All Forum Posts by: Kevin S.
Kevin S. has started 24 posts and replied 395 times.
Post: Looking for general contractor?!
- Posts 399
- Votes 240
How would you put a price on "free work"? After all it is not really free. Your work is worth a "dollar amount" to be credited towards equity.
How would you calculate that?
How would you avoid conflict of interest/double dipping?
I was approached by someone who has the resources (men and material as he was in roofing business) to partner up and buy MFs. I did not take up the offer because I have zero knowledge in construction wouldn't know if he made money off our own co-owned property right under my nose. You brought up a topic I wanted answers myself.
How would you, as a contractor, do this? Let's see what others has to say.
Quote from @Bradley Buxton:
Quote from @Kevin S.:
Quote from @Bradley Buxton:
Nevada is a great state to invest in because of the proximity to CA, no state income tax, 4th lowest property taxes in the US, constricted housing supply, and job and wage growth. As @Bill B. said there are many people in the Reno Tahoe, NV area that live in Nevada 6 months and a day to claim residency and don't pay state income tax. CA doesn't like that much. Appreciation is where you will build wealth and if you buy in cash it will cash flow. Retiring with mailbox money takes time and money. Happy to connect, share ideas and be a resource.
Bradley, are you in Reno? What is the average 3/2 home selling for? What is that same house renting for and time on market to rent? Thanks.
I am in Reno! The top investment properties that are 3/2 range from mid 300k to 600k+ depending on the area. Over 600k it's more of a write-off type strategy or a high end STR or MTR. Reno and Tahoe have a wide range of prices and depending on your strategy the home prices will vary. Rents will also vary from about $2000-$4000 based on the area and house. I have some tools that we use to analyze the entire market all at once. I'm happy to share what we call wall street tools for main street investors.
That's about what we have here in Florida. Houses in mid 300K fetching rent ~ 2100ish. This requires 40% DP to break even. Time on market about 30 days to rent. How does that compare?
Quote from @Bradley Buxton:
Nevada is a great state to invest in because of the proximity to CA, no state income tax, 4th lowest property taxes in the US, constricted housing supply, and job and wage growth. As @Bill B. said there are many people in the Reno Tahoe, NV area that live in Nevada 6 months and a day to claim residency and don't pay state income tax. CA doesn't like that much. Appreciation is where you will build wealth and if you buy in cash it will cash flow. Retiring with mailbox money takes time and money. Happy to connect, share ideas and be a resource.
Bradley, are you in Reno? What is the average 3/2 home selling for? What is that same house renting for and time on market to rent? Thanks.
I truly appreciate you sharing your story. I believe you will gain audience instead of loosing. There are many investors, especially beginners that need people like you who wants to help and has nothing to sell. I'll DM you soon. Thanks for the offer.
Quote from @Bill B.:
My average home is worth about $400k today (but I bought an average of about 7 - 10 years ago at and average of sbout $200k) rents for about $2,300. Insurance is $60, PM is $170, property tax is $120 so that leaves about $2,050/mo pp.
I just looked at totals I spent $1.668 mil on my 10 Vegas rentals. That required $305k total as down payments. (I bought 5 as primaries and moved a year later to lower downpayment requirements.) I reinvested all rents as well as some additional savings that would have gone to retirement accounts.
I calculate their “safe/fire sale value” at $3.86 mil. Which shows you the downside of today’s high rates. I’m earning nearly 75% annually on my downpayment but only 6.4% on my equity. (Although obviously 30% of that would be lost to taxes so maybe it’s 8.5%.) but that’s the downside to paid off properties reduced returns. Plus the profits are favorably taxed. Plus the $250-$300k/yr in appreciation (and additional 7-8% return on my equity.) is tax free.
All this is to explain my original post. It's not fast money. But it's not hard to achieve if you treat real estate like your retirement plan. Nobody has a problem with putting money in their IRA/401k for 40+ years with zero cash flow. But then they want cash flow day one from real estate. I didn't use real estate to quit my job, I used it to retire. It took 5 years to know it had worked and 7 or 8 to pull the trigger. (My company closed, so actually they pulled the trigger.)
The OP is making more than triple what my wife and I made. So I would think they can pull it off in 5 years without too much effort. I’m not trying to sell anything, just help people get started, realistically.
Thanks for your input, Bill. Can you walk me thru again how exactly you did it? You mentioned to Keeya to buy house with cash which I thought you did. But then you talked about 305K as down payments as well as moving 5 times because it was primaries. Should it matter if you are buying cash? Did you buy most of your 10 houses within a short time? Thanks.
Post: Seasoned Real Estate CPA Expert Answering all Questions on Investing Tax Strategy
- Posts 399
- Votes 240
Quote from @Account Closed:
Keep the questions coming people! I'm very happy to add value and support your real estate endeavors. Let's help one another achieve success!
Hi Kislay, see if you can help analyze this situation. I am trying to determine who will be a better fit for me. A CPA well versed in REI or Financial planner.
