All Forum Posts by: Justin B.

The e-mail for October's meeting went out.  If you would like to get that info each month, please let me know your e-mail (just message it to me) and I'll get you added to the list.

As for Israel, I know nothing about real estate over there.  I'm strictly talking US.  Most of the advice you get here on BP is U.S. based advice (unless they say different).  I have no idea if any of it would translate to other countries.  Sometimes it doesn't even apply to a different state.

The first few loans I took out were at 15% down.  Amortization is over 20 years, interest rate has varied between 5.25 and 6%, and balloon payment is due after 5 years (We just re-finance at that point).  Any other specific terms you were looking for?  Your results may vary as I have a pretty good relationship with my bank at this point (having done 10 loans and have over 5 years of on-time payment history).

I have 10 sub-$100k properties that I bought with my LLC (Yes, in my LLC's name). However, it's not a typical 30-year mortgage at 4% like you can get in your name. It's a 20-year mortgage with a 5-year call and the interest rate is closer to 6%. It's a "business loan" or "In House Loan". It's not an FHA or Freddie/Fannie type deal. The property is still held as collateral and I personally guarantee the loan. I do invest with my father and brother so we're all in the LLC which is why it makes sense the way we do it. If it was just me I probably would have done more research around what putting it in my own name entails as the terms are much better.

If you really want to put it in the LLC ask if they are willing to do a business loan around the terms I mentioned above. Since it's Wells Fargo, probably not. I work with a small bank that only operates in the state I invest in. If you are looking to use a national bank, you're just going to get a "do it this way, or go away" type of response.

Find a small bank (local or state wide, not regional or national).  Talk to them about what you're doing.  You'd be surprised what you can work out with those types of banks.  The national banks have certain ways of doing things and a traditional mortgage in your name is easy and fast.  Plus there is no shortage of that easy and fast business so unless you are talking much bigger bucks, they just don't want to spend the time.

I can probably clear this up.  If you buy a house, it doesn't matter how much for, if you hold it for 30 years, that means you've depreciated it fully (27.5 years for a residential property).  Remember, the IRS assumes you depreciated your house even if you actually didn't.  So if you aren't depreciating, you MUST.  You can catch up on previous years, but I'm not here to go off on a tangent so Google catching up on deprecation if you need to know how to do that.

After 30 years, it's fully depreciated.  When you sell, 100% of the sale price is taxable.  The tax rate all depends on how you own it.  If you own it as an investor (there are exceptions here), then it will fall under the capital gains tax rate (whatever it is when you sell it).  So that $100k house would cost $20k in taxes if your capital gains tax rate is 20%.

If it's subject to ordinary income rates (again, analyze your situation and find out whether it's ordinary income or capital gains), it just goes on your tax return as income and you pay whatever rate that is (as high as 40% if you are a top earner).  It's the graduated scale and that income is just combined with all your other income for one tax bill.

The key words here are "30 years".  If you sell it after 1 year, you haven't depreciated much and it's only the "profit" you are paying taxes on.

For the hypothetical point of how could I only make $50k on a house I sell for $100k...If you fall into the highest tax bracket, 40% goes to Uncle Sam, 6% goes to a realtor, maybe you had to carry 3% back at closing.  Now you're basically at 50% ($50k).  Hope that explains it well.  Let me know if anything I said was confusing.  I tried to keep it very high level.

Yep, Message me your e-mail and I'll get you added.

 I'll address these 2 statements.  Yes, using equity/credit cards/non-mortgage loans can be dangerous if you don't know what you're doing.  With the right experience, any strategy can work.  For beginners, I'd suggest staying out of that type of debt initially.

You're leaving out a lot of valuable information.  Are your properties in a place where the demand is low and supply is high?  Are the properties in great shape and easily saleable?  What is the true value?  Is that $700k truly worth 1 million or $700k (or less)? Do you consider the % you are leverage based on what you bought for or appraisal value?

There are lots of questions to ask.  One particular situation with $700k of debt and $2k/month cash flow may be extremely dangerous and another may be low risk.  It all depends on the answers to those types of questions.

Personally, I don't mind higher leverage.  I like to stay around 70-80% leveraged myself.  If any property I own starts to get close to 40% equity, I refinance to get it back to around 20%.  I know other investors that are paying off their mortgages as fast as they can and don't want any leverage.  It's all about the level of risk you are comfortable with.

Know your market.  Know your properties.  If you have $700k in debt and $2k/month cash flow and you don't know if it's that's a good or bad thing, it's probably a bad thing.

I'd agree, start using whatever vacation you have and go down there a few times and find a property.  Get it all done before you quit.  Also, is it such a bad thing to get a job when you're down there.  You can quit shortly after when you have enough cash flow to pay expenses, then that gets used as your job.  Even if it's for a year or 2, is that a bad thing? 

The flip side is you have enough cash.  Depending on where you go in Florida, with $300k you could flip several properties at once (or whatever your comfortable with) and build up even more cash.  No one will care about your job if you are bring a lot of cash to the table.  Also, the bank may not care too much about the job if you are putting a significant amount of cash down (50%+).  When a bank knows you are more vested than they are, they know the risk is much lower that you'll walk away than if you only did a lot less down.

But personally, I think the best move is to buy the MFR (maybe 4-plex) with your current job where you have established employment history, salary, etc. Put as little down as the bank will let you. Once you have it, quit, move down there, rent the other units, and then put your cash to work.

I'll take a different tact and address the nervousness.  If you weren't nervous, I'd be worried.  I was nervous on my first one as well.  Nervousness is not a bad thing.  It keeps you on your toes.  The only advice I have for you is until you feel comfortable (and this goes beyond your first deal), make sure the worst case for you isn't life altering.  If you just could not get this house rented for 2 years, how does that affect your life?  Can you float the expense for that long?  What if a $5k repair bill comes up, will that wreck you?

Obviously any of those things suck, but if the worst happens and you can handle it financially, it helps make things a lot easier.  If it destroys your life financially if the worst was too happen, the deal is too big and you need to scale back.

Once your comfortable with doing deals, those items won't even be a concern anymore.

This exact sign has shown up EVERYWHERE in the Maryland area north of DC.  It could be all over, but in the last few weeks, I've only been in this area.  I called it and it was Google voice stating it would try to connect to me.  I was actually expecting to hear a message.  I'll call it back when I actually have time just to see what it is.  I'm not looking to be an apprentice but with the amount of signs I've seen, it's clear that whoever this is has spent THOUSANDS.  I've literally seen well over 100 signs just where I've been and I know there are a lot more I haven't.