All Forum Posts by: John Barrett

@Andrew Ginnetti I think this is just an order of operation type of problem. I would complete the sale and purchase via the normal 1031 process (escrow & title, facilitator, agents, etc). I would obtain traditional financing for an investment property. This will include standard escrow reserves for your tax and insurance. Once everything is up and running smoothly, you can work with your legal council to transfer the property into your LLC without violating any of the governing rules. You will need to maintain your LLC and follow the associated rules but other than that your mortgage company will handle insurance and taxes via escrow.

I would challenge you to really think about whether or not you need an LLC at this point in your investing? There are additional complicating rules / requirements for operating your LLC in a compliant fashion that could make this option less attractive for you if you only have one or a couple rental properties. Rather, you could look at simply getting an umbrella insurance policy on top of your existing home owners policy to provide the protection you are looking for.

Best of luck,

John

@Chen Su Tenant screening is super important as @Sherief Elbassuoni has mentioned.  Additionally, you can join the local landlord association and use updated and approved documentation (lease agreements, movein-moveout checklists, notices etc).  In Washington you can look up both RHAWA and WLA.  Both landlord associations are good and provide a lot of resources and guidance for landlords.

Landlord tenant laws are different between cities, so you can target cities (other than Seattle) that have more reasonable rules.  In general, using a good screening criteria, clear documentation and open communication with your tenants and you will do just fine.  While you can always run into issues with tenants I have found the vast majority are good people just looking for a clean, safe place to live.

Best of luck,

John

@Brian G. Bump This question is really dependent on your level of risk tolerance and the time frame you think you will need between the sale of your existing property and your next investment.  If you think you will have a relatively short time period between the sale and your next purchase, I would use an online savings account. You can find relatively high yield savings accounts by looking on sites like Bankrate.com to compare options.  Most are currently have rates around .5% which isn't much but you don't have the risk of loosing your principle.

I would caution you to avoid thinking about the ways you can potentially earn higher returns on the proceeds from your sale if your time period before redeploying the funds are less than 1 year.  Instead, I would be focused on capital preservation. Investing with a really short time frame exposes you to all the risks of volatility and market timing.  If you have a longer time period, you have a lot more options that you could potentially look at (again adjusted for the level of risk tolerance).

Best of luck,

John

@Ryan Washington Do you really need a financial planner to review your goals or are could your questions be answered by other investors via a meetup or mastermind group? The reason I ask is that there are many financial advisors that will naturally want to steer your investing towards investments that they know and understand best (stocks, bonds, ETF's or REIT's). This is not necessarily malicious just people tend to favor what they know best. From the path you are on, this advice could conflict with your goals.

My suggestion would be to find a local REI group (BP, meetup.com or Facebook) and start getting connected with local investors. This will build both your network and confidence.

Best of luck,

John

@Vinny Cristenson Just because Seattle is very expensive doesn't mean there are not investment opportunities in cities that are within a 1-3 hour drive.  If you broaden your search to include a wider area you maybe able to combine the benefits of lower entry prices while not having to invest outside of this geographic area.  There are cities in eastern WA that are attractive price wise.

None of this means you do not need to follow @Joe Villeneuve's advice to become an expert on the market you are interested in. There are a lot of resources both here on BP as well as meetups / REI clubs as well as agents in the market you choose who can assist you. Make a list of all the information you need to be able to make an informed decision about the market you want to invest in and then build your plan to get all that data. Once you have all the information, you can feel comfortable you are making an informed (not risk free) decision about moving forward.

Hope this helps.

John

@Kristen Crotts Based on how I am reading your post, it seems like you will be moving out of your existing house hack to owner occupy your new rental and that is why your lender is indicating you'll be able to get in for only a 20% down payment rather than the normal 25% down payment required for an investment property.  If I have this incorrect, please correct me.

With regards to creative financing, you could look for properties where the owner is willing to either offer seller financing or carry back a portion of the down payment as a second on the property. This would need to be something you work with your lender to ensure they are ok with. Alternatively, you could look at tapping equity created in your most recent house hack. If looking at this strategy, you will need to make sure your DTI ratio still supports the new loan you'll be looking to take out. You can also look to friends and family to borrow money. Finally, you can look at ways to increase your savings (earn more, work more, etc.) until you save up the extra money needed.

Best of luck,

John

@Brian Sherman & @Aaron Garcia My personal opinion is you don't need to pay someone to be your real estate mentor.  There are an amazing amount of books, podcasts and information here in the BP forums to give you insights on the questions you have.  Just because you don't have a personal relationship with someone doesn't mean they cannot fill a mentor ship roll for you.

My suggestion is start really deep diving whichever area of real estate investing sounds most interesting to you.  Once you have spent some time learning about that area of investing you'll be more be in a better position to make connections with investors doing what you would like to do.  Don't forget about your local meetups (most likely virtual at the moment).  This is another great way to have casual conversations with other investors.

Hope this was helpful.

John

@Andrew Smith The easiest thing to do is go look up investing meet ups on meetup.com.  Prior to the pandemic, there were multiple in person meetups per week/month in the Seattle area.  I have gone to a few in the Snohomish County that were great and I am hoping will resume when possible later this year.

Beyond meetup.com, you can find a number of real estate groups on Facebook that you can join and there are people there coordinating meet ups.

John

@Annie Johnson This was a fun meetup, hoping to make it to your next months meetup. Thank you for putting this together.

John

@Phil Greely It really depends on what you are trying to accomplish.  If you are trying to turn your cash really quickly (refinance out your original investment in 6 months or less) it can be extremely challenging at the moment due to the current prices.  Even though the inventory is very thin currently, there are always deals out there, they just may not work for the particular strategy / goal you are trying to achieve.

In a very hot market like this, you need to have your financing in place and a well defined purchase criteria (property type, age, specs, level of rehab & location). Based on the information provided, you could easily put down a 25% down on something listed off the MLS and still have the cash available to do the rehab without using hard money. While it may take longer to refinance out part or all of your original investment, I would argue that's not the worst thing in the world.

John