All Forum Posts by: Rick Albert

Let's say the property is worth $300,000 and you own it with no mortgage.

If you do the cash out refi at 70% LTV (yes there are some that are higher), you can get $210,000. That allows you to buy around $630K-$650,000 and now you have two properties.

You sell, you keep $279,000 after closing costs and commissions. This money is tax free.

Using $250K towards a down payment (rest towards closing costs and rehab), that allows you to buy an $833K property, assuming 70% loan to value. 

Both strategies work as long as the numbers make sense. This is also assuming you are sole heir to the property and no other parties are involved. If you are splitting it with family, then you are more than likely better off selling and going your separate ways.

I buy a house for $100,000. Now it is worth $500,000. If I sell, there are capital gains taxes.

When I die, my kid inherits the house at current market value and rests. Now that $400K gain isn't taxed when my kid sells. It is an amazing wealth building tool as an inheritance. 

Right now, you have to get creative. 

I am not sure how turnkey properties are cash flowing right now, especially in the single family market.

Depending on how involved you want to be, one angle is to find properties where you can increase the bedroom count within the existing square footage. Things like enclosing dining rooms or splitting living rooms might make sense. This way you have the option of renting the entire property at a higher price or rent by the room. 

If you want something more turnkey, buying multifamily might make more sense. The total rents will be higher than SFR, and you are spreading the risk of vacancy (a house would be 100% vacant versus a duplex might be 50% vacant at a given time).

You have think about how involved you want to be and go from there.

Facebook Marketplace and Facebook Groups is probably a good start.

Zillow now offers posted rentals by the room, but not sure who is looking there.

In terms of running background and credit check, I like mysmartmove.com. It is the most thorough. 

I would do the background check just like any other investment property and make no exceptions. This includes checking past landlord history, money in the bank, paystubs, etc.

 Because of the step up basis, it likely makes sense to sell. Then you take the equity to buy a higher valued property.

Like any neighborhood in Los Angeles, it all depends on what you are looking for.

Generally speaking, Del Rey is fine. 

Here are sources to consider:

For Schools: https://www.greatschools.org/

For Crime: https://crimemapping.com/

Crime stats can be difficult to interpret. I've had clients say a neighborhood is unsafe based on the sites but they lived there for years with literally no problems. Also, the closer you are to commercial (restaurants, bars, etc.) crime would be higher. Look street by street.

For the schools, in the LA area generally LAUSD isn't great. Typically we see a good elementary school and then goes down hill from there. 

The best thing you can do is drive around at different times of the day and during the week to check it out. 

It depends on the extent of the work. Is there actual plumbing changes or are you just changing the physical sink? 

Before you do anything you generally need a FULL scope of work for the entire property. From there you can decide next steps. Especially if permits are required, etc. That can help in making your decision.

Generally referrals are a good way to find someone. Otherwise Yelp, Angie's List, etc. 

Another interesting option, but you will need to speak to the right professionals, is IF there is decent equity, you could do a cash out refi against the property and pay another property "cash" to offset the income to cover the new rental and this one. That would be a win-win. That way when your step father leaves, you haven't slowed down your investing journey.

1) Consult an attorney. This can get very complicated. I cannot stress enough how important having everything buttoned up by an attorney and recorded with the county is. If it isn't clear, then it can cost you a lot of money and time. Take care of it now.

2) If you want him to stay, doing so for free only works if your mother has money set aside to pay for everything (like investments or a large bank account), otherwise it is out of your pocket. So maybe a structure where he covers all repairs and the bills just so it isn't your financial obligation. That can still be a win. He will likely keep the larger of the two social security checks plus everything else that is stated in her trust.

3) Keep in mind as you apply for loans, lenders will count this property towards your debt to income ratio. This includes property taxes and insurance. If you want it to zero out, then your stepdad will need to pay 25% above all the bills since lenders will count 75% of the rent coming in.

That $1,200 a month can be rough. This is especially true as you try to qualify for loans down the road and that affects your DTI.

Out of that $1,200, you could factor in loan buy down and tax benefits in addition to potential appreciation. 

If you net $700K, that could put you in a position to buy around $2,800,000 worth of real estate. If your property is worth less than that, it could be a reason to make the sale. Being in your 30s you have the time to pay off that type of property.