All Forum Posts by: Josiah Kay

It really depends on your goals. If you are looking to scale quickly, saving the cashflow to reinvest would probably be your best option. Otherwise, if you are just looking to acquire a few rental properties, aren't interested in quickly scaling, or don't like the idea of multiple mortgages hanging over your head, using your cashflow to pay down the mortgage would be a good option. 

In the end though, you just need to know what your goals are and run the numbers to see what strategy is in alignment with your goals. At first, I was using the cashflow to pay down my mortgage. Then, after clearly defining my goal, I realized that I had to shift my strategy and reinvest the cashflow into more properties to meet my goal in the time frame I allotted. 

@Brian Warren  I can't say if they are better than the million others out there, but it is better than the ones I have seen. Fortunately, I haven't yet had to rely on my lease to enforce a requirement or evict someone so I couldn't tell you what clauses have been especially helpful. I can tell you that the BP leases go into minute detail regarding any clause I could of thought of. None-the-less, if you are truly looking to get the best advice possible on how to create the strongest lease in your state, I think you'd want to speak to a local real estate attorney. 

@Karen Lynne Taylor I'll message you with more information. 

@Karen Lynne Taylor I'm not sure if you are asking about the meetup, but we likely wouldn't be going into a detailed discussion on using OPM. I've heard a lot of great things about Brandon Turner's book "The Book on Investing in Real Estate with No (and Low) Money Down". That might be a good place to start learning more. 

BiggerPockets sells landlord forms for most states at the following link: https://www.biggerpockets.com/landlord-forms

Reading through the one for my state, it was very detailed and didn't leave much wiggle-room. 

Disclaimer: I am not a CPA and I am not giving tax advice. 

Based on your post, it sounds like you are renting out a portion of your primary residence, but trying to take a full deduction on your taxes and mortgage interest. Typically, when I've seen tax returns for duplexes, only half of the taxes/interest deductions are taken. I am not sure how you would go about calculating these deductions given that you only rented out a room for a portion of the year. You also say that you "entered your mortgage interest again." This makes it sounds like you itemized deductions and claimed your mortgage interest and then are claiming it again on your Schedule E. I would recommend finding a CPA that can help put together your tax returns. Turbotax is great, but as your tax returns get more complicated, it can be a bit trickier to use. 

I would recommend looking at the hassle of finding a new tenant in comparison to the cashflow lost by not increasing rents to at or near market rate. If you go with $1,150 and the market is between $1,300 - $1,400, you are leaving $3,600 - $6,000 per year on the table. What are the rents at for the other two units? 

@Robert Smoot What kind of rental property are you looking to purchase (i.e. single family, small multi-family (2 - 4 units), large multiple family (5+ units), etc.)? That will dramatically change what financing abilities you have at your disposal. 

For example:

Single family: You will probably be more limited with financing on a single-family because it will have to be a non-owner occupied loan (unless you try and rent out homes). For this reason, most banks will require 20% - 25% as a downpayment. So, like you said, partnering would be one option or getting private lender to cover a downpayment would be another. You'll have more options if you a trying to BRRRR since that will allow you to create equity and refinance out a private lender quickly.

Small multi family: This would open up the doors to house hacking and allow you to get owner occupied financing which will require much less down when compared to a non-owner occupied. I understand there are FHA loans out there that require as little as 3% down and even a 203(k) loan that allows you to roll your repair costs into the loan amount. I would recommend searching around BP to get more information on these options.

Large multi family: Unfortunately, I do not have much insight on the financing aspects of commercial real estate and how you can use these to leverage less money down. I would recommend searching BP for more information. 

Regardless of the route you are taking, just remember that you still need enough cash reserves to handle the unexpected. You don't want to be in a position where you have all your cash tied up in a property and then a furnace goes out and you don't have the cash to repair.

A few recommendations:

- "E-Myth Revisited" by Michael Gerber (this will have you working on your business instead of in your business)

- "Rich Dad, Poor Dad" by Robert Kiyosaki and Sharon Lechter (this provides a more foundational perspective on money)

- "Cashflow Quadrant" by Robert Kiyosaki (further builds on the "Rich Dad, Poor Dad" foundation)

- "Set for Life" by Scott Trench

- "Long-Distance Real Estate Investing" by David Greene

- "The Book on Managing Rental Properties' by Brandon Turner and Heather Turner

- "The Miracle Morning" by Hal Elrod

-"HOLD" by Gary Keller (geared toward SFR)

-"The ABCs of Real Estate Investing" by Ken McElroy (geared toward commercial investing)

"Multi-Family Millions" by David Lyndahl (This is on my list of "To-Reads". I've personally been recommended it and have seen it recommend on the forums as well).

Otherwise, listening through the BP Podcasts you'll find a goldmine of information to get your started in your real estate investing journey. 

I'd be less concerned about the rent/price ratio and concentrate more on meeting your cashflow/ROI minimums. The rent/price ratio is more of a "rule of thumb" than a hard and true metric to analyze a property. For example, on the podcasts, you may have heard Brandon state that he wants a minimum of $200/month in cashflow with a 12% ROI. Using those numbers, you can analyze the current listings to determine what price you would need to purchase the property for to meet those minimums.