\n<\/p>\n
How important are mortgage rates<\/strong> to real estate investing<\/strong><\/a>? Should I take out as much depreciation <\/strong>as possible to lower my taxes? And what should I do when my DTI (debt-to-income) ratio is too high<\/strong>? You\u2019ve got the questions, and David Greene has the answers! On this episode of Seeing Greene<\/strong>, David goes high-level, getting into the topics like real estate tax benefits<\/strong>, return on equity<\/strong> (ROE), and why loans and leverage <\/strong>are riskier than most rookies think!<\/p>\n We\u2019ve got questions from house hackers, BRRRRers, multifamily and commercial investors, and more on this week\u2019s Seeing Greene. First, we hear from a college student trying to house hack in an expensive housing market<\/strong>. Then, a family who has outgrown their space and wants to use creative financing<\/strong> to buy their next primary residence. And finally, a mother concerned that real estate investing <\/strong>could affect her children\u2019s stability<\/strong>. Don\u2019t know what you\u2019d do in these situations? Then, stick around! David\u2019s got the answers!<\/p>\n Want to ask David a question? If so, <\/strong>submit your question here<\/strong><\/a> so David can answer it on the next episode of Seeing Greene. Hop on the BiggerPockets forums <\/strong>and ask other investors their take, or follow David on Instagram<\/strong><\/a> to see when he\u2019s going live so you can hop on a live Q&A and get your question answered on the spot!<\/p>\n David: Shalom: David: Guy: David: JJ: David: Jack: David: \u00a0<\/p>\n \u00a0<\/p>\n<\/div>\n Help us reach new listeners on iTunes by leaving us a rating and review! It takes just 30 seconds and instructions can be found here<\/a>. Thanks! We really appreciate it!<\/p>\n Interested in learning more about today\u2019s sponsors or becoming a BiggerPockets partner yourself? Check out our\u00a0<\/em>sponsor page<\/em><\/a>!<\/em><\/p>\n Note By BiggerPockets:<\/b> These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.<\/p>\n
This is the BiggerPockets Podcast show 720. Leverage is great. It\u2019s not great for everybody. It\u2019s meant for people that understand how to use it. There\u2019s a lot of things in life that are like this. Okay. Cars are great, but we don\u2019t let nine-year-olds drive them. We don\u2019t even let 25-year-olds drive them if they haven\u2019t passed a driver\u2019s safety course and passed the test and understand the rules of the road. You got to earn the right to drive. You got to earn the right to play with fire, right. There\u2019s people that use fire in their jobs. There\u2019s welders. There\u2019s different types of people that use heat to conduct certain things, but you don\u2019t just give them the tool and let them go play with it right off the bat. You got to earn that right. Leverage is very similar.
What\u2019s up, everyone? This is David Greene, your host of the BiggerPockets Real Estate Podcast, here today with a Seeing Greene episode for your viewing and listening pleasure. If you\u2019re listening [inaudible 00:00:50] on a podcast, that\u2019s awesome. I appreciate that. But you can also check us out on YouTube, if you want to see what I look like. I\u2019m often told that I am taller in real life than what people thought. I don\u2019t know if that\u2019s a compliment or if what they\u2019re trying to say is I have a shrill tiny voice that makes me sound like I\u2019m four foot two. Not sure which way to take it. So let me know, when you watch me on YouTube, do I look like what you pictured in your head? It\u2019s always fun when you see what someone looks like, and it\u2019s very, very different than what you were expecting, and you can never really look at them the same way again.
In today\u2019s show, we\u2019ve got some really cool stuff. We talk about how to continue house hacking even when your debt-to-income ratio can start to shrink from owning all the new real estate. We talk about if a property that is currently owned should be rented out or if they should stay in that property and not buy a new one. We get into if someone should save $300,000 in taxes or if they should avoid that and save that money in the future, all that and more in today\u2019s Seeing Greene episode. Now, if you\u2019ve never listened to one of these episodes, let me just break it down for you real quick. In these shows, we take questions from you, our listeners, we play them, and then I answer them for everybody to hear with the goal of helping increase your knowledge base and real estate so that you can be more successful on your own path to financial freedom through real estate.
