All Forum Posts by: Lawrence Potts

Lawrence Potts has started 8 posts and replied 444 times.

Hi, my daughter purchased their primary residence in Fort Lauderdale with a conventional loan in November 2022, but she got a very good job offer and they plan to move to Texas by the end of April. What would be an implication of selling the house tax wise or is it better to rent the house because of the location? The house has almost no equity, so very little or no gain by selling as of now, but I do not think it would be possible to pay two mortgages, if they buy a new house in Texas without renting the first one in Florida. Please advise what would be the best steps for her to do? Thank you very much for your help!

As far as tax implications go, I am not an expert or professional and I am not giving any advice. We were in a similar situation years ago when we were wanting to sell our first home. We had about a $40k gain give or take, but we were able to apply for an exception through our CPA, kind of a "get out of jail free" one-time lifetime card with the IRS that allowed us to defer. I highly encourage you speak with your CPA about it though. I am not aware of other requirements.

If they plan on buying in Texas, they will most likely need a signed lease in place to offset the mortgage payment on the Florida home. If they can get that, it will help not negatively effect their lendability in TX.

As far as renting the FL home, there are other options going Mid-Term or Short-Term. You'll need to have an operator in place (maybe a property management company that can operate for you for a premium) but could be profitable. However, as long as you are able to break even, it may not be a complete loss when considering tax depreciation, interest write offs, writing of repairs, cost segregating, principal paydown, etc. Maybe you can hold on to it for a few years and break even until you have enough equity and then sell.

IRS code states that you can defer capital gains tax on the sale of real estate if you can show you lived there for 2 out of the 5 most recent years.

Hope that helps! Best of luck. Let us know how it goes and if you need anything.

0 Votes

Fort Lauderdale, Florida

Hey @Jeremy Stebbins!

I would highly encourage you to connect with @Ryan Thomson if you haven't yet. He's a stud house hacking agent in Colorado Springs and I've had very good interactions with him. Hope that helps you out!

3 Votes

Colorado Springs, Colorado

Quote from @Sankha Ghosh:

I want to express my gratitude to everyone for your invaluable input and guidance. I'm eager to embark on this real estate investment journey and appreciate the time and effort you've taken to address my questions and provide such insightful advice. I'll be sure to keep your suggestions in mind as I move forward.

@Edward Zachary Samperio

Thank you for the comprehensive and encouraging response! Your insights have given me a clearer understanding of the steps ahead, and I appreciate your recommendations for resources and tools. I'll definitely keep a close eye on local market trends and remain adaptable as I progress.

@Lawrence potts

Thank you for your detailed response and for connecting me with @Ryan Thomson and @Grant Schroeder. Ryan has kindly replied already, and I'll be reaching out to Grant for more insights on house hacking and lending options.

Your advice on talking to a lender is well received. I plan to do that shortly. Instead of just Googling and calling lenders, is there a better way to identify lenders who will grant HELOCs against a rental property?

I also appreciate your advice on building a network, offering value to mentor relationships, and being cautious about joining boot camps.

Hi @Ryan Thomson, thank you for offering your expertise and for recommending @Kayla Govier. I will reach out to Kayla for further guidance in the Denver area.

In the coming years, I'll definitely consider investing in Colorado Springs. Do you have any advice on how the Colorado Springs market compares to Denver, or are there any unique considerations I should keep in mind for the Springs area?

Hello @Ben Einspahr, I appreciate your insights and the breakdown of property types among your clients. It's intriguing to learn that single-family homes with income suites or renting by the room are popular options. Unfortunately, given our current life phase, renting anything other than a separate unit is not feasible. However, I remain open to exploring all possibilities. Of course, I will work with a real estate agent, but for preliminary research, is there a way to find duplexes where both units are for sale using websites like Zillow, etc.?

Thank you for offering your resources and information on the monthly meet-up – I'm excited to learn more and connect with like-minded individuals in the community. If you have any additional tips or advice for someone in my situation, please don't hesitate to share!

There may be some local credit unions that offer portfolio lines of credit or investment lines or credit, but it’ll vary from institution to institution. Grant may have a connection for you. I have a local CU here but it’s pretty difficult terms and they only deal locally.

0 Votes

Quote from @Scott Swofford:

Just getting started in Real Estate investing. I currently have a deal in progress (fix and flip) with a hard money loan. Being a first timer the down payment used more of my personal cash than I anticipated but I understand that's just part of getting started. I have found another deal, quadraplex with all units rented, that I want to purchase using a conventional loan. My challenge is the down payment considering a large part of my investment money is tied up in the other deal. The loan could be paid off with my earnings from the flip. Does anyone have any suggestions for a short term personal loan that I can use for the down payment? I know of the obvious options but wanted to see if anyone had other creative ideas.

