All Forum Posts by: Rick Albert

I completely disagree, paying cash is a horrible idea unless you plan on taking out a mortgage in the next 6-12 months. Here's why:

1. The entire point of real estate is leverage. If a property appreciates at 3%, it is on the entire property, not just the cash invested. For example on a million dollar property, 3% is $30,000. If you put 20% down ($200K), then that's a 15% cash on cash return. You 5x your money. Otherwise, you have high interest savings accounts giving 4% interest. Do that and you eliminate the risk of bad tenants, maintenance, etc.

2. The whole point of tenants is not only cash flow, but to buy down the mortgage. For example, the tenants in my house hack pay the equivalent of the interest on the mortgage. Conceptually I have a 0% mortgage.

3. You miss out on some of the mortgage tax benefits. 

4. If you have that much cash, buy rentals with a DSCR loan, and then use that income to qualify for the primary residence. Definitely easier said that done but I'm talking concepts.

5. If you take a look at mortgage rates over the last 30 years, we are actually on par with the "norm." Plus if rates drop, then it just creates a potential buying frenzy, thus raising prices and the payments don't change much.

Multifamily properties are tough to sell in Los Angeles. This is just a high level, general statement.

Conceptually, selling separately sounds like a bad idea. The only reason is because once one building sells, you are asking another buyer to basically go into business with someone they don't know. It would be like an HOA at that point. The only caveat is maybe if you have property management set up that can handle it all, it becomes their problem to manage.

I'm in the residential world, so take what I say with a grain of salt. I'm just thinking as a buyer.

A great example is I often see duplexes being sold separately where someone has 50% ownership. They tend to sit on the market.

Typically, you don't want to lose money, especially if you have a long vacancy, major repairs down the road, etc.

A couple of considerations to calculate:

1. Loan buy down

2. Tax benefits

3. General appreciation

If it is in a solid area, maybe the play is appreciation and then a few years later do a 1031 exchange to another, better performing property.

With multifamily, typically you can't do STR, but maybe MTR? Maybe the numbers make sense there.

Yes, I did it with my wife and we are still doing it. There are a couple of things you need to consider:

1. What are each other's goals? This is in the short term and long term.

2. What are your tolerances? My wife didn't want roommates but was willing to have a second unit on the property, as long as it was private.

3. What is your current financial situation and how does that fit into house hacking?

Assuming your financial situation hasn't changed, if you are refinancing to a lower rate, I'm not sure why you need the house hacking income. If you qualified before, you should be able to qualify again. 

This is a tough one because you also have potential disclosure issue when selling. Your Natural Hazards Disclosure should have some of this but it is tricky.

I think if the equity is there and you can move the money to a better producing asset, I think I would sell. We just don't know the environmental impacts and ignorance is bliss. The longer you keep it, the more information you will get. I know it sounds weird but Sellers want no knowledge and Buyers want all the knowledge.

There are couple of things to think about:

1. Be careful when you post questions like this. This is when the Realtors come out and say their market is best.

2. You can make it work in almost any market. I could make a strong argument for both Birmingham Alabama and Los Angeles California. 

3. House Hacking is a great way to get into investing. By house hacking my first condo, I've been able to scale to now 14 rental doors between four different states.

4. I do look at the population, rental laws, rental laws, and major businesses/organizations (hospitals, universities, big business, etc.)

I think you are on the right track with talking with someone. I have a financial adviser/financial planner and people were shocked when they found out I was working with someone. I told them this: My expertise is in real estate and I want to spend my time there. I will hire out to another expert to handle other aspects of our finances to make sure those are on the right track. One of the best decisions we ever made.

I agree, you need a fee only, which honestly is the best option. I interviewed a few financial planners with different models and the fee only was the only way they get paid without me spending money (in trades, buying insurance policies, etc.).

Talk to @Michael Izbotsky. He's sharp. I work with him and do real estate consulting work with some of his clients so that he covers his basis.

I voted no BUT that is a high level answer. You can make anything work in any market.

My concern with Austin is the amount of building that is happening. With new construction, comes more competition. I was looking at 4-plexes in Georgetown and saw that there were apartment buildings nearby recently renovated, pools, gyms, and other amazing amenities. I can't compete with them other than in price. So again, you can make it work, but you really have to look at the numbers carefully and I would argue be more conservative than before. 

There is a high probability it is enforceable. Generally you go with the strictest ruling.

With that said, it becomes a risk play. Some might ask, "who is going to enforce this?" What I've seen before is the only time rules are enforced are when neighbors get pissed (ie STR neighbors).

I would side with caution on this, especially if it is a newer built community where the rules are fresh with people.