Before we get into today\u2019s show, one last order of business are Quick Tip, and that is 2023 is now here. 2024 is not going to be better than 2023 if you don\u2019t make intentional changes to do so. And 2023 is not going to be any different than 2022 if you don\u2019t make intentional changes to make it that way. So spend some time meditating on what you would like your life to look like. And more importantly, who you would have to be to make that happen. Sometimes we make the mistake of asking, \u201cWhat do I have to do, or what do I need to accumulate to get what I want?\u201d It\u2019s much better to ask, \u201cWho do I need to become?\u201d Because when you become that person, those things will find you. All right, let\u2019s get to our first question.<\/p>\n
Hi, David. Excited to have you answer my question. My name is Shalom, and I\u2019m an avid listener of BiggerPockets. My question is as follows. So currently, I\u2019m a college student in New York City, and I will be graduating soon with an income of $85,000 a year. I\u2019m wondering how I can start house hacking or how I can continue my real estate journey. So currently I have one parking space, which I do arbitrage on. I lease it out for 275, and then arbitrages sublease it to someone else for 335 a month.
Now I\u2019m looking to expand, but I don\u2019t know how to house hack or how I can grow without\u2026 because my market is so expensive. So in New York City or in Brooklyn or in the outskirts in New Jersey, duplexes go for a million and a half, two million plus. So how can I house hack or expand in this market with such limiting constraints with\u2026 of income and other kinds of things? Thanks.<\/p>\n
All right, Shalom. Thank you very much for asking that question. I appreciate it. Let\u2019s dive into this because there is an answer to what you\u2019re asking. You\u2019re talking about house hacking, which is probably my favorite topic in all of real estate to get into. There\u2019s so many ways to do it. It\u2019s such a superior investing strategy. It could be a\u2026 It\u2019s flexible. It should be a part of everybody\u2019s strategy, even if they buy properties using different means. House hacking is great.
What you\u2019re talking about is a commonly encountered problem in high-priced areas, more expensive stuff. Like what you\u2019re talking about, New Jersey, New York, you\u2019ll frequently see this. The reason that duplexes sell for so much is someone will buy it, and I know that sounds silly, but think about it. If you\u2019re normally going to be paying four grand a month for your mortgage, but you could buy a duplex and rent out one side for 2,500, it\u2019s a huge win if you only have to pay 1,500.
So if you\u2019re trying to get cash flow, it\u2019s not going to work, but if you\u2019re trying to save on your mortgage, it is going to work. So, unfortunately, all your competition is okay not getting cash flow, which creates more demand. The supply stays the same. Prices go up. That\u2019s what you\u2019re facing with. So if you want a house hack in an expensive market, which you should, there\u2019s two things to think about. The first, well, are you currently paying rent right now?
If you factor in the rent that you\u2019re paying and include that as income in the investment, you might find the numbers look a lot better than what you\u2019re thinking of not doing that. The second thing is you probably aren\u2019t going to be able to buy a duplex because the higher the unit count in the property, the more likely you\u2019re going to make the numbers look better.
The other thing is that you could look into non-traditional house hacks. So we always describe the strategy of house hacking. Brandon Turner and I would do this all the time by talking about, \u201cBuy a duplex, buy a triplex, live in one unit, run out the others,\u201d because it\u2019s very simple to understand the concept. But that doesn\u2019t mean that the execution needs to actually be done like that. It\u2019s kind of hard to make it work that way, to be frank.
It\u2019s easier to go buy a five-bedroom house with three bathrooms, add another bedroom or two to it, so you have six or seven bedrooms, rent out those rooms and live in one of the rooms yourself. Now, this isn\u2019t as comfortable, but that\u2019s what you\u2019re giving up. You\u2019re giving up comfort in order to be able to make money. Now you\u2019re a young guy. You\u2019re making 85K a year, which is not bad at all.
