All Forum Posts by: Ryan D.

There was a recent BPMoney podcast on dealing with excessive student loan debt. You should listen to that & get started on one of the recommended plans ASAP.

These buildings don’t even make the 1% rule. You’ll be cash-negative after accounting for maintenance & cap-x. Unless there is some non-obvious upside here that you haven’t posted (like very strong appreciation from expected nearby downtown development, etc), you would need to negotiate down the price significantly for this to work.

I concur with Jay - how can someone possibly consider spending hundreds of thousands of dollars on something without ever seeing it? In addition to seeing the property yourself, you need to put in face-to-face time with your property manager to build the type of relationship you need to be successful. Otherwise you are just some easily ignored voice on the end of a phone. My wife or I fly to see every property we purchase OOS, conduct the walkthrough with our property manager and our contractors, the inspection with the building inspector, & if possible be there for the appraisal as well. This is part of your due diligence as an investor, and substantially reduces your risk when buying. Sure, you can farm all this out to someone else, but you had better have a significant level of trust in their abilities - but keep in mind, no one will ever protect your money like you will.

Is Most states the tax appraisal number has little connection with the actual market value of the property, and will be entirely irrelevant for getting a HELOC. Your bank will do their own appraisal (and since this is a duplex, the appraisal will be based upon comparable sales) and then offer you the HELOC based upon the results of this. Do Not rely on your tax appraisal number for anything other than paying your taxes. It has no other value/use.

In general, consider consumer debt to be toxic, & work to pay it off ASAP. What is that CC debt costing you in interest? Likely this is something on the order of 15-20% annual rate, & going only on the info you’ve provided here, I would make this your top priority. The duplex that you say needs $12k in repairs to get it rent ready - do you already own the duplex, or is this something you are thinking about buying? If you own it, then spend the Capital to get this business asset productive. Then take the remaining $15k or so from your REFI & go after your next investment.

So as others pointed out, speaking specifically about cash-on-equity, the return is poor. This does not necessarily mean the entire investment is a poor one, as there are multiple ways to make money in RE. Your real return here is relying on equity appreciation, just be aware of that, and equity appreciation is (almost) always speculative. 

That being said, there are a few things to note concerning your plan to pull out equity:

1. This is a residential property, not a commercial property (anything 4 or fewer units is considered residential), hence you can only get a residential, not commercial, loan against it. 
2. I am not aware of any lenders who will loan on a residential property that is titled under an LLC (they may exist, but I've never heard or come across them). You will almost certainly have to pull this out of the LLC and put it into someones name to get a loan on it. This is certainly not a show stopper.
3. Once you put the title in someones name, you can then get a loan/HELOC/etc against the property (recourse against the person in who's name the property is titled). After this is established, in most cases you can then deed the property BACK into the LLC. Easy peasy.

Does anyone have a recommendation for an office to do Broker Price Opinions on residential multi-family (4-plexes) in the Jacksonville Florida area?

I have three buildings that I would like to value.

Thanks!

How you acquired the property (ex financing, down payment, etc) isn’t relevant in calculating the capital gain. Your capital gain is what you sold for, minus what you bought for. If you have deprecated the property (& the IRS requires investment properties to be depreciated), then your “bought for” price is lowered by the amount your depreciated (this is called your Tax Basis). For example, if you bought the house for $500k, held it for several years over which you depreciated the property by $50k, & then sold for $700k, your Capital Gain (for tax purposes) is: $700k - ($500k - $50k) = $250k. It makes no difference what your original down payment was.

Step 1 is to check the rules of the HOA - you may specifically be prohibited from renting out the condo.

You put $21k into the property, and it has appreciated another $10k, so you have ~$30k of equity in the condo. If you were you make $200/month in net cash flow, this is $2400/yr cash return on your $30k of equity, which is an 8% return (2.4k/30k), plus any tax benefits, appreciation, & principal paydown on the loan. What you have to decide, is this  return worth it to you? 

LLCs are NOT for tax purposes, they are for liability protection. You will NOT save any money by operating with an LLC, indeed there are startup & operating costs involved (not large), which means having an LLC will actually cost you more than not having one (outside of any liability related issues). You will have to pay an annual filing fee with the secretary of state to keep your LLC current with the state - generally this is some nominal fee on the order of $100/yr. In California this annual fee (called a Franchise Tax) is $800 (the highest in the country by far, hurrah for California) + an addition fee based upon the LLC's income.