All Forum Posts by: Luciano A.

@Ben Feder

A good investment-friendly agent can help you with this. If it was on MLS your agent can see what the previous listing showed regarding pics and pricing thus share with you. Your agent can even see who bought and what type of financing was used. Seeing what others are willing to pay for a flip will help you with your numbers.

Looking at what sold in the area and then driving to look at the exterior and street can help alot. I recently decided to drive by a property that hasn't listed on MLS for awhile but looked beautiful on the inside and outside judging just from the pics. I thought it must be the neighbors or street it's on since other properties in same area are flying off the shelve. When I went by saw the exterior pics did not show how bad the stucco condition was. So anyone who was interested in this and went to go look at it in person was turned off.

If you focus on one area of town and learn everything about any solds and those for sale you will be able to move alot faster on closing deals and coming up with ARV. Just takes time but you are on the right path.

Wish you the best. I predict you will be crushing it in your market very soon if you are starting out.

@Robert A Davis

That is awesome you and your wife are working together in RE. Having a wife as an agent saves you and makes you money on both ends of the deal that is awesome. 

One thing to consider when you are to sell as a rental to an investor is the property tax adjustment. If the sale price times the tax rate is not much than someone not wanting to do rehab and want turn-key might consider it. If HCAD has a lower value than the market it will affect cash flow. Thus will be a low returning investment. 

If you dont need to do much to get it market-ready I would lean more towards selling to a home buyer than an investor. As an investor, I really wouldn't look at anything more than $150 for SFR but that's just me.

Best of luck 

@Eamonn McElroy

Thank you for your insight. Makes sense. SO ANYONE READING MY POST ON THIS SUBJECT ....DONT LISTEN TO ME. lol

I am always open to learning and being corrected. The only way to learn is from your mistakes. 

@Steven Hamilton II

  I didn't join BP to try to sell or raising capital for my next deal. I wanted to be surrounded by other RE minded individuals that can talk shop and exchange ideas. I don't brag about my accomplishments nor have them listed here. However, as a person who got a Finance degree from Haas Business School at UC Berkeley and over $10m in real estate not including a couple of businesses I thought I would chime in with my thoughts on what he could do to help him. In my professional career, I have paid over $50k in CPA/Attorney billed hours. 

Many small investors who self manage don't take under consideration that they might need to hire out a PM because they can't do it themselves anymore or don't want to do it at all. That lined expenses can hurt their bottom line thus they keep self-managing until one day they just give up and become a slum lord because they didn't realize the work it takes to manage a larger portfolio. I was implying if he were to set up a small business under a DBA or new LLC he would be able to write off a lot more. He could charge each rental 8-10% management fee thus his business generates income. I am assuming with only two rentals he would not show a profit thus wouldn't have to worry about SE taxes.

Setting up a separate LLC to manage the property would help him in the long run if he were to buy more units. Both in liability protection and taxes if done right.

I didn't assume he was making over $150k if he was currently writing off expenses on Schedule E and just passing the losses to the following year. However if he had a separate business to do management the losses on that can be used to offset his W2 for at least 2 out of 5 years. (This is what I have been told since I have not had a W2 since I was 17). 

I might not have sat in on State CPA exam but this forum is for exchanging ideas and thoughts. Come at me showing my error in thought and I would be happy to admit when I am wrong. 

I do see where I was wrong in explaining but cant change post. Having a PM business listed on Schedule C and expanding your rental portfolio can be a great tax benefit. Unless you're a licensed Real Estate Agent you can only manage your personal rentals or those with partners. Thus income would be little but tax benefits can be good versus writing off only on Schedule E. 
 

@Eamonn McElroy

Yes, you are correct. Sorry I did not mean to imply he should write the expenses on Schedule C in his current situation. I am assuming he currently is using only Schedule E to write down all his expenses to offset rental income, which limits his total loss after taking the depreciation and other normal expenses for a small rental etc. Given he has only two SFR, I dont think he would pass the professional investor test with IRS (750 hrs a year)so limited on total right offs. Unless his wife or partner is a stay at home person but that is outside this question. The phantom loss on paper is limited if it is on Schedule E for those trying to offset their W2 income. However, if Luis was going to write off things outside of repairs and wouldn't it be better to establish a DBA so that it can be treated as a business thus write-offs and losses can offset his income. And by having a property management collecting rents and writing checks to do repairs it gives him some privacy so he can act more like a property manager versus the owner. When he goes out driving around looking at potential rental purchases it would make more sense to have a business so it can be written off (mileage/food, internet, computer, and other expenses) if he is looking to grow rental portfolio but isn't buying an SFR monthly. Also, many small investors who self manage think that will save them money versus using a PM thus don't allocate an expense line for professional management. If he was to set up his own PM business can allocate 8-10% from each rental into this business thus business showing revenue. I am assuming expenses would be higher thus no real profit so wouldn't have to worry about Self Employment and SS taxes. Can use this business to show a loss for at least 2 years out of the 5 years.

@Harman N.

Ask to get cash value and replacement type policy so you can compare. Each has its pros/cons.

If you are trying to lower your monthly premium get highest deductible you can and get $300k general liability then get an umbrella policy for $1m to help cover ur personal assets as well as ur rental.

Once you get a handful of these properties get commercial policy which can lump sum them under one versus individual policies for each.

@Ben Feder

Best to find an agent who is investor friendly. They can send you listing of comps with what they paid and before pics and pics after rehab with sold price. Of course this is all parts of transaction was done through ur local mls.

Picture some stranger walking to your front door asking if they can see your newly purchased house to see how it looks after rehab...... I see a few doors closing on ur face.

But you can look at open houses on rehabs by flippers. Using a solid agent will help u get through this easier.

Best of luck

@Jay Bob

When we acquire a small multi-family building when typically ask each resident what is their one wish if they could wish for anything to be done to their unit that will make them happy. They usually will tell you and be surprised how simple and cheaply you might be able to do to give them that.

I’d not raise immediately. Do some updating on exterior, do their one thing then reach out at end of February and ask them if they are wanting to sign another one year lease or stay on M-M. You can give them a new one year rent with a slight increase or allow them to stay on m-m with a much larger increase.

Don’t try to get market rents from start as that is a large jump. If they move out then sure list unit at market rate.

Congrats and best of luck

@Luis Baumeier

On tax return you have a schedule E to show each rental income versus expenses. This is only for the property expenses and income. Schedule C is where you list your LLC as rental business and show all ur expenses .

But this is a better way so you can write off more.....

Create a DBA under your LLC. For example if your LLC is called Luis Holdings LLC u can go to ur local court house and get dba Luis Holdings LLC "doing business as" Luis Property Management Group.

Setup new bank account pay all expenses from their and collect rent into that account. This way u can expense things like mileage, materials etc as a property manager showing IRS ur actively involved.

I’m no CPA/Attorney but paid lot to them to learn a few things along the way.

@Alfred Harris

If you are just starting out buy in your name up to 10 to get best rates on conventional loan. Your partner the same thing. Just get a good insurance broker who can get you proper coverage and larger liability coverage including an umbrella policy. Once you all build up a large equity stack then go to a commercial banker and package a loan for al of them into your LLC.

Don't listen to those late night infomercials that tell you LLC is only way to buy for protection. Good insurance, running your rental like a business and always looking at liability will go along way.

Best of luck