Another side question:
Do you keep the income/expenses with your personal tax, or did you start a separate 'business' (LLC or whatever) to keep the taxes/liabilities/etc separate from your personal stuff?

 

Seperate LLC.

 

Knowing MXT77 that tells me he's in a hot spot.

Texas is the #1 Relocation destination and the Texaplex (google it) is the hottest economy in the nation.

There was just a study released that shows it's cheaper to buy than to rent in 72 of the major metropolitan areas and the Dallas area is #16 on that list.

Interestingly in Fort Worth it's still slightly cheaper to rent, but they recommend buying in FW before Dallas because FW's economy has been better.

I haven't seen the final figures but in October FW was on track for a 6% Appreciation figure and Dallas for a 4% Appreciation.

I work with a lot of property investors and none of them will accept a $100 profit and bet on the cum of enough tax write off and appreciation to give them a profit. One unrented month destroys all your profit and you must have enough cash to make it out of pocket profitable or your wife will be hollering at you all the time.

Keep in mind that investment loans come at a price. You won't get the same down payment nor the same interest rate. Underwriting is tougher on investment properties because historically one bad investment property will bring down 3 loans. Investors tend to rob Peter to pay Paul and end up losing 3 properties to foreclosure instead of just one.

Also an LLC or corporation won't be able to get the loan. People get home loans, not companies.

 

Interesting. My Wachovia statement quite clearly has my LLC on it.

 

Mortgage loans are rarely given to LLCs or corporations. Fannie/Freddie and HUD say they are designed for people. The few corps that do get loans for homes do not get traditional mortgages at traditional down payments or interest rates.

IF you were able to secure a loan for an LLC, and that's a very big IF, then it would not be a mortgage as you are used to thinking of it. Think credit card rates and terms.

And your statement isn't your note nor your deed. My statements have a different name on them than does my note & deed and that doesn't affect my liabilities or change a thing. I don't use my first name but the law requires me to use my first name when I buy a property. As a convenience for my my lender just uses my middle name and they also take my checks which aren't in my full name.

 

I'll write a little bit more. There are two ways two make money on rental properties. One is by cashflow and the second is through equity. If your goal is cashflow, you want to buy cheap houses, starter single-family homes that are 1-story in decent neighborhood. As long as you have decent downpayment, 20-25% you should be able to make $400/month cashflow on a property like this. Properties like these should be bought with a 30-year mortgage. Your goal should be to save that $400/month plus any other money you can each month, and buy several of these properties.

The other way of doing is counting on appreciation. That's where you buy a nicer, higher end home but when it comes to these houses usually the rent you collect will not cover your mortgage and other expenses. You can make a lot of money if the house appreciates, but at this point you're gambling. A lot of people made this gamble in the mid 2000s during the runup of the housing bubble and most of them lost big time. If this is really what you want to do, I'd go with option number 1.

As to whether or not you should put it in an LLC, it's really up to you. Keep this in mind though. As long as you have a mortgage on the house, you're still personally responsible for it whether it's in an LLC or not. A bank will not issue a loan to your LLC, the loan will still be in your name. If you want to protect yourself against liability, the proper way to do that is through an umbrella insurance policy.

 

Yeah, I think that's what I was primarily looking for. For example, the house I'm looking at is old, so I don't want a renter to sue me if they live in it and get lead-paint or asbestos poisoning or something. Beyond that, though, I was also thinking about things like: if the property is profitable and I include that in my personal tax/income, then it could put me above the cutoff for investing in a Roth IRA & stuff like that, too. I don't want to cross that threshold any sooner than I have to.


Thanks to all of those that have contributed so far! Keep it coming, this is good stuff.

 

When it comes to lead-paint specifically, the rental forms that you buy online and download will include a blurb in there about lead-paint and that should be enough to protect you.

You're missing the point on the whole tax write-off thing. Following the IRS rules, the way it works out is that even though in real life you make a profit, on paper you show a loss because of the depreciation. If anything, it will help keep you below the cutoff for the Roth IRA.

 

The notion that real estate is going to come back any time in the next decade, is frankly preposterous.

By historical affordablity measures, houses are still too expensive. When you factor in the existing inventory + bank owned shadow inventory (which will continue to grow) + people who would like to sell but are under water, you have a recipe for continued downward pressure on prices for some time to come.

AND the transaction cost for real estate are so high you need significant appreciation just to make any money.

 

I suppose you are correct and all other economic and real estate experts are wrong, right? The housing market had crashed before but always bounced back within a few years. I'd love to see you tell Warren Buffett in the face that his educated prediction is preposterous.

Whom should I believe - some guys on here or well-known experts? I'd choose the latter, thank you very much. Besides, I'm in no rush of selling the house within 1 or 2 years; I'm in for the long run.

Moreover, as they say in real estate: "Location, location, location." If you invest in some ghetto in a deadbeat town, your chances of profit wouldn't be so good. But if you invest in a good town with prospect of growth and economical backing from giant, profitable corporations, then your chances of a long-term profit would be GREAT. The latter applies to me. Here, the local economy has the backing from giants, such as Boeing and Microsoft. In addition, the Chinaman has just ordered 200 planes from Boeing (not to mention a new contract from the U.S. gov't), this will create massive new jobs in the area, and thus, all things in the local economy will prosper, esp. housing.

http://www.ibtimes.com/articles/102932/201...t-hu-jintao.htm

The prospect of my long-term profit looks bright; I can't speak about y'all's. Microsoft had turned its local town into one of the wealthiest towns in the nation. Boeing had done a great deed to its local economies as well; just ask the fat, juicy workers at Boeing. Location, location, location!!!

In conclusion, I would much rather listen to the experts than some guys on here.

P.S. Another good sign for me: I bought that house 4 months ago (just finished building) for 315K, but now, the surrounding homes are selling for 335K - an increase of 20K, and they're pretty much sold out. Yesterday, I met with the builder and he joked with me by saying "If you resold this house now, you'll have made $20K." I laughed and thought: "Um, no! I'll wait for a few years."