You can take some risk by buying real estate. I think that\u2019s a smart move. You should be investing your money but sacrifice your comfort. You don\u2019t have to just buy a duplex and rent in one side of it. If you were going to do that, I\u2019d buy a duplex that had two to three bedrooms on each side and rent those out individually. You\u2019re always going to increase the revenue a property brings in by increasing the number of units that can be rented out.
This can be done by going from a duplex to a triplex or a triplex to a fourplex or a fourplex that has two bedrooms instead of one bedroom and renting the bedrooms out individually or converting a family room into a bedroom and renting that out. Now, this doesn\u2019t work at scale. It is very difficult to build a large portfolio doing this because now you\u2019re renting out 10 to 12 bedrooms on every single unit. It\u2019s very hard to manage that.
But when you\u2019re new, and you\u2019re just trying to get traction, and you\u2019re going to be building appreciation, buying an expensive market, this is probably the best way to do it. You\u2019re also going to decrease your risk while learning a little bit of the fundamentals of investing in real estate. So that\u2019s the advice that I\u2019d have for you. Stop looking at duplexes.
You got to look at triplexes or fourplexes, and you got to look at single-family homes that have a lot of bedrooms and a lot of bathrooms with sufficient parking and neighbors that aren\u2019t super close because you don\u2019t want them complaining and putting your tenant\u2019s parks in front of their house. So you\u2019re going to have to be looking on the MLS and looking more frequently for the right deal, but be looking for a different kind of deal, and you\u2019ll find that house hacking works a lot better.
All right. Our next question comes from Jesse Goldstein. \u201cHey, David. Thank you for creating what is clearly the best source of real estate content available. Your show is packed more full of real estate protein than my family after Thanksgiving dinner. My question is about how to apply creative financing strategies used for investment deals to the residential real estate space. As a background, my wife and I are expecting our fourth child and are quickly outgrowing our 2300-square-foot townhome.
Our plan is to rent it out if we can find a bigger place, but since we have not been able to find one price right in the few months since we have been looking, a colleague is relocating out of state in December, recently listed her beautiful home, but with today\u2019s interest rates, it is significantly more than I feel comfortable spending. I was chatting with her a few weeks ago after I heard her saying they had no bites after two price reductions and were considering renting the property out.
It seems both of us have been hurt by higher interest rates. I think we may now be in a situation where they might entertain some creative financing ideas to potentially solve both of our problems. They are set on their 1.3 million market price but currently have a very low-interest rate in the twos and are now getting quite motivated rather than renting it out. We have spoken briefly about a subject to loan installment, land sale contract, lease option, or potentially holding a second mortgage, and we are both seeking advice from real estate attorneys.
What is your impression on employing these strategies in the residential space? None of the local Pennsylvania realtors have been speaking with have heard of this approach. If we proceed down these paths, how might both parties compensate our respective agents for their hard work over the last several months? Thank you.\u201d Okay, let\u2019s dive into this one, Jesse.
First off, when it comes to compensating the agents, that\u2019s something that the seller is going to be responsible for. That needs to come from the seller side regardless of how the transaction is structured. Now, the title and escrow company can handle this for you. They\u2019ll just take out the commissions that would\u2019ve gone to the agents and pay them even if you\u2019re not doing the transaction at what we call an arms lengths deal where you didn\u2019t put on the MLS. They didn\u2019t just find a buyer they don\u2019t know. They\u2019re selling it to you.
Your question comes down to structuring this creatively, and it sounds like what you\u2019re thinking is you can get a better deal if you do that. Based on everything that I\u2019ve seen here, the only part of the deal that sounds better is the interest rate you\u2019ll be getting. You\u2019ll get it in the twos and not in the sevens or the sixes or wherever they are.