Scenario#1: Cash on hand $1,050,000. 7 yrs to retirement. Put in stocks and have roughly 2M in 7 yrs (compounding at 7% annually in stocks giving 3.5% yield). Annual income in retirement ~ 70K (3.5% yield of 2M stocks). This one require financial planner over CPA?
Scenario#2: Buy cash 3 SFH @ 350K each total $1,050,000. Same initial investment as above. Cash flow each house $2200/m x3 = $6600/m x12=79K/yr. Invest 79K in stocks @ 7% x 7 yrs=868K. Retirement income will be 79K(cash flow)+30K(3.5% yield of 868K)=109K/yr. Rent will go up but I will assign that to capex and not count that.
Scenario#3: Buy 7.5 house using leverage. Bear with me with the odd number. I am using the same initial investment of $1,050,000. Houses here require 40% down to break even for PITIA. Home price=350K. DP=140K. $1,050,000/140,000=7.5 homes. Cash flow=zero.
Using leverage the value of 7.5 homes = $2,625,000 (350K x 7.5). The mortgage balance @ 7 yrs=$2,392,000. That's mortgage pay down of $233,000. Home value in 7 yrs ~ 3.36M (appreciation 4%/yr).
Sell the homes and cash out 968K (3.36M-$2,392,000 mortgage balance). Money in hand ~ 2M (1,050,000 initial investment+968K). Invest 2M for cash flow! Same as scenario#1??? Except I don't know the tax consequences of scenario#3.
I know the returns and appreciation are not guaranteed. I used averages. Which scenario has the most complex tax considerations? What am I missing? What would cost of CPA services be in scenario 2 and 3? Scenario#2 and 3 require CPA over financial planner? See if you can try and simplify as best as you can. Thank you.
At what monthly cash flow did you calculate 12 houses? $2000/m x 12 x 12=$288,000/yr?
At what price range house would one achieve $2000/m cash flow? $350,000 range homes?
Which city/state did you have in mind with that calculation?
It would take about $4.2M (350,000x12) cash to buy those 12 houses. That would mean saving about $850,000/yr x 5 yrs = $4.25M. Or saving $425,000/yr x 10 yrs.
That doesn't include ongoing capex, PM etc. So that's more like 7-12 yrs.
Just trying to understand your numbers so I can also use it to adjust mine accordingly. Thanks.
Post: When would you buy a property with a negative cashflow?
- Posts 399
- Votes 240
Quote from @Joe Villeneuve:
Quote from @Kevin S.:
Quote from @Joe Villeneuve:
Quote from @Mary Jay:
Quote from @Joe Villeneuve:
Quote from @Mary Jay:
Quote from @Joe Villeneuve:
Quote from @Mary Jay:
Quote from @Joe Villeneuve:
Never,...ever.
I see people who invest in linear markets say "Never"... At the same time, the rents in the linear markets dont grow very well, plus the price of the RE is linear... I am not sure how people make money with all breaks/fixing/non paying tenants... Untill the property is paid off... Of course if a person can fix everything himself, then it probably is easier
You always talk about strategies, and they are all smart... but Ive never heard you give an example of your deal. May be I just overlooked...Can you please give an example of your buy and hold (like how much did you buy for, what is your cash flow on it when you bought it, when did you buy it, at what interest, what are the rents on it back then and now, what is your cashflow now on it)...
Sort of like what Bill did earlier, he gave us an example of his scenario...
I own in linear, hybrid and cyclical markets... I can tell they all are very different. I personally prefer cyclical or hybrids because with linear there is not much of cashflow and not much of appreciation...But would be interesting to hear your deal
If you could provide an example of a recent deal you made with a positive cash flow that would be great. Something like Bill Brand does... Something like: bought in 2024 for such price, interest is such and such, rent is such and such... If you provide numbers for a recent deal (2024 or the end of 2023) that would be helpful! Thank you
I've given many, many examples of deals (there's an echo in here) over the years. Every example I give to describe a strategy or REI principle, I use numbers to show how and why,...and they all come from real deals.
However, I'll give you an example of one we just got (I have a partner) in a western suburb of Detroit. Like I said, I have a partner, so I'm not going to give you an exact location in order to protect my partner. So please don't ask:
Buy using seller financing - $120k
DP (10%) - $12k
SF - $108k
Terms (7%/25 yrs) Pmt - $763/m
T/I - $325/m
Rent $1600/m
CF - $512/m
That means we sill recover our cost in less than 2 years.
Bought about $15k under Comps because seller had tenant in and wouldn't CF enough at full price using traditional financing. With interest added to the sale price, seller will be making almost $230k, and will have about the same CF they had when they owned it...without having to deal with the tenants. They have a lien on the property if we ever defaulted.
Joe, I got few questions (I am new to REI).
Why did the seller sell when he seem to be cash flowing well? Not dealing with tenant the reason?
What was the actual comp of the property? I assume you just took over the remaining payment of $120K left on his mortgage while the property was valued much higher that the current cash flow of $1600 would qualify for traditional financing? Which means you bought with big equity built in?
I am trying to understand the deal. The why of it. You already wrote the how of it. Thank you.
1 - Why? Simple, Weller was retiring from REI and wanted to sell off their properties.
