All Forum Posts by: Account Closed

This might be a strange question to ask, but as a married couple am I able to buy rental properties in my name only? I think there are many pros and cons to this option but wanted to get input from others if they have any experience in this area.

Thanks!

I saw my name mentioned on this tread a few times and thought I should post. 

I started writing a blog about legal issues real estate investors face in Oklahoma. Just a few thoughts from my perspective as an attorney, real estate broker and investor.

This is the latest: https://www.biggerpockets.com/blogs/10010/64662-le...

Hope it helps.

 To be clear..operators CAN LEGALLY "wholesale" if that is their desire:
1. own the property and resell (some call themselves "wholesalers" and others call themselves "flippers"
2. be licensed

The main reason for this post was to make people aware that some teachers don't know the laws or don't care. $5400 is a lot of cash to pay for BAD information. These people could go to a state accredited RE school, learn a lot more and for a LOT LESS. 

Would starting off with a 5 unit property be a good idea or should we start off with a duplex or triplex?

Where would I️ go to find investors for wholesaling ?

Hello BP nation!  I have a property under contract and the seller is pushing back on some stuff.  The thing that worries me the most is that they don't want to turn on the utilities.  I'm doing extensive rehab (SOW is ~120K) so I can't afford any major surprises.  I'd like some input here...Should I close on this thing without having the utilities turned on first?   Yay or Nay; why or why not?

Here's my plan, please tell me if I'm nutz lol. My idea has been since I have a ton of knowledge in the construction industry, from remodeling to handling jobs and estimating job costs, I'd like to partner with a "money guy", someone to put up the funds to purchase and rehab the property, my responsibility would be find the deals, arrange and do the rehab with my laborers and do a profit split at the end. Now I'm not saying this will be my business model the rest of my life, however I can gain a lot of knowledge from a seasoned investor, and I can relive the investor with the aggravation of finding the properties and doing the construction side of it. Any input would be greatly appreciated. Thank you

I was a math major in college.  My statistics teacher said something on the first day of class that has stuck with me to this day, "Statistics can be used to prove any argument as being true, you just have to carefully choose which statistics to use."

The article references how only 4 out of 24 metro areas had higher average appreciation rates than the stock market returns during that timeframe. Which means if the stock market went up by 7% annually, home appreciation would have to be at least 8%. The problem is I don't know of many people who simply purchase a home with cash and let it ride. If you are like the average American and purchase with 20% down payment, that 8% appreciation turns into a 40% CoC return. Historically the stock market averages roughly 10% once you factor in dividend reinvestments. This means a home at 20% down only needs to average roughly 2% appreciation to initially keep pace.

We can argue about whether a home is an investment, or a liability, the answer is really a matter of how you choose to define the terms.  But one thing is for certain, renting is an economic liability.  Money that is spent on renting is simply gone, never to be seen again.  Where as owning you may eventually see some of that money again when you sell.  Generally speaking owning has much lower monthly payments which will more than cover any repairs.  As @Mike H. pointed out his mortgage is 1k, and rents the property out at 1400.  This leaves a yearly difference of 4800, and nobody is going to have 5k a year capex/repairs on a property of this value.  Which means it is not only cheaper to own that property, but you also get debt paydown.

@Joe Splitrock While the numbers on the surface of your example would tend to say that the stock market wins, (200k worth of stocks versus roughly 151k for the home (190*.93)-25) there is still more to it than that.  Stocks would likely be subject to at least 15% tax rate unless you like waiting until retirement to see your money with a Roth, while the sale of the home would be tax free, changing the numbers to 170 vs 151.  Additionally that 9% mortgage would have been refinanced out of to something much lower a long time ago lowering the monthly payments.  And while 700 may have been a good rental price in 1987 and a good mortgage payment amount, the price of a rental today would probably be double that at 1400.  Meaning that there is a growing gap between what a current renter pays, versus what your parents pay because they have locked in their rate 30 years ago.  This ever growing gap of money can be reinvested at a rate of 700*12 = 8400 a year that a renter would not have which quickly shifts things in favor of owning, rather than renting.  Fun Fact:  if you take a purely hypothetical 'break even' property at 100k with 20% down, where the rents equal the mortgage plus expenses, and assume that rents rise at the same level as inflation then after the first year your break even property will start to turn a small profit since rent went up, and while your expenses went up, they did not go up as fast because your biggest expense (debt service) stays constant.  Each year your profits go up a tiny bit more and more as inflation hits.  If you take this profit and put it into the stock market you will actually have more money in the stock market at the end of 30 years this way, than if you had simply put the whole 20k into the market in the first place assuming 9% returns and 4% inflation.  This seems funny since in the case of buying the house you start with 0 money in the market, versus starting with 20k in the market, and because putting the entire amount into the market immediately maximizes the number of years that it is allowed to compound, but with the house you start to have regular ADDITIONAL deposits into the market since you start slowly making yearly profits from the house.  These additional deposits are trivial at first, and grow to the point where they end up very significant.  Not to mention you also own the house free and clear.  Given these hypothetical numbers, buying the house and slowly investing the rental profits into the market is slightly over double the economic gain than simply buying the stocks would have been.

The only time that renting is better than owning, is if you plan on constantly buying and selling every couple of years as you move around the country searching for a better job as those realtor fees add up quick.

But for anyone that continues to believe that renting is that pathway to economic success, I currently have a vacant SFR in phoenix and it would tickle me to death to be able to 'help' you achieve financial independence by allowing you to pay me rent.

Your primary can be an investment or a liability, it's up to you how you want to classify it. In my case, I build my own homes, it takes about 8 months and all of a sudden I have another $150k in equity. I will live in it for 2-3 years and sell tax free and do it again. If I wasnt building my own homes and selling them, then my house just becomes an instrument for my family to use with not much financial upside. I personally think the worst thing you can do is own your primary house outright if you don't plan on selling it. Your literally sitting on a pile of cash. (Unless you get a heloc). Cash is king, and if you can trade $1500 a month for $300k cash money, you have to do it. Use your primary as a piggy bank for your other investments, then your house because an investment because it's essentially funding your other projects. 

Nothing is absolutely true all the time.  

People need a place to live and to keep their stuff.  Either they own a home, co own a home (with a lender) or they rent a home owned by another.

Location makes a difference in whether one owns or rents.  An average earner can't afford mkt rate rents or ownership in places like NYC and LA. The cost of entry is too high, while inheriting long held property could ease that. A 2 hr commute could give the same earner a home ownership opportunity.  Thus a long commute is exchanged for the chance to own.  But it's not everyone's cup of tea.

Not all rules apply to every situation. Time and consistency can result in "wealth" simply by staying current and in the same place. Full/part deferral of appreciation on sale or free transfer of property gains is written into the tax law and benefits those who own offering a tax-free tangible asset that can be monetized to fund education, new businesses, investments or living expenses.  Owning can give a boost to those who got in & managed to hold.  While renting returns little and requires extra discipline to bank or invest the "savings" difference assuming there's anything left after the expenses are paid.