The details shared in this episode, especially regarding how both David and Rob approach bank accounts were most enlightening. Seriously, these are the details that get glossed over throughout most of the episodes. I completely understand that you are trying to teach the masses, but these are the details we want and need. Please open up more about these approaches. Rob mentioned the Profit First method. It would have been great to go deeper into that and compare why each of you use the system you use and how profit first differs, etc. Perhaps another episode!?!? This side conversation alone made this episode gold!
Always have separate bank accounts for your investments so that you do not co-mingle funds, which could cause a lot of headaches if you ever get sued or audited.
I use the term co-mingle loosely here, since most people understand what that means and I dont have to explain it, but I realize that unless you are dealing with LLCs, the technical definition of co-mingle would not really apply. None the less, still a good practice for the same reasons really.
David I totally agree like how you articulated your explanation. The idea of buying cheaper “usually means” buying C or D neighborhoods. Yet as you say: “Buy the worse house in the nicest neighborhood. Personally I agree 100%. Totally prefer building more reserves for a better property and avoid like a plague anything I can’t live in myself with my family.
Hey Dave and Rob, I didn't even know that my question was going to be used on this episode and I just heard it a couple of days ago while I was finishing a flip. Thank you guys for the advice with my rental, we were leaning towards the idea of just taking the loss until the rent be raised. I have been listening for over a year now and keep learning new things. I really appreciate all of the knowledge you guys drop in this podcast as well as the quirps and quaffs.
I always thought "cheap house investing" means remote investing when you live in an expensive market. Crappy "C" house costs $500K here but a nice "B+" house in a remote community costs $180k. Sure the % HVAC is higher, CF may be smaller, so I have a larger reserve. But if HVAC goes out in a high market, OUCH, too.
Wanna start by saying thanks for all the free educational content. Don’t you have to refinance out of your FHA to get another? Meaning you’ll have to add enough equity to have 20% for a refi. Not quite as easy as just saving 3.5% a year. Still really good advice and the path I’m following! Also you said you don’t need to tell anyone that you’re making your primary a rental. Do you mean tell anyone at the bank? Because you definitely gotta let your insurance agent know
@@OneLeggedTarantula I did look it up more after commenting. Most cases you can only have one at a time but there is no limit on how many times you do it. There were only a couple factors where they would underwrite you to have 2 at a a time, such as if you were a co borrower on the first FHA you could go get your own. If it’s 100 miles away from your first house you may or may not be approved based on the situation, If your family has grown “significantly” Or if you’re buying a property that was last bought with an FHA and foreclosed on
I was using other people property for short term rental using airbnb , and I saw that for every reservation airbnb withheld, 29% income tax automatically where there is no gain at all
inspections are a waste of $$. learn how to do it yourself. old house? have the sewer checked. hvac can do a service check and a roofer can really spot damaged shingles.
Thanks for the great info! Always love listening! In reference to not having to tell anyone with a sneaky FHA rental. We bought a duplex with an FHA, and my husbands job took us out of state a year later. The one thing I would have to disagree with is this, you will have to tell your insurance company, and that can hike your insurance premiums, you also may have to inform the township/ city (as we were notified we had to) which took away some of the tax benefits we were receiving on our loan such as a homestead credit. This jumped our monthly mortgage $600 in 2 years. So just be ware there may be some sneaky hidden issues depending on location. This home was in Michigan.
In Texas, I use a company that appeals property tax increases on my behalf so far they have been successful. As far as insurance, I just raise the deductible, so my cash flow stays where I want it.
Yes many of us feel you are neglecting the strategy of accumulating less expensive houses for cash flow . These are often in post industrial cities where there are strong rent to price ratios and people start off with a few because the barrier to entry is low or it’s where they live or whatever and then they build a portfolio and become experts at all the nuances of cast iron plumbing cloth wiring rubber roofs and all the other nuances of this space . I think the way to go would just be to have another show segment maybe with hosts that are interested in that strategy that focuses on it .
I’m confused on what they were talking about with the loans. If you buy a property with the intention of living in it, but then move out doesn’t mess with the rules for example, if I buy a duplex and wanted to house hack, but then move out a month later and put a tenant in in there, would I be able to do that?
What’s up, David and Rob! As always, I love the content. You guys have been instrumental as I begin my REI journey. I have a question that is along the same grain as this cash flow conversation. I have a unique situation as I have lived rent free most of my working years, at a boarding school that provides housing. I decided that I wanted to take advantage of this benefit by buying a property to eventually rent out (after meeting the 1 year primary residence restrictions). I bought a log cabin in an up and coming area of western NC. I have lived in and value added in this home for the past year (minor cosmetic renovations, furnishings, etc.) I’ve known the market for awhile, and I worked with a realtor to find a deal on this cabin. It is a vacation/wedding destination town and a retirement haven. The local community is growing as people move out of the city and into the mountains. A lot of younger families coming in and exciting growth, so I am expecting significant appreciation over the years in addition to the equity I bought. Similar homes go for about 50-75k more than what I bought mine for. I got a 3% mortgage, and closing costs covered. I originally thought about doing Airbnb, but now I am considering mid-term and even long-term. However, with mortgage rates being so high when I bought, I am worried I will have some negative cash flow (approximately 200-300 per month as a long term). It’s possible it achieves positive cash flow as an Airbnb but I worry about the down months and other risks associated. As such, I am asking for your thoughts and advice as I consider my options. I thought there’s good potential as a flip, but perhaps not in this market and after capital gains (this is far from my hopes anyways). I got into this as a long-term investment, with the hopes of my expenses being covered while I live rent free and watch my equity build over time. However, with this potential for monthly loss, even though it is a minor dent to my income, I am wondering if I made the right decision. Many might say that I should’ve put all those savings towards other investments, but I understand real-estate, enjoy the entrepreneurial process, and believe in the potential for long term wealth building. My goal is for this house to be paid for over the long term, refinance to pull money out, and do it again in another nearby, yet different market (BRRR). I would love to hear you guys address my situation on an upcoming show. Thanks again!
Hi Nathan! Thank you for listening and we appreciate your detailed question. We have a very active community on our forums full of experienced investors and I would recommend that you post there since your situation is unique! www.biggerpockets.com/forums?
It blows my mind that Rob is supposed to be a seasoned real estate investor, and a co-host of the largest RE podcast, and he doesn't even know how loans work... The BPRE podcast has gone so downhill. I miss the good old days. Thankfully the 'On the Market' podcast is compensating with amazing & knowledgeable hosts like Dave Meyer, James, Henry & Kathy