2 - Actual Comp? About 135-140.
3 - No, I didn't take over the remaining payment,...there was none. The property was paid off.
The Seller couldn't sell at full value because nobody would buy it at that value. There's only 2 buyers, Homeowners or REI. The homeowner would pay full price, but not with a tenant in place. The property wouldn't cash flow using traditional financing at full price. This way, the seller gets more profit (principle and interest), keeps more at closing (no bank fees, etc...and lower closing costs), reduced sales tax and Capital Gains tax, and doesn't have to deal with the tenants anymore. The End goal of the seller was to take the cash at closing and invest in paper for cash flow. This way, the cash flow from the financing is higher than the return from the paper, and they still have a lien on the property,...if needed.
4 - Lots of equity in place? No. Unlike traditional financing, where the buyer buys cash from the bank (mortgage) and gives it all to the seller, I'm just buying the equity in pieces.
5 - See above. Everyone involved, except the bank, who isn't involved at all, makes out better this way.
Thanks for the explanation. I got it except the part that it wouldn't cash flow with traditional financing. By that what % DP are you referring to and are you basing it on 140K? What would the PI payment come to if it was 'traditional financing' in this case?
Post: Home sellers would no longer be forced to pay up to 6 percent commission to agents
- Posts 399
- Votes 240
Quote from @Russell Brazil:
Quote from @Nathan Gesner:
Quote from @Cheryl L VanFosson:
The difference is that the current method allows the buyer to purchase with less money up front. The higher purchase price can be financed. If buyers have to pay their agent directly, they will need more cash on hand, which will price out a large portion of buyers.
Buyers will have to come up with an additional 2%, which is a 40% increase to what they currently require on an FHA loan.
Incorrect. I suggest reading the Department of Justice Statement or Interest in the MLS PIN case. The DOJ does not envision buyers paying their brokers directly anymore than they currently do. The DOJ has said for buyer agents to negotiate their fee w the buyer then put that directly into the offer saying our offer has the seller paying the buyer agent commission of this amount.
Our contracts, which cross 2 states will have a check box for just that and you fill on the commission amount. It's that simple.
I am no expert but if this is the case then what changed? The negotiation will be business-as-usual 3% to be put in the offering for the buyer's agent.
Also, if this is true then you apparently are a better read/informed agent than many (less informed) realtors posting here who claim to be 'experts' with some even referring us regular folks as civilians.
Post: When would you buy a property with a negative cashflow?
- Posts 399
- Votes 240
Quote from @Joe Villeneuve:
Quote from @Mary Jay:
Quote from @Joe Villeneuve:
Quote from @Mary Jay:
Quote from @Joe Villeneuve:
Quote from @Mary Jay:
Quote from @Joe Villeneuve:
Never,...ever.
I see people who invest in linear markets say "Never"... At the same time, the rents in the linear markets dont grow very well, plus the price of the RE is linear... I am not sure how people make money with all breaks/fixing/non paying tenants... Untill the property is paid off... Of course if a person can fix everything himself, then it probably is easier
You always talk about strategies, and they are all smart... but Ive never heard you give an example of your deal. May be I just overlooked...Can you please give an example of your buy and hold (like how much did you buy for, what is your cash flow on it when you bought it, when did you buy it, at what interest, what are the rents on it back then and now, what is your cashflow now on it)...
Sort of like what Bill did earlier, he gave us an example of his scenario...
I own in linear, hybrid and cyclical markets... I can tell they all are very different. I personally prefer cyclical or hybrids because with linear there is not much of cashflow and not much of appreciation...But would be interesting to hear your deal
If you could provide an example of a recent deal you made with a positive cash flow that would be great. Something like Bill Brand does... Something like: bought in 2024 for such price, interest is such and such, rent is such and such... If you provide numbers for a recent deal (2024 or the end of 2023) that would be helpful! Thank you
I've given many, many examples of deals (there's an echo in here) over the years. Every example I give to describe a strategy or REI principle, I use numbers to show how and why,...and they all come from real deals.
However, I'll give you an example of one we just got (I have a partner) in a western suburb of Detroit. Like I said, I have a partner, so I'm not going to give you an exact location in order to protect my partner. So please don't ask:
Buy using seller financing - $120k
DP (10%) - $12k
SF - $108k
Terms (7%/25 yrs) Pmt - $763/m
T/I - $325/m
Rent $1600/m
CF - $512/m
That means we sill recover our cost in less than 2 years.
Bought about $15k under Comps because seller had tenant in and wouldn't CF enough at full price using traditional financing. With interest added to the sale price, seller will be making almost $230k, and will have about the same CF they had when they owned it...without having to deal with the tenants. They have a lien on the property if we ever defaulted.
Joe, I got few questions (I am new to REI).
Why did the seller sell when he seem to be cash flowing well? Not dealing with tenant the reason?
What was the actual comp of the property? I assume you just took over the remaining payment of $120K left on his mortgage while the property was valued much higher that the current cash flow of $1600 would qualify for traditional financing? Which means you bought with big equity built in?
I am trying to understand the deal. The why of it. You already wrote the how of it. Thank you.