All Forum Posts by: Jonathan Towell

Hi @Tonya Cox,

You might Google "Quest IRA." They provide self-directed IRAs specifically for the purpose of investing in real estate. One downside to those is that you lose a lot of the tax benefits of real estate.

Curt is right if you're talking about traditional lenders (banks). But, seller financing is a way to get around that. Folks willing to provide private financing usually don't care about all the same ratios that banks look at.

1. I'm biased, being from Texas, but I'd suggest looking in the midwest. It isn't perfect, but I like the rent-to-value (R2V) formula as a quick gauge. If a property costs $100k and can rent for $1k, that is a 1% R2V ($1k/$100k). The higher the rent-to-value, the more cash flow the property will produce. Generally, you'll see higher R2V in the midwest than on the coasts.

2. I think BiggerPockets is probably a great place to find property managers. Just ask the forum for recommendations in your target city. Property managers usually charge one-half the first month's rent to place a new tenant plus 10% per month for ongoing management.

3. You can use a self-directed IRA to invest in real estate. Google "Quest IRA" to find a group that does self-directed IRAs for real estate. I do not know if such a product exists with a 401(k), but I'm guessing you'd have to ask your employer's 401(k) provider about that. I doubt such a vehicle exists, but I've been surprised before.

In most situations, owning your home is going to work out better than renting.

Let's say you get it for $220k. Let's also ignore the $10-$20k for now because you are living in the house as-is. Let's assume you put 20% down. So, your total loan amount is $176,000. Assume 30 year amortization and 6% interest rate. Your mortgage payment will be $1,055. Add in $2k/yr for insurance and $3k/yr. Those add $416/mo. So, mortgage, insurance, and taxes are $1,472.

Are you paying more than that on rent?

It seems like a good deal to me. I'd just do a month-to-month lease.

You could, however, be stuck with her for a while if she decides not to move out and you have to go through the eviction process. But, that is a risk I would take provided she passes the standard background checks and reference checks.

I don't see any reason why not. It is your house. You can do whatever you want with it.

The classic book on this is The E-Myth. Highly recommended.

If my memory serves me, you should be able to get another FHA loan as long as you are going to occupy the new home. I believe you can get an FHA loan every 6-12 months with up to 4 FHA loans total. You might check with a local FHA originator to be sure though.

Besides zero-down, owner financing, FHA is probably the tool that will allow you to put the least down. But, you have to live in the house to get the loan.

Yes. Always buy real estate in an LLC. I don't often hear about people using S-Corps, but that is a question for the CPA.

The reason: if someone injures themselves on your property, it will be harder for them to come after your personal assets if that property is in an LLC.

Side note: The title "own nothing but control everything" isn't quite accurate as you still own the LLC which owns the property. But, I see what the title is getting at.

@John Morgan Yes, you could certainly use private money for the down payment. That is a much more workable model for SFH. You might also look into owner financing. Homeowners who are willing to owner finance often do not demand big down payments like banks do.

You might check out Robert Allen's "Nothing Down for the 2000s." (It may have a more recent version.) It has a lot of ideas for how to get properties for "nothing."