All Forum Posts by: Natalie Schanne

@Tatiana Duarte - If you want to be a landlord, you will learn the MOST if you do so inside or near your permanent residence. I hate long commutes, so I would draw a radius within 15-30 minutes of my job. I would ask a real estate agent to send me all the listings of properties I could qualify for and I would get the agent to take me out to see 3-5 at a time until I found the one.

If I were in your shoes, I would either buy a 'too big house' with conventional or FHA financing and rent spare bedrooms to professionals for $500-900/bedroom (as I've done in the past with my 5 BR 3BA) or I would buy a 2-4 unit multi-unit house and live in one and rent out the others. If you manage it yourself, you save the 8-10% in property management fees + markups on repair expenses. You also learn more about managing tenants, and you are likely to have FEWER vacancies because you'll care more about getting it filled asap. Avoid newbie mistakes by making sure to screen properly and having a solid lease. (There's plenty of advice about that on BP).

I wouldn't pick South Jersey just for lower taxes. Pick a place (likely NEAR YOUR JOB) with a solid economy (growing jobs and population). My in laws live in South Jersey and their house has appreciated roughly 2.5% annually over 30 years (and they've put more than 2%/year in CAPEX like updated floors and fixtures into it). It definitely didn't appreciate 5.5%/year like my property has in the Washington D.C. area with essentially no CAPEX. (I haven't spend $4k-8k+/yr in house upgrades like they do). My father in law generally works in Philly. If they had the same house in Philadelphia, it'd've been worth $400-500k now instead of $200k given the same 78k purchase price. Obviously areas of appreciation can't be entirely predicted...

What's your advice for convincing your spouse to get interested in House Hacking?

I love Scott Trench's Set for Life House Hacking mindset. Since 2009, I've owned a foreclosure-rehab turned house hack (5 BR 3 BA). I lived in 1 BR and rented out 4 BR to professional women. Every other time I've lived somewhere outside of home, I've shared with a roommate or rented a cheap bedroom in someone else's house (like $500-600/mo vs $1200+ for 1 BR 1 BA) and saved/invested the difference.

In 2016, I moved to a new state, married the love of my life and we're expecting our first baby in late May. Because his job is 1 year term-renewable, we leased a 1000 SF 1st floor 2 BR 2 BA condo for $1500 before we knew I was pregnant. I chose this larger apartment because I had initially planned to rent out the spare bed + bath for $700-800/mo, but he stopped me because he 'wanted to ensure our privacy.' 

Anyway, I partnered with someone from my REIA on 2 flips and now I'm actively touring several properties a week to buy my family a rehab-fixer upper that we can live in as well as rent out part of it. (Goal: either we can sell in 2 years and get the free capital gains or we can keep the great primary residence financing and rent it anytime.)

I want to house hack. Where I live, duplexes are NOT common. Most are 'ancient' conversions of larger homes and are not very nice. When touring with investors, I have seen 0 suitable for my family. My strategy has been to look for 4+ BR 2+ BA houses in good neighborhoods that are fixer uppers / REO / foreclosures. I have found several with two entrances / split levels and a common laundry space such that I could rent 2-3 BR to another family or 2-3 professionals and earn $1500-2000/mo on a $200-250k purchase while living cheaply in the other 1000 SF of the house and having limited forced interaction with the roommates/tenants. Whenever I take my spouse to one of these 2000 SF houses, I can see money and potential, but he doesn't want me to buy. He imagines just us and our family. Why would he prefer a $1500/mo (150k-purchase cost) 2 BR 2 BA 1000 SF condo over a $250k 4 BR 2-3BA 2000 SF house where we rent out half and live for like $500/mo?

What tactics would you use with your spouse to get him or her interested in sharing a too-big house with nice people you choose that you may not even see frequently in order to pay a very low monthly net rent and maximize the ROI on your primary residence rehab? Thanks!

@Robert S. - Thanks for linking me in and for the kind words! Cheers. :)

@Ali Boone - Thanks for the thread! Do you think we should set up a monthly free group BP female investor conference call to chat for 30-60 mins? I know I would love some of your tips on working with investors.

I am an active real estate investor in the Philadelphia - Princeton NJ markets, a licensed RE Agent in PA, NJ and VA, and own/manage several rentals. I am involved hands-on in 2 flips right now. I love finding deals. I enjoy researching and buying REOs and at sheriff's sales. With a little lipstick and nice marketing, it's fun to turn an undesirable 'pig' into a prized property with multiple offers at/above the goal ARV.

