All Forum Posts by: Natalie Schanne

@Marc Rice - My current investments are 12+ cap and in appreciating B class neighborhoods. I don't think I want any far away turnkey properties. 

@Joe Villeneuve - do you believe that prices won’t be lower in 2 years? I feel like this is 2005-2006 all over again. In 2009 I bought my first home for 255k and it had sold for 450k in 2005. Plenty of foreclosures on my street because all the homes had sold for 450-500k.

@Gerard Mixon - are you moving into it yourself? If so, be your own property manager. It’s not particularly hard to learn, doesn’t take a lot of time and nobody will ever manage your property as well as you do. If your time is incredibly valuable (like worth more than $100/hour) then please outsource it. I don’t have any recommendations.

@Julia Sung - investments are very personal. Some areas have higher expected appreciation (think Hoboken). Some areas have higher expected cash flow (think Camden, Trenton, student housing rentals). Which game do you want to play? I met a guy who syndicates apartments. He lives near Denver Colorado. If he had focused on Denver Colorado, he’d probably be worth 3-5x more what he is now after buying in cheaper states because the appreciation went crazy. But it’s not entirely predictable. Who would have thought you could buy a house and sell it for 3-5x as much in San Francisco between 2009 and today, meanwhile probably not cash flowing at all. In Trenton New Jersey I have met many investors buying older row homes for $30-60k and renting for $1100-1400/month with about $3000/year of taxes.

What should we do with $500,000 cash borrowed at 3.5%?

My partner and I are completing cash out refinances of some properties where we will have at least $500k cash to invest. Market is hot and I haven’t seen anything I’m excited to buy. I don’t have a lot of spare time. We recently both became accredited investors. My recent investments have been in single family homes near to me. I would love to buy an apartment building or other commercial asset but they’re all very expensive. Trends in my area are negative - sort of - lots of people are leaving New Jersey yet we are also experiencing LOTS of new apartment building and the job market is pretty solid between government and pharmaceuticals. I’m not sure if I should just throw it all in the stock market (which is also at record highs but my portfolio grew 20% last year just in S&P trackers where I did nothing.)

What would you do with $500,000 borrowed at 3.5% for 30 years?

@Anthony Gabriel - consider a 5% down conventional loan. That way the PMI eventually burns off without having to refinance it because you probably will be living elsewhere in 1 year and won't be able to get a 3-3.5% loan for 30 years at that point. I'm not sure what your question is really. Go for it.

@Thomas Klein - also remember that some mortgage loan officers will promise you nearly anything during your initial application just to get you as a lead in their pipeline and then let the “bad cop” underwriters decline you later, after a hard credit hit and maybe even a $400-500 appraisal charge.

@Steve Testori - Re: 1031 -- There are a couple horror stories with 1031 exchanges where the "qualified intermediary" steals ALL your money. You can search for these. They're obvious cases of fraud but that doesn't help you if you've lost ALL your sales proceeds. 1031 providers don't have to have any kind of license or register with anyone. It's built on reputation but anyone can hang out a shingle. Additionally, it costs you $1-3k in FEES to do the 1031 (as far as I know). And you have to identify and purchase your target property in a very specific time window. Additionally, there are rules about matching the leverage (mortgage %) or having less leverage. I'm sure every provider will have one or more YOUTUBE videos or blog posts explaining all the rules. 

Some people find themselves overpaying for property 2 when they're competing against OTHER bidders in this hot market and having to finagle a sale in a certain time period. It's unlikely you'd be able to use the cash to buy an deal REO on auction com, xome, hubzu, hudhomestore, etc. because of all the fancy footwork with when everything needs to be identified and close.

If you sell the next property #2, you have to pay taxes at that future time or you have to re-1031 (IF it's still possible then), just like selling property 1 if you didn't do your 1031. The depreciation (deductions)will be lower over the life of it because your cost basis is low.

At least 1 friend of mine has paid for a 1031 exchange and only used SOME of the proceeds to buy another property because they didn't identify and close on enough of the target properties in the time window. If this happens, you've paid your fee and only get some of the benefit of the tax deferment. Person paid capital gains tax accordingly on the rest. If any of this doesn't make sense, read some more about it from forum posts especially from reputable 1031 exchange providers.

@Steve Testori - I’m an investor friendly agent in New Jersey if you’re interested in chatting about what your NJ rental will likely sell for. Depending on the condition and your planned repairs, if any, we could get a virtual tour made and you could continue to rent the property until we sell it to another investor or owner occupant. (Usually owner occupants pay the most). Now is a great time to sell because inventory is low, interest rates are low and prices are at near all time highs.

As for what to do with the money, your third option is to sell it "normally" and use the proceeds to buy into a commercial syndication (multifamily or otherwise) that is doing a cost segregation study that will create high paper losses for you in year 1. (You can pay for or diy these cost segregation studies on single family homes as well where you write off your personal property such as cabinets, etc. anything that's removable. Lawyer / CPA Bill Noll on the REIA speaker circuit used to sell a diy cost segregation type spreadsheet for about $500. Your mileage may vary.

Your fourth option is just to do a cash out refi, keep the rental and invest in more properties in AZ or wherever you live. A refi is not a taxable event. I just got quoted 3.375% on a 75% LTV cash out refi on a Jersey property which is less than the existing loan at 4.375%.

@Sawyer Smith - I saw a well priced large home in a popular neighborhood for sale with bizarre listing photos. When I went for the tour, it was like going to a horror museum with mummy coffins, spiky bloody bed frames, hatchets, mannequin heads, horror art, and lots of horror movie toys (some new in box like collectors edition). Not like chintzy Halloween props. When I showed up for my tour, the TV was on with a creepy horror movie and nobody was responding to my calls “Hello, real estate agent”. I started my tour in the other side of the house. He came over as I was finishing and scared me and said he had been sleeping on the couch. This creepy middle age dude was the owner after his parents had passed and obviously wasn’t taking care of anything. I got under contract but he didn’t reduce his price when I asked for a discount when the inspector found a leaky roof and an old septic. He ended up selling for 20k less than my revised offer to a wholesaler. Don’t know why he never called me back. I even offered to let him leave behind anything he didn’t want. (Also, thank goodness I didn’t have a part in this bloody horror murder fantasy!)