All Forum Posts by: Joe Einbinder

@David M. I appreciate the response first of all. If I needed to sell the home and work to pay off the HELOC for a few years, that would be worst case scenario, but like I said, I won't buy it if I don't have a pretty certain idea that it would cash flow. Plan is to just start renting it out in a year or two once we have finished school and are back to making more money. At that point, we can move to a new house or back in with my mom. I guess I have a couple different ways of exiting if I had to.

Hi all!

So I have an interesting situation going here and I have to get creative to make something happen or I''ll be stuck in the paralysis by analysis phase forever! I will try and sum up my plan as quickly as possible, bear with me!

My wife and I currently live with my mom. We own a condo free and clear, that we rent out, at a net profit of about $600 a month. We are living here because we are both going back to school in the fall, and need to downgrade our work schedules a bit in order to manage everything. So in other words we wont be making much through the next year or two, and are eager to get an investment property going/ move out of of my moms. We have about $25,000 in cash plus the $165k in equity in our condo. Most people I've heard of, using a HELOC, will use it as down payment on the new house, but I'm thinking of instead using it to pay our mortgage for a year or so while we're in school. That way instead of putting a giant balance on the HELOC right away, we are putting smaller balance on it every month, with the opportunity to use any leftover funds to pay it off as we go so that it hopefully doesn't get out of control. The single family houses we are looking at are 2 bed/ 1 bath priced from $180k - $215k and we will not buy unless we are sure they will cash flow etc. (South Minneapolis).

Anybody say go for it?? Or do you have any other ideas for us that may work better?

Any input will be much appreciated for these two novice investors! 

Many thanks, 

Joe

@Sylvia B. Well now we get down to my confusion! So I have a 1 bed condo that I rent out and last year was the first year I’ve collected rent. My accountant asked for only the full amount of rent that was paid to me, and specifically told me not to give her the profit... I pay HOAs, she didn’t want that either...

@Jaysen Medhurst wouldnt you get taxed on the overall rent paid? Not just the profit?

@Jaysen Medhurst sorry I should’ve given more context. I’m looking at properties in an expensive area that may only cash flow $300 or so. With how much I would pay in income taxes (in same bracket as you) it seems like the taxes would eat up all of that cash flow!

How much of your profits are eaten up by income taxes on rent paid each year?? I know you get deductions for depreciation, and maintenance but even after that, it seems like any profits would be eaten up and possibly make for negative cash flow. PLEASE HELP SQUASH THIS QUALM!!! I REALLY WANT TO INVEST!

@Lien Vuong @Bjorn Ahlblad I appreciate the responses guys. I knock doors for a remodeling company already so maybe I can go hit a few doors in my ideal areas to try and get in contact with some owners. Have you ever used an absentee owner list? Or gotten off market deals through a wholesaler?

How does one approach a private seller without 100% cash?? If I’m trying to make someone sell me their house instead of putting it on the market, what are my bargaining chips if not all cash?

Hi all,

So my question is regarding reserves. I'm about to buy my first deal using a HELOC. I also have $20k in reserves. I'm wondering if most people leave those reserves in a basic checking account or move it to say a vanguard account so it can gain some interest? I'm pretty sure most would say leave in the checking for quick easy access in case of emergency but wanted to see what the BP community has to say on this! Many thanks!

- Joe

@Ryan Detig thanks for the response! So as of November I’ll be moving out of the condo to rent it out. You’re saying take a conventional loan, use it to buy a rental and not pull the equity from the condo at all? My loan officer does have about 5 investment properties himself by the way.