You\u2019re not actually getting a better price. They want that 1.3 million. One thing to be aware of is if you take this over and you\u2019re not getting your own loan, there\u2019s a little less due diligence that\u2019s done. So you\u2019re going to want to get an appraisal to make sure you\u2019re not overpaying for that property unless you\u2019re okay paying 1.3 and you don\u2019t care what it appraises for. But odds are, if it\u2019s not selling, they probably have it listed too high, and they\u2019re considering selling to you because they want to get the same money.
Now they\u2019re not actually losing anything here other than they\u2019re keeping that debt on their own book so to speak. So they\u2019re still going to be responsible for making the payment even though you\u2019re the one making it for them, and if they try to buy their next house, they\u2019re going to find that that\u2019s difficult. So, sometimes because the sellers don\u2019t understand the downsides of a subject to, you do all the work, you put it together, maybe you even close on the home, they go to buy their next one, and their lender says, \u201cYou can\u2019t buy a house. You still have this mortgage on your name.\u201d
And they say, \u201cWell, no. So-and-so\u2019s paying it.\u201d Doesn\u2019t matter. Still shows up as lean on the property under you. Subject to is not this like catch-all that fixes every single problem. It can work in a lot of cases, but in other cases, it doesn\u2019t. I don\u2019t know that this sounds like one where it says an immediate, \u201cOh, subject to will make the deal work.\u201d You didn\u2019t mention what the numbers are running it at an interest rate in the twos. Okay, people fall in love with the interest rate. It\u2019s an ego thing. \u201cMy rate is high. My rate is low. I\u2019m in the twos.\u201d That doesn\u2019t mean anything.
If the property loses money every month or you could have a cheaper payment if you bought somebody else\u2019s house that you didn\u2019t do subject to. It doesn\u2019t matter what your rate is. It matters what the property\u2019s actually producing. You could theoretically buy a house with a interest rate in the 40% if it cash flowed. If it brought in enough money, that\u2019s what really matters. So you need to do a little bit of homework here, run some numbers and see, \u201cIf I buy this property with their mortgage, is it going to perform the way that I want it to perform?\u201d
If it doesn\u2019t just stop looking at it. The purchase price is going to be the problem here, not just the interest rate. If it does work, there\u2019s your answer. Now all you have to do is figure out how to structure it if you\u2019re going to buy it. Part of the problem is you\u2019re going to have to come up with the difference between what they owe and what they\u2019re asking for. So let\u2019s say that there\u2019s a mortgage on this thing for 700,000, and they want to sell it for 1.3.
Well, that $600,000 difference you would have to put as the down payment, or you\u2019d have to pay as a note to them, or you\u2019d have to get from another lender, and that lender\u2019s not going to want to give you the loan because they\u2019re going to be in second position behind the loan that\u2019s already there. See, when we get a loan to purchase a property, we\u2019re paying off the existing liens with the money from the new loan, which puts the new loan back in first position, which is where they\u2019re always going to want to be. This is another complication that comes up with the subject to strategy.
So if they only owe 1.1 million, and they\u2019re trying to sell it for 1.3 million, and you have the $200,000 that you were going to put as a down payment anyways, that could work. But everything\u2019s got to line up for you perfectly if you\u2019re going to make something like this work. My advice is to not look at creative financing as a way to make a bad deal seem like a good deal. It almost sounds like you\u2019re trying to talk yourself into this deal because their rate is in the twos, or you\u2019re like, \u201cHey, we know each other. Here\u2019s my chance to use all the cool stuff I learned on BiggerPockets.\u201d
I really like the excitement, but that\u2019s not what creative financing is ideally designed to be. It\u2019s more when someone\u2019s in an incredibly distressed situation, and they are very motivated to sell, and they\u2019re willing to do creative financing even though it\u2019s usually not in their best interest. Now, if you\u2019re looking to buy this house for yourself because you mentioned replacing your townhome, so maybe this is a primary residence, then your due diligence is even easier. Look at what your mortgage would be on this house, if you assume their mortgage.