Taking a personal loan for the down payment on the 4plex could cause issues with your DTI depending on how you’re financing the 4plex. If you’re going conventional residential financing for nonowner occupancy and they’re lending against you and your income and experience, this could be problematic. UW could see this as risky, most don’t like seeing your down payment borrowed unless coming from a HELOC and they want to make sure you are not over leveraging yourself in case you can’t make the payment for any of your debt (DTI).

You could try going the DSCR route but the numbers need to look pretty solid, and you’ll need to do anywhere between 10-25% down depending on the lender.

Your better bet may be to bring on a partner that has the liquid capital for the down payment and go that route.

Hope that helps!

0 Votes

Atlanta, Georgia

Quote from @Brendan Simpkins:

Hi all,

I'm a newbie and am currently in the process of looking for my first house hack in Nashville. Most likely strategy I'll follow is rent by the room with a SFH. Would love to connect with others who have done/are doing this strategy, especially here in Nashville, to learn more about the experience. I'm fairly well educated on how the strategy works, but looking to get more insight into the challenges, things to consider, etc. Thanks in advance!

Get connected with @Grant Schroeder he can go over your financials and figure out what mortgage product makes the most sense for your situation! He’s helped a lot of my out of state clients and does a lot of work out in TN.

1 Vote

Nashville, Tennessee

@Sat Palshetkar, it’s very hard to cashflow when you’re occupying one of the units no matter what market you are in. If you are out of pocket $500 a month househacking (so technically negative $500 cashflow) that’s significantly better than paying rent north of $2,000 (I don’t know how much rent is in your market so just making assumptions). That’s equivalent to making another $1,500/month except that savings isn’t taxed (unlike if you got a $1,500 raise or if you started a side hustle making an extra $1,500).

How some house hackers run their numbers is by underwriting after they move out how much they’ll receive in gross rent and then find out their net cashflow. House hacking is a long term plan: utilizing owner occupying financing to get low down payment options to own an asset that will perform in time (versus paying more to get in the game).

I hope that helps. Plus, even if you are negative cashflow today, you need to factor in the depreciation you can do while owning, tax write offs for repairs and interest on your mortgage, the experience you’ll gain as a future landlord (much more forgiving when we make mistakes), principal paydown of the mortgage made by your tenants, and appreciation over time. Double check with your cpa about your tax incentives because I am not a professional especially in Canada! Hope that helps!

2 Votes

Toronto, Ontario

Quote from @Sankha Ghosh:

Hello everyone,

I've been lurking on the forums for a while now and finally decided to put together a preliminary plan before diving into real estate investing. Apologies for the long post, but I wanted to provide enough context and details to get valuable feedback from this community.

My family and I are looking to jump into real estate investing while maintaining our W2 jobs. We currently have a house in OH, that we're renting out, and we live in a rental in Denver, CO.

1. Strategy & Timeline: Start with house hacking by purchasing a duplex, living in one unit and renting out the other. Our goal is to acquire 2-3 more properties in the next 2-4 years, generating a minimum of $1,000-$2,000 in monthly passive income and targeting a cash-on-cash return of 6%-12%. We don’t want to rely on appreciation for profit and don't plan to flip houses quite yet.

1a. Timeline:

Month 1: Finalize the plan and start working with a real estate agent and financial institutions.

Month 2-6: Analyze properties, make offers, and close on a property.

Month 7 or later: Find a tenant and move in by September.

1b. Property Details: We're looking for a duplex priced between $400K - $900K that requires minimal to no work before moving in. We want a 3+ bedroom unit for ourselves and a 2+ bedroom unit to rent out. We're considering locations in Denver and the surrounding areas, and we expect the rent to be between $2000-$3500. I understand these ranges are wide but I have not had a chance nor do I feel I have the expertise to perform a more granular analysis.

2. Financing: We're exploring options for minimal out-of-pocket down payment financing, such as a 5% conventional loan or an FHA loan (planning to stay at least a year). We plan to cover most of the down payment using a HELOC on our current investment property.

3. Property Management: We intend to self-manage the property but will hire a leasing agent to find, screen, and settle tenants. We're not opposed to professional property managers and are willing to pay a 6-8% fee.

