth IRA where it will grow and pay out tax-free when I retire. As I age, I would transition my contributions to a Traditional IRA because I would need the tax breaks on my income.

My goal is generate as much tax-free income as possible when I retire and a 401k puts a drain on that as I'll be paying taxes on distributions during retirement. 

@Mark S.

There is no difference to me, and to some others I know, between your pets and other members of your family - they're usually just as much apart of the family dynamic as anyone else. 

However, this question is just like any other insurance question, one where you're trying to balance potential out of pocket costs vs. monthly premiums.  The idea of insurance is to protect you from a catastrophic financial event - one that could push you into bankruptcy.  I've seen vet bills pile up on folks and it's no different from having a disease or medical problem yourself.  It can be very expensive.

It sounds to me like you've got the money to prepare to pay some very high cost medical issues should they arise.  Is there a way you can do a higher deductible plan with your pet insurer?  This would decrease your premiums but still allow coverage for, let's say, a $10,000 event or something.  It's the same with car insurance - I've personally pushed my deductible as high as possible over time because my liquidity has gone up.  I certainly don't think pet insurance is a bad idea but if you have the financial ability to self insure or use a much higher deductible plan, then it makes more financial sense to do so. 

@Laura H.

My $0.02 to your questions:

1)  Take the $15-20k left over from the purchase and pay off your credit cards.  Even at 13.5%, you will not find a risk free real estate investment (or any investment for that matter) that will generate those returns.  Take the money, pay the cards off, and never have to think about them again.  Not to mention that since you will be buying more property, your credit score will be favorably affected by decreasing your consumer debt and showing your ability to repay.  Maybe that saves you 0.25%-0.50% but maybe it doesn't.  

2) Take your extra cash flow and save for your next properties.  Consider this your "real estate money".  

3) With your current monthly excess, pay down the student loans. Consider this your "personal money". Then, once complete, begin contributing this to your real estate money. Also, since your company is not offering a match, I would stop contributing to your 401k and either contribute to a traditional IRA, Roth IRA, or put it towards debt repayment. I would change my mind on this strategy if there was a match, but there isn't.

Congratulations on making these steps to better your financial future, you're on the right track!

@Emily Kessler

I've done this both ways. If you're planning on listing a property for sale and want to use MLS then yes, you do have to go through your broker who will broker the transaction for you. This is what I've done when attempting to sell a rental and will do with a flip I'm working on.

On the other hand, I've purchased properties at sheriff's sales and off-market which I have not gone through my broker to do so. These were deals that were received through mutual friends, family, others in my network. Anything that you're going through the MLS for, you'll need to work through your broker. I will note that I never used any of the standard contracts, forms, etc. in my off-market deals and went through an attorney to close those transactions.

@Adam Juodis

I just use a simple two column spreadsheet with assets on the left and liabilities on the right. It's simple and easy to track net worth. I know there are some web apps out there like Personal Capital that are great if you'd like to link up accounts. Any way you do it, it should be easy to update and simple to use.