All Forum Posts by: Michael S.

@Travis Johnson welcome to BP! You're in a great market with a great resource like @Andrew Fidler. I don't think he'll like a coffee meeting. Maybe craft beer and lunch. He's doing great work on our properties.

Hello Eriko,

WElcome to BP! This is a great resource and very knowledgeable community. I am in California and invest in Toledo OH. My local market and rental laws make it difficult to invest here. So we decided to invest out of state. So far so good. We'll be happy to discuss our experiences and outcomes so far. At this point we have 5 properties and 20 doors in Toledo.

Best Regards,

Michael S.

Hello Janeile,

With the little I know about these types of projects, the red flag for me is you won’t really be able to raise rents. These types of deals typically would be a yield play, or tax shelter for folks looking to deploy capital (early in the build). There’s not much value-add with this. The city’s interest is in keeping the rents affordable for several years after the project was built. I believe it’s like 30 years to remain compliant for tax credits. The original developers claimed all the tax credits for the 1st 10 years. This was built in 2001 so you must maintain the affordable housing rates until 2031. At this point, the “real” money has already been made. Someone may be able to come along and buy it “right” and make a steady income for the next 12 years. Basically, the developers and initial investors make money early on in these deals. All that said, $1.7 Million for 52 units seems like a reasonable deal. There’s just not a lot of due diligence information to base calculations from.

A building like this you would need about $525,000 in equity. Likely work with Fannie or Freddie for a non-recourse loan. They didn't provide a CAP rate so I assume it is low maybe a 5 or 6 CAP. The outcome wouldn't be exciting for the amount of cash laid out. However, it could be a good deal for someone with a lot of cash they need to deploy for minimal yields.

Best Regards,

Michael

Hello Michelle,

Welcome to OOS investing in Toledo. We are in California and investing in Toledo. So far so good. We’re up to 7 properties with 23 doors. We use @Andrew Fidler and team for our Acquisitions and Property Management. He is very knowledgeable about the area and the nuances and intricacies from zip code to zip code, and block to block. They can handle things from start to finish (acquisition to management). We’ve had a great experience. Feel free to reach out for any insights or more details about our journey OOS Investing in Toledo. 

We will continue to OOS Invest in Toledo and we will use Andrew and team to do it.

Best of Luck,

Michael

I think some folks have had experiences with Sec 8 tenants that are negative. And many that are positive. There is more red tape to get going, and annual inspections and such. I know investors that solely target Section 8 and are happy with their choice. There are good tenants and bad tenants everywhere. Typically, Section 8 housing would be offered in places where the tenant pool would be lower income anyway. If your investing in these areas, then it goes you’d likely have the same issues arise Sec 8 or not. The bonus is… You get a guaranteed deposit into your account on the 1st of every month without excuses and stories (most of the rent amount).

Also, to qualify for Sec 8, the tenant must be screened to some degree. Then you can still screen them through a legal set of criteria as well.

My opinion, it’s not Sec 8 that makes a bad tenant. A bad tenant is a bad tenant regardless. That said, I’m willing to put up with a little more degree of difficulty for an automatic check.

Depends on your goals, risk tolerance, investing area, etc. Sec 8 has been good for me so far. I’m sure I’ll have problem tenants eventually. But isn’t that part of the game?

I’m not a CPA or Tax Accountant so I can only tell you what my understanding is. Here goes… If you are not a Real Estate professional, and your high income is from a different field, you cannot deduct “Passive Income” Losses. You can only use these losses to offset passive income. The distinction of Real Estate professional is deriving your income from spending more than xxx hours working in the Real Estate profession. You can still show a paper loss position. However, that loss doesn’t offset the earned income.

That said, you can use the expenses as an offset to your passive income. You can reduce your passive income by that amount to reduce your tax exposure. I keep my Real Estate investing activities contained within an LLC for accounting, and liability purposes. All my business revenues and expenses are tracked in my LLC accounting. The LLC is a pass-through or entity, so it is ultimately recognized as part of my single tax return.

After all factual and legitimate accounting, the tax exposure can be significantly minimized with proper planning, documentation, and execution.

Again, I’m not a tax professional and I don’t play one on TV. This is my understanding and not advice. Other than to seek true professional guidance and proceed accordingly.

Goals are very good. However, you can adjust as your situation adjusts. Think about your longer-term goals. From what I've experienced in Toledo, you could pick up a house hack duplex for $30,000 (if you buy right). I'm closing one now at $31k. With and FHA loan as primary you'd need (3.5%) $1,050 down and about $4k in closing costs and fees. You could be into a house hack for $5k. In this scenario, the other unit would likely rent for $400-$500 a month. Total total PITI comes in around $280 per month. You can chalk up the change to maintenance, reserves, and Capex. Still, you could basically live for free and stack from there. The other bonus, the rental income form the other unit counts toward your qualification. If I could rewind my life to your age, I'd do a house hack, no question!

I rarely hear a story that ends well when it starts with "me and my girlfriend/boyfriend bought a (fill in the blank) together." There are happy endings of course (I just rarely hear them).

To revert back to my statement about adjusting goals... If you adjust to the house hack approach, you've accelerated your plan and most importantly you've taken action. Taking the action will change a lot of things.

Maybe the next move is to buy another duplex to house hack a second time, and put Moms in the unit you vacate. Now, you both cover your housing costs from the other unit.

You might even consider shooting for a 4 unit. Acquisition costs a little more, but you probably make money living in a unit.

What are you trying to accomplish through RE? Do these steps align with your ultimate goals?

@Brian Burke that's great advice. Thanks for taking the time for such a well thought out and thorough response. I appreciate the insight. Sounds like you take your issues and use it to prepare to overcome objections down the line. Either way, there's value in each exchange positive or negative.