All Forum Posts by: Mohamed Youssef

@Amir Twig

The one strategy that generated the most benefit for our clients is the STR with material participation if done right. The requirements to qualify are much easier than trying to claim the real estate professional status for non-real estate professionals.

@Matthew Waggoner 

Usually, you won't see the most benefit from cost seg. study unless you are able to offset rental losses from depreciation against other types of income ,but you can only do that if you qualify for REPS or materially participate in STR, or if the real estate or any other passive activity is generating a lot of cash flow or income and then you can use those losses resulting from the accelerated depreciation to offset them.

@Marcos De la Cruz

We usually recommend having a very good insurance policy in place that should cover any damage or legal liability. 

Depending on the type of properties you own and whether you have different investors in each deal, it could make sense to have separate LLCs for each. For example, for a large multi-family, it definitely makes sense to have a separate legal entity for asset protection.

If you own several SFH on your own and they are all located in the same State, then maybe putting all of them in one single-member LLC will make sense. Yes, you will still owe the $800 each year, but at least you don't have to file separate tax returns for each.

I hope this helps.

 Thank you for the feedback on the OC market, Peter. I agree, it seems like with the increased inventory, there will be more adjustments to price in the local market here. Still very hard to find opportunities that make sense around here, but I will keep an eye on it. Multi-family (4-5 units or more) looks much better around here already for buyers.

 These are great numbers! Thank you for sharing, Ashleigh.

@Ashleigh Medina Hello, do you mind sharing the average price for new builds and the average rent in your area? I believe new builds are great for appreciation in the right market and also low maintenance cost.

Zillow's April 2025 forecast projects a 1.9% decline in home values this year, a notable shift from the previously anticipated 0.6% increase. This adjustment reflects a market where increased inventory is providing buyers with more options, leading to softer price growth.

Despite the dip in home values, existing home sales are expected to rise to 4.3 million, up from 4.1 million in 2024. Mortgage rates remain volatile, with expectations to settle around 6.5% by the end of this year.

The rental market also shows movement, with single-family rents projected to increase by 3.6% and multifamily rents by 2.5% in 2025.

With a projected decline in values and a rise in rents, it may be the right time to stay alert and look for promising opportunities. Each state and metro area is moving differently, so it’s worth checking the data for your local market here: https://www.zillow.com/research/home-value-sales-forecast-33...

I've been thinking about buying an investment property, and I'm looking locally here in California, even though it is very hard to find any properties in CA that will cash flow, and I'm also looking at out-of-state. I decided to dive into some recent CA market data. Here's what I noticed:

1. Inventory Levels: There are definitely more homes for sale now compared to this time last year, active listings in California are up about 50% from March 2024. But even with more houses hitting the market, the supply is still lower than we'd typically see in a balanced market.
2. Home Prices: Prices are still climbing, but at a much slower pace. The median home price across California is projected to rise by around 4.6% in 2025, reaching approximately $900,000. Some areas, like the Bay Area, have seen prices grow at an even slower rate (around 3.5%). Also, some property types like condos start seeing price drops.
3. Mortgage Rates: Mortgage rates seem to be easing slightly in 2025 and are still lower compared to a year ago. Even so, affordability remains tight, with only about 16% of Californians able to comfortably afford the median-priced home.

As someone actively looking at investment properties, I'm noticing a slowdown in the market. While more houses and slightly better mortgage rates sound promising, there's enough uncertainty out there to keep me cautious. I'm not rushing into any deals just yet, and I suggest fellow investors, especially those newer to real estate investing, take the time to carefully evaluate opportunities before jumping in.

@Yury Krytsyn 

Hello Yury, I will try to answer a few of your questions that I'm familiar with:

- I'm in CA, and I'm starting to look to invest out of state, too. The states that I'm looking to invest in are AL, OK, and TN. All of these states still have newer properties that are below the national average home prices, and they have above-average job and market growth. The rent-to-price ratio is very good in those states.

- I would suggest that you create a single-member LLC in the state where the property is located, but since you live in CA, you will also need to register as a foreign corporation in CA.

I hope this helps.

Debt Service Coverage Ratio (DSCR) loans have revolutionized portfolio building for investors seeking scale without relying on personal income. The loan is based on the rental property's cash flow.

Beyond the basic debt coverage calculation (typically requiring 1.25x or higher), successful investors focus on:

• Property selection specifically suited to DSCR parameters (favor steady cash flow over appreciation potential)
• Pre-purchase strategies to enhance day-one cash flow (tenant improvements, minor renovations prior to appraisal)
• Strategic entity structuring to maximize borrowing capacity across multiple lenders
• Relationship development with loan officers rather than purely transactional approaches
• Documentation systems proving property performance beyond standard financials
  

One particularly effective technique is using shorter-term rentals (STR) in markets with clear seasonal patterns to establish higher revenue for DSCR calculations, then transitioning to annual leases for management efficiency once financing is secured.

Another strategy gaining traction is portfolio-level DSCR products, allowing cross-collateralization. These products can help investors finance properties that might not qualify individually while maintaining overall portfolio performance requirements.

The landscape continues evolving rapidly, with some lenders now offering interest-only periods, rate buy-downs, and creative prepayment structures to differentiate their offerings.

Has anyone successfully built a portfolio primarily using DSCR products? What qualification strategies have proven most effective in your experience?