All Forum Posts by: Trent Chance

@Alina Trigub great tips. Esentialo, find the "win" for her. Thank you.

I do know that she's managed two different parks for over 16 years and.the income helped her raise her kids. She recently moved and is tired of messing with it and "just wants her money".

The last part makes it tricky but the tax savings could make a huge difference.

Thanks Jason! Interesting.. I never thought of reducing units. I guess it's true that in some areas people would pay anything to be in the latest 'hipster' part of town.

I hope I use the gains wisely 😁 I'm moving into a biggy project but after OVER analyzing things I'm pretty confident I know what I'm looking for next.

Thanks @Daniel Z Fang how's the RE life in San Jose :)

Another forum member asked what everyone thought of taking money out of a 401K to invest in RE.

I know it's a heated topic but my answer is below.  Tell me what you think.

"It can work well:

Is it a good idea? I'm not sure - I'll let the pros answer but I will give you my experience.

In February 2016 my wife and acquired our first home. It was outside of Nashville and very livable but we had plans to raise it's value using my 401K:

• -$137,500 Purchase Price
• -$5,000 Down Payment (3.5% FHA)
• -$15,000 Remodel (HVAC, Kitchen, Flooring, Trim & Paint)
• -$1,000 Monthly Payment (Mortgage, Escrow & HOA)
• -$20k All-In

In Fall 2017 we took out a HELOC based on the new appraisal. Our $15K injection + sweat equity boosted our equity by $12,500. We converted this property into a SFR and it does well for our first attempt.

• -$165,000 New Value (The appraised value due to both forced & market appreciation)
• -$12,500 HELOC Approved
• -$1,550 Monthly Rent & no vacancy so far

In November 2017 we used the $12,500 and a little cash to move into a newly constructed home approximately 10 miles from downtown center:

• -$300,000 Purchase Price
• -$15,000 Down Payment (5% Conventional)
• -$1,970 Monthly Payment (Mortgage, Escrow, HOA)

It's now been two years since we moved into this home and the market has been kind in Nashville:

• -$165,000 Home is now valued @ $200,000 (originally $137,500)
• -$300,000 Home is now valued @ $330,000 (approximately)
• -$43K is what I stand to clear on the original home after selling using a 1031 Exchange to avoid capital gains taxes.
• -$13,200 isn't true cash flow but it is what we captured beyond monthly payment over 2 years, we can assume 35% for expenses since this property is remodeled and the HOA cares for the roof and external structure.

Total gain over 3.5 years:

• -$62,500 in Equity on Home #1
• -$30,000 in Equity on Home #2
• -$6,600 in Cash Flow on Home #1
• -$20,000 in Debt Pay-down for both homes combined
• -Plus tax savings that I don't know off-hand

When you look at each wealth generator I imagine REI far outperformed my 401K had I left my original $15,000 slow-cooking.

• Total Gain: $120,000
• Total Cash Invested: $35,000
• Net Gain: $85,000 (plus whatever tax benefits we've received - highest returns yet!)
  

Next, I'm most likely selling the original home and acquiring a deal that nets almost 5x the cash flow of that SFR. I'm working with @Dave Foster on the best steps to shield the capital gains taxes through a 1031 exchange. At some point we'll turn our current home into a SFR hoping we don't lose a bet on appreciation in Nashville.

I literally had NO IDEA what I was doing and managed to get this far before I had even decided to work towards full-time investing in the near future. The one advantage I had was the Nashville market is insane."

I'm about to make an offer on my first MHP.

The numbers look great. I plan to possibly 1031 exchange my first SFR into this property for nearly 5x the return I get now. The issue is I have to actually get the property :)

The seller said she isn't interested in owner financing but did concede that she may work with something temporary.

I'm looking for advice on an offer to make the owner financing attractive for the seller.  I've never completed a seller financing deal and would like at least 6 months to get the property where I want it and get a mortgage with a lender.

The property is already worth $50-100k more than she's selling it IMO but I'd prefer to get it in my hands, finish stabilization and essentially refinance at the higher appraised value / better LTV. I'm not sure if you can essentially BRRRR MHPs but I'll give it a shot if I can get my money out for another deal.

 Glad to help but remember I'm a still a newbie - a lot of people here can give you great advice.

Disclaimer:  I'm not an expert on what I'm about to say but...

There may be scenarios where taking the tax hit works out to your benefit as well.

For example selling and putting half of your sell into a 1031 towards a property and other half into a large apartment syndication where could recapture depreciation of the asset.

Congrats on jumping in :)

Is that really supposed to say 3% Conventional?

It can work well:

Is it a good idea?  I'm not sure - I'll let the pros answer but I will give you my experience.

In February 2016 my wife and acquired our first home.  It was outside of Nashville and very livable but we had plans to raise it's value using my 401K:

• -$137,500 Purchase Price
• -$5,000 Down Payment (3.5% FHA)
• -$15,000 Remodel (HVAC, Kitchen, Flooring, Trim & Paint)
• -$1,000 Monthly Payment (Mortgage, Escrow & HOA)
• -$20k All-In

In Fall 2017 we took out a HELOC based on the new appraisal. Our $15K injection + sweat equity boosted our equity by $12,500. We converted this property into a SFR and it does well for our first attempt.

• -$165,000 New Value (The appraised value due to both forced & market appreciation)
• -$12,500 HELOC Approved
• -$1,550 Monthly Rent & no vacancy so far

We then used the $12,500 and a little cash to move into a newly constructed home approximately 10 miles from downtown center:

• -$300,000 Purchase Price
• -$15,000 Down Payment (5% Conventional)
• -$1,970 Monthly Payment (Mortgage, Escrow, HOA)

It's now been two years since we moved into this home and the market has been kind in Nashville:

• -$165,000 Home is now valued @ $200,000 (originally $137,500)
• -$300,000 Home is now valued @ $330,000 (approximately)
• -$43K is what I stand to clear on the original home after selling using a 1031 Exchange to avoid capital gains taxes.
• -$13,200 isn't true cash flow but it is what we captured beyond monthly payment over 2 years, we can assume 35% for expenses since this property is remodeled and the HOA cares for the roof and external structure.

Total gain over 3.5 years:

• -$62,500 in Equity on Home #1
• -$30,000 in Equity on Home #2
• -$6,600 in Cash Flow on Home #1
• -$20,000 in Debt Pay-down for both homes combined
• -Plus tax savings that I don't know off-hand

When you look at each wealth generator I imagine REI far outperformed my 401K had I left my original $15,000 slow-cooking.

• Total Gain: $120,000
• Total Cash Invested: $35,000
• Net Gain: $85,000
  

Next, I'm most likely selling the original home and acquiring a deal that net almost 5x the cash flow of that SFR. I'm working with @Dave Foster on the best steps to shield the capital gains taxes through a 1031 exchange.  At some point we'll turn our current home into a SFR hoping we don't lose a bet on appreciation in Nashville.

I literally had NO IDEA what I was doing and managed to get this far before I had even decided to work towards full-time investing in the near future.  The one advantage I had was the Nashville market is insane.

@Tanner Marsey

Hey... Go easy on the Nigerian Prince. I like that guy 😁