All Forum Posts by: Matthew Cater

Hi All,

I am a real estate rookie and have some questions that I am sure others have had. I thought it would be best to get these out in the open where someone can chime in on their experience provide suggestions. I have three main worries that are holding me back from committing to real estate investing and taking action. Can someone provide insight into how they got past these hurdles? Some background info: I would like to begin small by house-hacking a SFR and then perhaps other SFR investment properties.

1. Not sure that I'll be able to find (good) tenants in my market.

2. With #1, I'll have 2 mortgages and not able to find tenants. Two mortgages makes me feel uneasy with the amount of debt, Also, how do you qualify for mortgage #2 with the DTI ratio of 2 mortgages?

3. The vast amount of laws and regulations of being a landlord.

Any help/thoughts would be appreciated.

Thanks!

Okay, good to know. Thank you again! @Nicholas Aiola

@Nicholas Aiola I have a few follow-up questions regarding basis for REI.

1. Tax basis assets vs book basis of assets, do I need to track them separately?

2. Tax basis dep exp vs book basis dep exp, do I need to track separately or does QBO? Is it relevant? If I plan on doing the bookkeeping/tax prep do you have any best practices?

Thank you!

1. How does the process work for moving out of an owner-occupied principal residence and converting it to an investment property? What are the steps with the bank? Do you refinance the loan? Say if you put 5% down on the principal residence, would I need to wait to get to 20% equity in property 1 to convert to investment property?

2. Once you leave property 1 and purchase property 2 (another owner-occupied principal residence), can you also put 5% down?

3. The intention is to house hack property 1 and then convert it to a full investment property after 2 years or so and purchase property 2: Can I take all of my house furniture and personal property (couches, TV, etc.) with me to property 2? Does landlord usually furnish a house for tenants?

@Nicholas Aiola

1. Great to know this, thanks!

2. Great, thank you!!

1. Is depreciation allowed for a house hack? For example, buying a principal residence and renting out 2 of the bedrooms? Or is depreciation only allowed for a true buy & hold rental property?

2. What expenses can I deduct on my tax return on Sch E for a house-hack?

Thanks so much!

@Darryl Holmes

@Ryan Barnett Yes, that's my understanding. Property 1 as investment property. Then designate Property 2 as owner-occupied principal residence.

My goals: I want to buy a single-family and rent out the spare bedrooms (house hack). After I gain confidence with land lording/etc., I want to either purchase a buy & hold rental property, after successful completion of that, I eventually want to pursue a BRRRR investment.

I do not currently own any real estate, so this is all brand new to me. My "why" for REI is to have flexibility and create additional sources of income/cash flow.

Some additional notes, I would live in the first property for at least 2 years to be eligible for the homeowner exclusion on any potential gain on sale down the road. I believe you need to have rental income for at least 2 years to be able to show that on the loan application for the next property as well.

@Julie Dunlap @Darryl Holmes thanks for the responses. Yeah I'm with Darryl, any advice or recommendations to get started would be fantastic. I think it's a great way to cut out 30% to 40% of the monthly budget (housing). I think it's worth the time and effort.

@Patrick J. thanks for your response. 

1. I did forget to mention, I don't plan to sell past year 1, I was thinking about buying another property and leaving property 1 and convert it to a rental. Then buy property 2 as an owner-occupied principal residence and rent that out.

2. You're correct. From my understanding it could go on either Schedule C or E, but I am thinking long-term rentals so Schedule E would be correct. Separate bank accounts makes sense.

3. Makes sense, I plan on getting started with house hacking.

Thank you Nicholas!