All Forum Posts by: Jacob Pereira

Hello all

I'm trying to determine my next move, and one of the ideas that I'm contemplating is moving back into a fourplex I own for another year (I lived there for a year already in 2014) and then selling it in order to use the sec. 121 exclusion on capital gains for my next project. I've been unable to determine whether I'd be able to use the exclusion on the whole building, or whether I would need to prorate it out because I've only been living in one of the four units. I'm sure many people on BP have gone through this, and I'd like to learn from their experiences.

 Thanks BPers

I'm no expert, but I think you'll find it difficult to force appreciation on residential housing (1-4 units). The appraiser is still most likely going to look at comps and not put much thought into however much you raised rents or how much nicer yours is than the other similar property. Once you get into the commercial side, forced appreciation is a bit easier to achieve. If others have had different experience with appraisers, please correct me.

I love the idea, so I hope you can find a way to make it work, but if not at least you can apply that extra cash flow to your student loans.

Looks like I'm late to the party...I'm assuming you've already found something at this point, but if you haven't, I have a suggestion for the bold that is the opposite of most of the advice I've seen in this thread; at 300k your best bet is a fourplex on the East side, 78724 area. I own two fourplexes there and am looking to help clean up the neighborhood. 2-3 more good, locally-located landlords and the area will be able to command much higher rents. Right now you're probably only going to get about $3,200 a month on a $1,200 PITI (better than anywhere else in Austin, I know), but with minor improvements to the neighborhood, I'm expecting rents to hit the $4,000 a month range per building within the next few years.

If you're interested, PM me. I know a few people who might consider an off market deal (no guarantee to how good it is), but either way I'd like to get a local owner-occupy landlord group together to brainstorm ideas to improve the area. Again, you can't be afraid of some trash on the sidewalks or unkempt lawns, but this area's property values have nowhere to go but up.

I like the twists and turns this thread has taken. It started off with everyone advising against it, then switched to bold pro-deal proponents, then to cautious middle-grounders. In my experience, RE investing is a problem solving business, and those who run away from problems are also running away from money.

Assuming the price is really as good as you say, you'll be able to find an intrepid soul who is willing to take on the problem in return for a six-figure payday. I know if I were nearby or had a good network in the area I would definitely be interested in hearing more details. Find a local RE group, build a good case, be honest about the situation, and you'll be able to solve a lot of people(except the violent guy)'s headaches for a profit.

I'm surprised to see such low numbers. In Austin it's pretty much standard to offer 3% to the buyer's agent. I get a discount on the seller's side on account that I'm an investor and do multiple deals a year, but most MLS deals in my area cost 6% (3% to buyer's agent, 3% to seller's agent). New builds are a different story, of course. If other Austin investors are seeing different numbers, please let me know.

Nationwide, I think it's probably going to cool in the next year or two based on prices vs incomes, raising mortgage rates, demographic trends, housing stock, etc. In my market (Austin, TX) it's still got a while to go. I think it's about time to hear your thoughts on the matter, @Ben Leybovich.

It always depends on situation, but for most people, option one is the way to go. If you're a terrible salesman and only make $100k a year that still gives you a very favorable debt-to-income ratio to leverage. With your extra income you can easily hire a good GC or set up a network of contractors to take care of the things you're not there for. Again, depends on situation, but I vote option one.

I think it's a pretty simple math problem; is your house priced attractively enough that you can find another tenant in a few weeks (14.4 days to be exact for this month)? If not, why wouldn't you do it? You can also make it a bit more complicated by factoring the tax obligations of writing off the fee, but at the end of the day, you're talking about very little of the total. If you have a ton of prospective tenants clamoring for the property, you might as well hold on to the $3k and approve one of them.

As always, be careful that you aren't running up against any discrimination laws or could potentially be perceived to be.

I'm curious to hear why you would even consider it. Are there no other applicants for your property? Is it a large apartment building with lots of vacancies which you need to fill quickly? Are they offering to pay you a higher rent than you requested? Are these friends of yours?

@Erin Schenk, have you considered looking into a grant program? You're a teacher, which tends to get a lot of subsidized options. In Texas (where I live) there are tons of programs where teachers can buy houses at below market prices, get a grant for downpayment, preferential loan rates, etc, provided you live in the house for a number of years. A quick Google search reveals options in California such as CalPath, Extra Credit Teacher Home, and of course the national ones such as the Good Teacher Next Door Program.

Make sure you use all the potential benefits at your disposal; I used the VA loan to get started on my investment career and it really helped me gain the experience and confidence I needed to invest more heavily.