4. Help & Resources: We're seeking advice and mentorship from experts in the real estate investment community, both online and offline. This is my current state otherwise

Financial Advisor: I was referred to one by a friend and plan to schedule a conversation soon.
Real Estate Agent: I haven't started searching for one yet.
Financial Institution: I also haven't started looking for a financial institution.
Mortgage Broker: I'm not sure if I need one at this point.
Lawyer: I'm also not sure if I need a lawyer at this point.
Property Manager: Finally, I haven't started searching for a property manager yet.

5. Tools: We plan to use BiggerPockets tools for deal analysis and rent estimation and are considering becoming a PRO member.

Questions:

Property:

Does my plan pass the sanity check, or am I completely out of whack?
Is my price estimate and associated rent estimate appropriate for the general locations I'm considering (again apologies for the wide range)?

Financing:

Will a HELOC be difficult to obtain on an investment property? How can I find institutions that offer HELOCs on investment properties?
Is asking the seller to buy down a feasible option in the current market conditions?

Help & Resources:

How do I find an investment-friendly real estate agent? I've heard good things about BiggerPockets finder, but I'd love to hear about your experiences with it.
Do I need a mortgage broker/lawyer at this point?
How can I find a mentor? What can I bring to the table to create a mutually beneficial relationship?
Given my current stage in the real estate investing journey, would you recommend that I invest in joining a bootcamp or attending webinars?

Tools:

Are there any tools or resources you'd recommend for my journey?
Was becoming a PRO worth it for you?I 'd love to hear about your personal experiences and insights using it

Networking:

How do I find like-minded people at the same stage or further along who are willing to help?

Please feel free to add any additional context or suggestions, and let me know if I've missed any critical questions or considerations. I'm eager to learn from this community and start my real estate investment journey on the right foot.

Thank you in advance for your insights and advice!

Wow! That’s a lot. I’ll try to answer the best I can. And tag connections you can make. You’ve put a lot of thought into this which is great.

@Ryan Thomson is a house hacking expert nearby. His team specialize in house hacking. Highly recommend, I’ve had great conversations with him and he house hacked his portfolio as well.

@Grant Schroeder is a lending extraordinaire in the house hacking and investing space. He’s helped a lot of my clients and his company has products that are catered to what you’re wanting to do.

I don't think you are necessarily off on your estimations but I think you need to connect with a lender first to figure out what you qualify for with your income and liabilities first. You can go FHA 3.5% down on an owner occupied multifamily but would need more than 15% going conventional. Borrowing your down payment using a HELOC may impact your DTI which could impact your preapproval despite the rental income assumptions from the subject property.

Ryan has a house hacking calculator spreadsheet that is way better than BP calculators to use to help you run your numbers.

Timeline may be off. I’d expect any property you buy no matter what (outside of new built) may need some work done prior to moving in. It’s dependent upon your comfort levels and DIY savviness.

HELOCS are primarily reserved for owner occupied homes. There are some investment LOC's but few and far between, none I know of that can service you in CO but Grant might have some options.

I don't recommend joining a boot camp: it's all here or through your network (which you can build through local REI meet ups). Only join if you feel it's worth the $$$ to join. Otherwise, you'll learn it all as you dive in.

You may be able to negotiate seller credit to buy down rates, etc. 2/1 buydowns are more common than prior. Depends on the seller though. I have done deals this year with max credit and offers that were rejected immediately when they saw it. Talk to Ryan 👍 he can also get you connected to local REI groups to network.

Topic of mentors….ask and bring value! How can you help them? What skills do you have that can be of value to them? Give give give give and then ask for help. My first mentor came in to my life because he was flipping a house and I offered free labor to learn. My current partner became a mentor because I brought him a wholesale deal. If you’re going to ask them for their time and knowledge (which means money) to teach you, bring them something that can help!

I hope that answered some questions! These two recommendations should be able to help tremendously 👊👊👊

3 Votes

Quote from @Travis Norris:

Quote from @Lawrence Potts:

Hi @Lawrence Potts!

I'm looking to invest out of state. Knowing what you know now, what advice would you give me as someone that is starting out? What would you recommend I learn before purchasing my first out of state rental property?

I ask because I feel like I am being rushed into buying a rental property already, but I feel like I haven't done enough due diligence (I feel like I can never do enough due diligence, so who knows if what I researched is "enough"). I've researched a lot of cities, and am leaning towards investing in a duplex in Cleveland. I have connected with a lot of agents in the area, and have talked with them on the phone, and feel like I am ready to buy.

Would love to hear your thoughts!

Would love to share. Shoot me a DM

1 Vote

Portland, Oregon

Quote from @Jazmin Hernandez:

Hello Bigger Pockets community!
I am seeking advice!! My fiancé and I are very new to this. We don’t have family or friends that can give us advice so I rely on books, podcasts, and experts for help. We have been looking for properties for about a year and I would like some advice on what you think the best move for us is according to our situation.

