All Forum Posts by: Mack Benson

The first thing you need to do is get educated. If you are here asking for opinions my guess is you haven't done the research on different paths. There are a lot of resources out there from books and blogs to videos and podcasts. Roll up your sleeves and learn about what trips your trigger. 

Some things to consider: What are your goals? Do you want to be hands on or hands off? What is your risk tolerance? 

It's easy to write a check and deploy capital but it's another thing to vet deals and sponsors. 

To do this sort of research you need to know the market. If you are doing it in a remote market to gauge whether or not you should pursue it for investment I think you want to reach out to people in the market. Property managers would be a good resource and so would the "investor friendly" agent. I'd search BP and look for agents in the market who are also active on this platform. You could also try and make connections in the market with investors but that may be a bit more difficult. Either way you can find some local resources here on BP.

Honestly, in my opinion, the BP calculators are not very good for analyzing a deal this size. That being said I think you need to double check all of your inputs. I don't see any utility cost listed, depending on the area of the country sewer and water can be a killer. For the taxes you should make sure it is the amount that the taxes will be after purchase rather than the amount that the current owner pays, I've seen times where the taxes double or more shortly after a purchase.

I think if you are going to be analyzing deals this size you should either invest in a calculator specifically designed for larger deals or make one yourself if you are capable. There are a number of really good ones out there for a decent price. Also, if you are looking to syndicate this deal there is going to be a lot of costs that the BP calculators cannot do.

In my area most foreclosures have the utilities turned off so the plumbing need to be winterized by about October to prevent bursting. Depending on the expected temperatures in your area I'd look at doing the same thing until you have the HVAC situation handled. 

It depends on your goals. If your goals include listing homes for sale or representing buyers who are buying homes then getting your real estate license is a no brainer. The grey area is if you are doing it for any other reason and if the cost is worth it. How many homes do you need to sell in a year to justify the cost of being licensed? I've heard a number of investors recommend going through the classes to gain knowledge but not getting their license because they have no intention of being an agent. I'm not sure if that's the best use of time or resources but to each his own. 

If your goals include being an agent and working for a brokerage then I don't see why not but if your only reason is to gain some knowledge then I may question the value. 

I'd like to qualify my point of view a bit. There seems to be a general disdain within the BiggerPockets community for anything outside of being self taught because all of the information needed is readily available through podcasts, videos and books. While this is absolutely true some people benefit from other means. I chose to do a paid mentorship program because of my family and work life and I didn't have the time to be able to build a network from scratch. That being said, I think if getting your real estate license fits into your long term goals then go for it. On the other hand, if you are spending valuable time and energy (and funds) working toward a license just to hang it on the wall and look at it, would your time and effort be better spent on a different path?

In the end, what do you really want? What are your goals? How do you plan on going from where you are today, to where you want to be tomorrow?

I don't think buying a home to house hack is a bad idea but your salary and savings could make things dicey. To be honest though I bought my first house making about $35k per year, had less saved, a truck payment of $444 per month and about $300 per month in student loan payments. 

I'm not familiar with your housing market but it looks like there are some 3/2 or 4/2 homes in Eustis for about $150k-$200k so your down payment would be about $7-10k doing an FHA or conventional loan. With $13k saved up I think you are in a better spot than a lot of first time home buyers. The $150-200k mortgage is probably going to be slightly above what you two are paying in rent right now so you may only need one renter to cover the cost and then adding one or two more will be cash in your pocket.

A question to consider, what does your girlfriend think of having 2 or 3 roommates sharing the space? If she is good with it and if you are good with it (I assume you are because you are asking) then I would say start looking. You don't need to buy anything but take a look around and see if it makes sense in your area.

In addition to the books mentioned I like to add Syndicating is a B*tch by Bruce Peterson. Most books talk about how great syndicating is but Bruce goes into some of the problems you can encounter if you choose to syndicate. 

A word of wisdom is that this is a marathon not a sprint and a great team is your biggest asset. The deal flow with multifamily properties isn't what it is with residential so it may take longer to get a deal.

@Merri Chocola I think it would highly depend on my goals and what I want to do. I've seen comments ranging from note investing to buying cash flowing single family homes and paying them off to syndications. 

Note investing isn't a bad idea but I personally think it takes a good amount of research and I haven't been willing to dive deep into the readings plus it doesn't really match with my long term goals. To me it seems like it could pay off but the amount of time I would need to dedicate to learning about it does not make sense right now.

The single family space is another very common option but it takes time. Time to find the properties and time to manage the properties or manage the manager. If I assume I have the life I have today and 100k is dropped on my I'm not sure how I can do what I do and try to buy properties in my local market. If my market wasn't conducive to cash flow investing and I wanted to go out of state it would take time to build a team. This can be very lucrative but again, it depends on the goals and investment strategy of the individual.

Syndication can be a great option too but as you pointed out it can be difficult to find sponsors. That isn't for a lack of sponsors in the industry, there are a lot. One of the biggest hang-ups is the restrictions put on us regarding solicitation. If a sponsor goes out and advertises then they are only allowed to work with accredited investors which is fine for some sponsors but not all. Many sponsors work in the 506(b) space which means they need potential investors to reach out to them so the contact can be well documented in case there are any future questions from regulators. If you are looking at potential sponsors I would check out their website, there should be a contact us or invest with us form to fill out. Many will even have a link where you can schedule an introductory call.

I'm not a CPA but this question is intriguing to me. Are you investing in a fund or directly into the LP side of a syndication? There may be differences if your SDIRA is investing in a fund of funds and I haven't looked into that at all so I'm curious what you come up with if that is the case. I have read into the UBIT through a SDIRA for investing in an LP and I do not know of any way to avoid it. Here are some notes I made during some previous research

• The income made through a SDIRA is subject to tax on the percentage of the gain that are attributed to the debt financing. Because most real estate is purchased with debt financing it is very common for SDIRA's to be subject to UBIT
• Example. Property is acquired with 70% debt financing then 70% of the gains will be taxed. It isn't as bad as it sounds due to depreciation.
• Typically SDIRAs cannot realize depreciation but they can when using debt financing on a purchase
• This makes it so the income is usually not taxed until the property is sold and gains are realized
• Even then the SDIRA is only required to file taxes if the is more than $1,000 of UBIT because the SDIRA is allowed a $1,000 deduction.
• UBIT is taxed at trust income tax rates.
• Example:
• Invest $50,000 through SDIRA
• Receive $50,000 of taxable gains
• Used debt to finance 70% of the purchase then 70% of the gains above $1,000 are taxed
• $50,000*70%=$35,000-$1,000=$34,000 in taxable gains
• Following the tax table this $34,000 is subject to a total of $10,088 of taxes
• You end up receiving $39,912 in gains from the sale net of UBIT.
• This tax would likely make a 12% IRR closer to an 11% IRR so it's about a 1-2% decrease in an IRR
• UBIT will impact most investments made through SDIRAs but this shouldn't deter people from using the SDIRA

I ran into this a number of years ago. By being married both parties must be on the title (I think this is specific to homesteaded properties). This happened to me when a buddy and I bought our first house. He got married and we wanted to split our partnership. We were able to refinance to get my name off the title and mortgage but because he was married his wife had to be put on the title.