All Forum Posts by: Tim Delaney

I’ve always been curious of how Robert Kiyosaki always talks about paying no taxes because of his real estate investing. He runs an education company and publishing company amongst other businesses and openly talks about giving his money to someone else to buy and manage his real estate (so no material participation). Essentially @Scott Trench is in the same position, running a RE education and publishing company, and arguably more hands on with his own investing. I completely trust Amanda’s assessment here, but I do wonder whether Kiyosaki actually does take the REP deduction and if so, how?

I don’t actually expect @Amanda Han to have an answer for someone else’s tax situation, but it’s something I’ve been curious about for a few years.

As others have said, insurance will most likely not be worth it depending on your deductible. And yes, there is a risk that your rates would go up or they can drop you - but unfortunately, many insurers in that are may already be planning to exit the market or raise rates on everyone to make up for loses.

One thing to note about a claim like this, insurance will usually pay for repairs to the damage caused by the problem, but not fixing the actual pipe that broke. Also be sure your PM is documenting everything if you already started demo and rehab.

The key piece of information missing here is what your rents, monthly P&I payments are and what you are actually cash flowing? As @Chris Seveney mentioned there is not really enough equity in house 3 to get a meaningful LOC. even if you were able to leverage enough to pay off House 2 the new rate you would be paying would be higher than the existing mortgage, so you would still be behind overall.

Your ROI on those payoffs vs keeping money in index funds is not very good either.

Lastly, remember that cash flow from rentals can seem good until it’s not. House 1 you’ve owned for 9 years, how are your cash reserves? What big expenses are you going to have coming up soon? Roof? Furnace? HWT? Bathroom/kitchen update? Personally I’d be cautious about trying to live off the cash flow from one or two rentals even if they are paid off.

I have no experience with Utica National. Are you working with a broker? I personally like working with a broker because I know they are helping to vet the insurer and making sure that I am not missing key pieces of coverage.

That said, from my understanding of the insurance markets basically different insurers like to spread their risk out across geography and asset class. So it's possible that the other insurers just don't want to insure your house for some reason and their way of telling you that is to give you a crazy high quote.

A body of mine that owns a large portfolio is insured through Vermont Mutual or something like that. When I talked to them about my large portfolio they gave me a ridiculously high quote which the broker said was basically because they didn't want any more business in this market right now. When my friend started using them they were aggressively looking for rental portfolios in the market so he is sort of grandfathered in with them.

Hope this helps with your decision.

There really isn't enough information here for someone to give you a proper answer.

What you need to do is calculate those tax savings over the next 5-7 years (or however long you plan to stay in the house) vs. what the interest rate reduction will save you over that time period. There is always a chance that rates will drop, but I would imagine $25K would buy down the annual rate so significantly that you would never see a lower rate offered by a bank so you wouldn't even think about refinancing. You are talking somewhere around 5-6 points depending on how much you put down on the purchase.

Welcome! And congrats on owning three paid off rentals!

Everyone's situation is going to be personal, so take any and all advice you get here with a grain of salt and weigh your options on what best hits your goals and lifestyle. Before you take any action be sure to think carefully about what your goals are in the short, medium and long term. RE is a get rich slow game and there are increasing number of people talking about how difficult it is to retire from your day job even with large numbers of rentals because cash flow is thin.

On the one hand there is the Small But Mighty portfolio mentality which I believe is a book in the BP store by Chad Carson. Essentially there are investors out there that can build a large enough portfolio with little debt that can cash flow enough for a great life.

If you want to scale to many properties then you will want to consider leveraging your existing properties. The best bet is to talk to a small local bank (or three) about your options. If you want to do some flips or BRRRRs then you could consider taking out a Line of Credit against the three properties so you can use the cash with interest only payments for a short term project and then pay it back and then use it again (Lines of Credit are revolving - meaning you get to keep using the money). If you are thinking of just buying and holding one larger asset (or a few smaller ones), you could take out mortgages against the three properties and use that money as down payments towards new assets. Just remember to factor in that you will now have fixed monthly payments on the original three which will reduce your cash flow.

I ran into this with my business partner. I can use the accelerated depreciation to offset my active income as a REP, but my partner cannot. Ultimately we decided that the cost of doing the cost segregations right now was not beneficial enough since he didn't really have any reason to pay for them and if I would have covered the full cost then the benefit wouldn't have been significant enough to me.

That said, I do know there are ways to structure your operating agreement where the depreciation can be distributed to different partners in different ways. My partner and I decided not to over complicate things with this method.

I usually buy new boots at an outdoor type store, but if you're looking for experienced ones maybe try a thrift store?

Sorry, couldn't resist. I'd join the local RE Facebook groups and attend as many local REI events as I could. Take a look at the BP agent finder or the other tools on BP for finding professionals.

 Definitely not a fan of that practice. Instead trying to bait people in just go answer legitimate questions using your experience/knowledge and demonstrate the value you bring. Or if you are going to start a thread at least contribute your take or insight right up front and ask for input. For example the RE agent could share insights into latest trends or data that they have seen with their own analysis of it then ask if people have questions or additional insight.

Welcome Brian! Personally I try to reserve my HELOC for emergency or unexpected costs during a project, so if you can try not to use all of it for the initial purchase and planned rehab. Also, be aware that if you are thinking of doing a BRRRR that maxing out your HELOC can have a negative impact on your credit score so when you go to do the refi you may potentially run into issues.