Charlie McVan - if the properties are on one lot and you're not planning to separate them into two deeds (which may result in higher total property taxes), then if you move both properties (by transferring one lot) into an LLC you will likely prevent yourself from getting the free owner occupied $250-500k capital gains tax waiver after living in the one house for two years. I deduct my rental repairs on my schedule e against my rental income. I depreciate the (portion of) the property accordingly. Not all rehab improvements can be expensed immediately... they go into the basis of your rental property and/or get their own asset specific depreciation schedule. Consult your tax professional and keep property 2's fair market value IRS basis properly accounted for as you improve and depreciate it.

Giang Nguyen - I'd be wary of paying out 'profits' on a rental to anyone I'm not married to. As far as I know, a lot of your rehab expenses will be capitalized into the basis of your house and not immediately able to be expensed. So, you buy the duplex for $200k and put $50k into it. It's now worth $300k. If you owner occupy it for 2 years then sell it, you can get that $50k value gain tax free. Example: If you financed it initially at 80%, you put in 40 and got a 160 loan. If you refi'ed the house in 1 year at $300k, you'd have a loan for $240k, so you'd still be down up to $10k in cash. You personally (schedule e) can pay your boyfriend (1099 or not) to do the repairs but you can only expense in year 1 actual repairs, not modernizing decoration that raises the value and rental rates. (New roof etc. These are depreciated over 5-27.5 years depending - see IRS code). So your boyfriend could record documented income of say $50k, but you can only deduct say $10k in repairs in year 1 in the non personal residence side of the duplex. Loans are cheaper and you get a higher LTV when owner occupied and not in LLC. Most people get the umbrella policy if they feel their homeowner policy limits are not enough.

David S. - do you think you could still fully capitalize on the Super Bowl if you offered short term rental services to an existing tenant and split the profits? For example - keep all your units rented 100%. Offer in Oct/Nov/Dec an opt in (and liability waiver) to have their unit as already furnished rented for the super bowl weekend. You'd market it and find people and coordinate paying any taxes and split room rental profits 50/50 including cleaning the place before and after the super bowl rental for the tenant. Just a thought.

Kevin Toland - you just rehabbed the property, so there should be few or minimal expenses. I'd PM it myself and save the $$. If you're working with a construction person or trust one you can hire to fix stuff, that guy can self-solve any repair issue (with your permission). I'd screen other tenants along with the repair guy. Make sure good FICO, 3x rent income and background check. A good tenant can get any problem fixed affordably and just bill you (or will coordinate a meet up time with the plumber or whatever you've hired.) Make sure you have a solid lease that describes what happens when (lawn? Utilities? Notice at end of lease/auto renewal? Rent escalations? Repairs?) I can coordinate rent collection and repair people for my property in Virginia from New Jersey just fine.

John Smeltzer - welcome to the community! Make sure to chime in to forum posts with your experiences owning properties. Set up keyword alerts for CPA. Cheers!

Wayne Yates - Why don't you rent a furnished bedroom or walkout basement in someone else's house for $400-600/mo, utilities included? Find somewhere month to month within 15 minutes driving of your current job, then you'll save 100 miles, 2 hours each day. (I have used craigslist shared/temp postings, craigslist wanted, and church/community boards in the past to find affordable living.) You can use the saved time to work longer, potentially, and make $50-100 more every day. You can pocket the savings in comparison to your alternatives to save up for a house downpayment where you then become the 'landlord'. Or pay down your car debt faster. Consider wear and tear on your car is estimated at .50+/mi by the IRS so 100 miles is like $50/day in effective cost. (Even though actual cash expense is only $12 in gas, etc.) Commuting is not a tax deductible expense.

ZEE KHAN - do you need a license? Sometimes you can get a 'job' as an unlicensed assistant and get MLS access. You can't write your own offers to purchase, but sometimes as an investor you want to put your offer in with the listing agent because then they might push your offer through to acceptance. The listing agent encourages the seller to accept your lower priced cash offer because the agent gets a double commission of ~5-6% (whatever's negotiated) instead of a higher priced FHA (not sure thing) offer or whatever. Or vice versa.