All Forum Posts by: Ken Teng

I think your order of using money is reversed. Use your cash first, which is interest free. Use HELOC later, as the interest rate may rise and you can get burned. HELOC can serve as the purpose as short term rain funds, given you can still take it out.

Diversification, simple

Choose heloc if you do not know when you will buy, choose tradition loan or hel ( home equity loan) if you need the money now

I'm curious what insurance you are trying to get? Why are they so expensive? Here in CA, all insurances (basic+flood+earthquake) for a 1m house only cost around 3k. Usually I recommend buying based on the market value, because that is protecting yourself. But if your insurance is that high, maybe insure for less makes sense. Be sure to shop around and get a competitive price.

You focus on speculation. I have no objection to that, but the problem is timing. First of all, no one can really time the market. We can only evaluate the risks. I would say you are in huge risks. Look at mortgage rate and the potential interest rate hike. All point to a correction in real estate, if not a crash. You may want to at least unload some with smaller chances of appreciation. That may help you avoid some unnecessarily high risks

Put yourself in the bank's shoes. What do you care about? First the income to loan ratio. The income should include the house hacking rent (banks usually require a 2yr history on that to count, but any positive number counts). Second, your credit history. Third, the deal itself. If you can eloquently demonstrate how good a deal it is, i.e., the deal pays back the mortgage itself, you stand a good chance to be funded. But it is pretty difficult. You need to provide specific numbers with good justifications. So it is not the number of mortgages that counts. It is your paying back power that matters. Of course, the later mortgages will see a higher rate, because as you near your limit, the bank takes more risks.

As for LLC, I think it makes sense. Set up a LLC for later investments, so that if anything goes sour, your primary residence won't be affected.

You do not provide much detailed information about yourself. But based on the information I get, you do not have much cash at hand. If that is the case, it boils down to finding motivated sellers so that 1) you can put your creative financing to work (if the seller is not motivated, your chance of using your creative financing is very limited) and 2) getting an appealing price.

The rent to price of your home is around 0.75%. I would say it's below par. So if I were you, I would sell the house. But be careful, you need to pay taxes on the rental part. So maybe you want to do a 1031 to defer the tax?

$1000 cashflow for a $200k is decent. But be sure to factor in all the costs. As for the refi, please understand that equity in a rental property does not do you much good. If you can find a good deal, pull out the cash and buy it.

@Jim Chung There are three forms of LLC, simple LLC (not elected to be taxed as a corp), S-corp status or C-corp status. You can google them to find their definitions. Based on your situation, I recommend S-corp.

I am doing the same research. I can share my info gathered so far, but I am also looking forward to answers from expert.

It is generally recommended to form a OH LLC, because you need to pay Ohio government for registration anyways, and you need to pay taxes in OH.

I do not think LLC adds difficulty to 1031, because that is a standard procedure. You may have more difficulty acquiring loans.

LLC is for limiting liabilities. If you want to compartmentalize your assets and limit the loss within them, form a LLC around each piece.