All Forum Posts by: Jeff Rabinowitz

@Dick Rosen  is correct.  Don't lock yourself into a structure that won't work for the deals you find.  Once you do a few deals you and your advisers will be better able to find a structure that fits your business and your plans.

It make sense to learn about managing rental property before buying it.  Working at a good property management company should help.  You may also get an early notice when a current owner wishes to sell a good property.

If there are Real Estate Investor Association near Midland start attending meetings and talking to other investors.  You will quickly learn what works in your area and may find a mentor/partner who may help when you are ready to jump in.

If I don't know much about the investor already I am unlikely to loan to them.  When they approach me for the first time I expect honesty, a clear plan and, preferably, a back up plan or two.  I will usually allow a potential borrower the chance to correct a misstatement.  I will not ask more than once.

The better the deal, the closer it is to my farm areas (or expertise), and the more personal funds the potential borrower puts in, the more likely I am to make a loan to someone for the first time and the better the terms I am willing to offer.  

Sorry guys.  I responded to something on the first page.  I have not checked this thread for a while--didn't check first to see how long it is.  I am not going to read through the whole thing but it looks like my point was well covered.

@Roy N., You are absolutely correct.  I was responding to the comment that you always make more profit if you use leverage.  That is not true.  As @J Scott points out, you must earn more than the cost of the funds for the leverage to be beneficial.  Using leverage also increases your loss if the markets turn against you.

Leverage can make you more money if used wisely but it can also wipe out your investment very quickly if the markets go against you or the cash flow of the investment is reduced. 

If the property is worth what you are asking you will find a buyer.  I probably wouldn't accept an offer from a guy like this.  I would expect that he would play games and expect big discounts after the inspection finds dozens of deficiencies.  It is not worth the grief.

By the way.  If you have ever purchased a stock or mutual fund did you care what the previous buyer paid?  It is irrelevant.  There is no difference here.

The supposed buyer is using this to get inside your head.  Don't let him.

You will only make more money using leverage if the value of your property increases and you sell when it is higher than the price you paid.  Markets, including real estate markets, are cyclical.  They do go down, sometimes very quickly.  Many areas are just beginning to recover from the last crash.

@Peter Eiseman, this is not an either/or choice.  Some investors choose to borrow funds from others exclusively in their entities (LLCs, Corps., etc.) to limit personal liability, to free up personal lines of credit or to increase return on investment.  

It often makes sense to use your own funds if you have them to limit interest charges.  Sometimes using personal funds can make it much easier to close a deal that has a limited time to act.  It will also be much easier to attract OPM and at better rates if you have some personal funds committed to your deal.  

For many, the best answer is a combination.  As @Dawn Anastasi  says, when you become active you will often encounter deals when all of your personal funds are deployed.  When that happens it may make sense to borrow funds rather than miss a great deal.

@Joseph Chen , there are hundreds of member blogs on this site, many with numerous entries.  To access them go to the heading bar, select "Learn" then scroll down and select "Member Blogs".   There are also a large number of featured blogs.  To find these, select "Learn" then "BiggerPockets Blog".

Real estate can still be very attractive inside an IRA (and even more so, inside a Solo 401K). If you are planning an extensive rehab/renovation with a subsequent sale that forced appreciation is tax deferred (or tax exempt if held in a Roth). Yes, you lose the depreciation but that is not very significant over the short time period you will probably hold the property.

Another example would be buying real estate in the path of development.  If you operate your rental property for a few years and then expect a windfall when your property is bought by a McDonald's, again the benefit of the gain being tax deferred will more than compensate for the loss of a depreciation deduction.

Give serious thought to your exit strategies and how long of a period you plan on holding your assets before deciding which types of investments are best placed in which accounts.  If despite your proper planning a large gain develops in an account where you didn't expect it--well, if the account is self directed you still decide whether or not to realize the gain and unexpected gains are among the most pleasant problems you can have.