Our situation: We have been approved for 1.2million, have about 100k in savings, great credit, and have some student loans but no other debt. We make around 250-300k/ year together (just began our careers and really depends on our overtime).
FIRST time buyers in California. We would be living in this property until we buy our personal home. Looking in Orange County primarily but open to San Bernardino County. We would like to buy an investment property before our own personal home and purchase our first property in CA. However, eventually just invest in property out of state. These are my current options (if there are better option I would appreciate the feedback!!)

…………….…………….……………………………………

Option 1: Use CALHFA can only be SFH with ADU (no multi family!). They will give us 15-20% down payment, we will need to pay back the down payment loan PLUS 15-20% of our EQUITY if we sale or refinance. Program just came out this week so have to do more research.

Option 2: Get a duplex with 5-10% down. I have been told we HAVE to put down at least 20% down for a triplex and above and therefore buying a triplex/4plex doesn’t seem feasible. My fear is buying a 1million+ duplex or fixing it and never having cash flow, (in Orange County I see that is about the average price).

Option 3: Buy more affordable SFH around 600-700k BUT invest out of state. (Don't want to make a mistake by buying our personal home vs. investment property first) but I'm starting to see how hard it is to invest in CA.

Congratulations on committing to making this first step! I’d be curious to who you spoke with about lending, that seems pretty limited. Every lender is different, I suggest working with a lender that owns real estate.

Talk to @Grant Schroeder, he’s helped a lot of investors in CA, OR, WA, and his company has great first time investor products.

I think SFR with ADU's is a great option now that we seeing more counties and cities approve ADU's and financing options for them.

The 20% down CA loan program that just came out is really interesting but I’m not sure if it applies to nonowner occupied buyers. I think it’s only for first time homebuyers that are owner occupying the subject property. That option would make sense if you were to househack it: live in it and rent out the adu and then refinance out and move on to the next property.

I’d talk to Grant, he does an excellent job going over these types of strategies and asks good questions to help see what makes the most sense for your financial situation.

Hope that helps!

2 Votes

Orange County, California

Quote from @Luis Puello:

I am taking my real estate class in 3 weeks, and I'm working hard to pass.

I work in IT and have 2 Full time jobs essentially. I am trying to get my money up to invest. but now that I am in this position what do I do.

RN I am educating myself, I am looking to buy and rent and build a portfolio slowly but slowly.

My area in boston is expensive so I am looking to buy elsewhere. There are just to many options of how to start and i just want to have something practical and stay in my buy rent niche, and build cashflow one house at a time. But I have no idea what im doing. feel like im up in a cloud reading things that im like what is going on lol

I’m going to second @Nathan Gesner, I’m not understanding why you are getting your license if you already have 2 full time jobs. Especially if you are already planning on investing out of state. It’s a lot of time to be a good agent and it seems you’re pretty capped at time right now as it is.

1. What’s the purpose of getting licensed? Is it to increase your income? Is it to learn more about real estate? Being licensed and being an investor are two different things: most agents are bad investors and most investors would make terrible agents 🤣

2. Sit down with a lender who invests in real estate to start with and see what your financial situation looks like. Then I’d write out your goals: what or where do you want to be in 10 years and how does real estate serve that? Don’t make the mistake that real estate is the answer to your financial problems. It won’t fix bad spending habits or lack of discipline. But it can help you get towards your goal. Then focus on the next step. Then the next. Be okay with pivoting your plan or adjusting. That’s a part of real estate.

3. Read rich dad poor dad. It’ll help you keep things simple. Real estate isn’t hard, there is complexity as you grow and things you’ll need to learn, but for starting out, keep it simple mentality is more beneficial.

Hope that helps!

3 Votes

Boston, Massachusetts

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All Forum Posts by: Lawrence Potts

Lawrence Potts has started 8 posts and replied 444 times.

Post: Moving out of primary residence

Post: A 'House hacking' lender

Post: Starting My Real Estate Investment Journey: House Hacking and Seeking Expert Opinions

Post: Short Term Loan

Post: Nashville Rent by the Room House Hack

Post: New to house hacking. Need Advice.

Post: Starting My Real Estate Investment Journey: House Hacking and Seeking Expert Opinions

Post: Freshly New Investor and wants guidance on where to start

Post: Seeking Advice for Our First Investment

Post: Looking for Practicality here| Where do I start honestly | Real estate Agent soon