All Forum Posts by: Paul Shannon

I saw real estate was a great way to build wealth through sweat equity and leverage.  I started with a duplex.  When I started to understand the tax benefits along with the other advantages, I began to look at owning rentals as a business. 

House hacking is absolutely the lowest barrier to entry with less downside risk.  You'll also learn a lot of rehab/maintenance, managing tenants, etc, while the tenant pays your mortgage.  I wish I would have done it.  

If the properties are in an LLC you may be able to find a local bank or credit union that will offer a business line of credit secured by multiple properties. It's similar to a Heloc in that you only pay interest when using the funds. The catch is that most funds used have to be paid back within a year, then the line can be renewed, so it's a very short term play. They would use multiple homes as collateral and take a first position lien against them.

I agree with @Kim Meredith Hampton regarding you should require licensing and insurance information up front.  However, if you want to make money in this business, it pays to find someone doing work on the side.  The overhead and retail pricing that the big outfits you find on a google search will absolutely crush your bottom line over time.  

Well written.  It is about taking action and pivoting if your initial investment plan didn’t work out like you hoped.  

Picking a market and planting a flag is important, but Real estate success is about people, as specially if you are investing away from your hometown.  You will have to relinquish control and have a team you can trust.  So pick your market, but make sure you have a team to execute your plan there. 

It is true. If you do want to finance through a bank with title being held through an LLC with residential terms like a 30 year fixed rate vs a commercial loan, try Corevest, Lima One Capital, or Visio.

Try connecting with wholesalers in your area as well as other real estate investors. If you want to target a specific property type, you could buy a list from somewhere like listsource.com and send direct mail directly to home owners.  Just a few ideas. 

I think I can help with the 6th grade explanation, but that's a far as I can take it, as I'm not an accountant....disclaimer. 

The IRS allows for the "depreciation" of a real estate asset over its useful life, as the property gets older/wears down and newer buildings replace the older ones.  They have deemed residential real estate has a useful life of 27.5 years and commercial property 39 years. Obviously if property is maintained, it can last a lot longer than 27.5/39 years. 

You first have to determine the "cost basis" of the property, which is the purchase price and any capital improvement costs incurred.  Then you divide the property by 27.5 for a residential property to arrive at your annual allowable deduction.  Example $100,000 cost basis would allow you to "write-off" $3,636 ($100,000/27.5) annually in depreciation, in a simple situation.  

This is a powerful tax advantage of real estate.  That $3,636 can be used to offset the income the property produces.  The difference is you have the money in your pocket from the income.  The depreciation write-off is a "paper loss", so you never really felt the money leave your wallet.  If you are a real estate professional you can then not only offset income from the property, you can offset your ordinary income.  

There are also ways to accelerate depreciation faster than mentioned, like using a "cost segregation" strategy.  

Depreciation is "recaptured" when the property is sold, unless you use a 1031 exchange, which means it is essentially repaid off the purchase price at sale.  However, it definitely allows you to build wealth faster as tax sheltered money can compound with impressive speed. 

I would definitely recommend making tax planning a pillar of your real estate investment strategy.  Talk to your accountant about your goals.   

I'm dealing with a similar situation with a plumbing issue that has inconvenienced a tenant, causing them to stay 2 nights in a hotel.  

I think the best thing to do is show some empathy for the inconvenience.  It will disarm them.  These things happen and know matter how diligent you are at maintaining the property, it ultimately will have problems at some point in time.  

At that point it comes down to how much do you want to retain them.  20 nights is a long time and a significant expense for them.  If they understand that its not your fault, the offer for reimbursement of 8 nights instead of 20 reflects that.  It sucks cause its a major dent in your income statement for the year, but if they are good tenants, they will stay longer if they know their landlord has their back.  If they aren't good tenants, do what you think is right and be ready to move on.  

Ultimately, I'm going to cover the two nights for my tenant in my situation.  

 Not my post

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