All Forum Posts by: Jeff Roth

Quote from @Steve K.:

Quote from @Jeff Roth:

Hi Drew-

The doctors document their hours actively working on their real estate. It helps that STRs are more actively managed than LTRs to qualify for being designated a Real Estate Professional.

They do this with their individual tax professionals.

I have nothing to do with that or the cost segregation studies. I help them acquire the STRs.

 In order to qualify for real estate professional status, you need to spend more than half of your work-related hours dealing in real estate directly, or more than 750 hours during the tax year. There would be no way to do this while working a full time W2 job. A doctor’s spouse may qualify if they work a job in real estate, but very few working doctors would qualify. 

Correct. For the Real Estate Professional the doctor usually works with their spouse and some doctors have flexible work arrangements with their office or clinic or own the office or clinics and have administrative staff.

Hi Drew-

The doctors document their hours actively working on their real estate. It helps that STRs are more actively managed than LTRs to qualify for being designated a Real Estate Professional.

They do this with their individual tax professionals.

I have nothing to do with that or the cost segregation studies. I help them acquire the STRs.

Hi Mohammad-

My pleasure and thank you for the follow-up question.

I think you are in a great position and wise to be thinking about real estate investing as one of the vehicles to not only create passive income streams but offset your W-2 income.

One of the strategies I see the doctors doing that I work with is purchasing short term rentals as they are more actively managed and it helps them be seen as a real estate professional for tax purposes based on the number of hours they are working in their real estate business which helps offset their W-2 income. Additionally, you can do a cost segregation of the property and take bonus depreciation creating additional tax savings.

Beyond short term rentals, I think buying a triplex or property every two years as a primary residence and then renting out the unit you lived in and repeating this every two years is one of the best ways to accumulate a portfolio of properties with little down with property tax savings while you live in the property.

Then, it will be surprising how quickly the equity builds up as other people pay for your asset that you then can pull equity out and buy a larger apartment building after you have learned about property management from owning the smaller rental properties.

To Your Success!

 You bet Jason. You are one of the few trusted real estate voices out there. Appreciate you and your thought leadership. 

Hi Mohammad-

Congratulations on being a young doctor in Texas!

You are interested in real estate investing and are looking for resources to develop your knowledge.

I work with a lot of doctors and busy, high income earners to help them build real estate portfolios to slow down at work and offset some of their W-2 or business income.

Some books to consider are Multi-Family Millions by David Lindahl, Investing in Real Estate with No and Low Money Down by Brandon Turner, and Equity Happens by Robert Helms & Russell Gray.

Some You tube channels to follow include Get Rich Education, Ken McElroy, Jason Hartman, and the Real Estate Guys Radio Show.

Yes, until you are making attending physician money, I would house hack the house you live in by renting rooms or buying a duplex as a primary residence with low money down.

To Your Success!

Hi Jack-

Congratulations and great question. 

You say you are 23 and have saved up enough to start your real estate investing portfolio.

You are considering having others help pay the mortgage by buying a duplex or triplex and living in part of it.

Alternatively, you are considering buying a section 8 income property for around 100K.

Since you state you are already paying $1,700 a month in rent, I would start there and buy the duplex or triplex to reduce your monthly housing costs while building equity. Then, after two years of living there, you can move to another duplex or triplex and rent out the space you were living in. One big advantage of this strategy is you can use conventional financing with a lower amount down as it will be your primary residence which also has a lower interest rate than an income property loan.

On your question about buying section 8 rentals, I think this is also a good strategy to add to your portfolio and you can buy section 8 duplexes in Lansing, MI for around 100K and its a great rental and investment market.

To your success!

Hi Matt-

Great question about whether Grand Rapids is a good market for multifamily rentals and if Michigan is a good place for an out-of-State investor to look at.

Grand Rapids is one of the best local economies in the State. There is lots of economic development in Grand Rapids and it has a diverse economy. It also has net positive population growth and mostly from younger people. 

Grand Rapids is definitely a good market for multifamily investment as it has also seen rent growth unlike other parts of the country for multifamily.

It is also a more affordable place to invest compared to other parts of the country and Grand Rapids is generally landlord friendly.

A quality property manager is essential for an out-of-State investor and there are some good ones locally.

To Your Success!

Congratulations Jessica!

I love that you rented two of your bedrooms as mid term and short term rentals and made enough to pay for the mortgage and now you are going to use the rental income to show you can qualify for another property.

This is an excellent strategy and one more people should consider doing in this inflationary environment to offset the biggest cost in their budget--housing.

As you rightly point out, you can use this strategy with every house you buy accumulating a portfolio of houses that you originally started out living in as a primary residence every two years.

Well done and more people should consider doing the same, or rent their garage, or shed, or a boat, or an extra car.

Love it!

To Your Success

Hi Navid-

To start, I am sorry to hear about your father's dementia.

It is fortunate that you were able to sell his business and he invested in 6 investment properties in California 10-15 years ago and he and your mother are living on the cash flow from those.

You now are thinking about expanding your father's investment real estate portfolio because California is so expensive to live for them but don't have the same experience and confidence being new to investing.

This is an honorable goal and you are right to be cautious and thoughtful.

You asked about whether you should cash out refinance each house or borrow against all houses to get downpayment for new properties. On this question, because the interest rates are so low on the existing loans, as you state, I would not do a cash out refinance as that would increase your interest rate and payment reducing your parents cash flow they are living on. Also, I would also not cross-collateralize the houses if a lender would even do a portfolio loan.

On your second question about multifamily, I would not jump to multifamily until you have experienced the common management problems with single-family as the expenses scale with the size of the property as well as the cost of mistakes.

I would consider getting Home Equity Lines of Credit (HELOC) on each property. This gives you the dry powder you need if a good deal comes along or unexpected expenses and you keep the existing low mortgage rates and do not increase your payment until you use the HELOC.

Consider how you could increase the cash flow on the existing properties and if you have the means to pay off one of the houses to increase the monthly cash flow that way. Also, have you considered moving your parents to a less expensive area and renting out the house they live in?

To Your Success!

Hi Jonathan-

Great questions.

Should you have a general contractor walk the property with you at a fixer-upper you are interested in to get estimates on the cost of repairs?

This is a good idea and should be done during due diligence after you have the property under contract.

There are some contractors that just work with investors and efficiently get the work done on fixer-uppers or flips in a timely and cost effective way.

They may charge you for the estimate which is credited to any work you have done.

A general contractor is not a replacement for a quality home inspector and the home inspector may find additional work that needs to be done so good to have them there on the same day if possible.

Both results and estimates are useful in retrading or renegotiating after the due diligence.

To your success!