Compare that to what your mortgage would be on a similar house that you might buy if you bought it with today\u2019s interest rates and see which of those situations feels better to you. Do you like this one more at this price, or do you like that one more at that price? And if you like this house more, the only thing you got to work out is that situation with the seller where there may be the discrepancy between how much they owe in their old mortgage that you\u2019re taking over and how much the purchase price is that you\u2019re going to have to pay the difference. Good luck with that.<\/p>\n
Hey David, thanks for taking the question. My name is Guy Baxter. I\u2019m 26 from San Diego, California. I\u2019ve been listening to the podcast for almost three years now and just this year bought my first property in San Diego. I bought it in May.
I\u2019m coming up on the sixth-month mark and have a few questions about BRRRRing, just with the current market conditions. Since I purchased the property, interest rates have gone up quite a bit, and I\u2019m just trying to decide if I should continue on the path of the BRRRR and kind of bite the bullet with the higher interest rates and pull all of my cash out so I can put it and deploy it somewhere else, or if I should maintain the lower monthly payment and just save up a little bit more for next year to house hack again.
Luckily, with the rising interest rates in San Diego, the prices haven\u2019t quite dropped yet, so I should be able to get most, are all of my money back, maybe a little bit more, and yeah, hopefully, that makes sense. I can\u2019t wait to hear the answer. Thanks.<\/p>\n
Hey, thank you for that, Guy. All right. This is a commonly asked question, and I\u2019m going to do my best job to break it down in a way that will help everyone. When trying to decide, \u201cShould I refinance out of my low rate into a higher rate,\u201d which is what you\u2019d have to do to get your money out of the deal to buy the next deal. The wrong question to ask is, \u201cShould I keep my low rate or get a higher rate?\u201d
The right question to ask is, \u201cHow much money would I have to spend every month if I refinance to pull my money out more than what I\u2019m spending now?\u201d So let\u2019s say that your debt is at three grand a month, and if you refinance, it\u2019s going to go up to 3,500 at the higher rate with the higher loan balance because you\u2019re pulling the money out. Okay. So now you have a $500 loss if you do this.
You want to compare that to how much money you can make if you reinvest the money that you pulled out. So if you\u2019re pulling out $250,000, can you invest $250,000 in a way that will earn you more than the $500 that it costs you every month extra to take out the new loan? So now you\u2019re comparing 500 extra to what I can get extra somewhere else. That\u2019s the right way to look at this problem. Now, of course, this is only looking at cash flow, whereas real estate makes you money in a lot of different ways.
But if you can get the cash flow somewhat close, it\u2019s a no-brainer to buy the new real estate because you\u2019re going to eventually get appreciation. You\u2019re going to get a loan pay down on a new property. You\u2019re going to get rents that go up on the new property while your mortgage stays the same. So every year, it\u2019s going to theoretically become more valuable to you, and over a 5, 10, 15, 20-year period, having two properties instead of one is almost always going to be a superior investing strategy. So most of the time, most of the time, pulling the money out to buy more real estate, in the long run, will be better, but it\u2019s not always the case.
All right. If you\u2019re cash flowing incredibly well on the San Diego property, maybe it\u2019s a better quality-of-life move for you to just live off of that and not reinvest. If you\u2019ve got a bunch of real estate and you don\u2019t want to buy more, maybe it\u2019s a better move to just stick with where you\u2019re at. But what I want to get at is don\u2019t ask the question of, \u201cShould I get out of the 4% to get into a six and a half percent?\u201d It just doesn\u2019t matter. It matters what the cost of that capital is.
How much does it cost you to pull that money out, and how much can you make with the money if you go reinvest it, or are you going to lose money if you go reinvest it? What if there\u2019s just no opportunities out there? That\u2019s a realistic scenario for a lot of people. There\u2019s nothing to buy that they like. In that case, it doesn\u2019t do you good to do a cash-out refinance and have capital if you\u2019re not going to go spend it on anything. Okay.
So ask yourself the right questions. Think through this. Maybe give us another video submission with some different investment opportunities that I could compare. And then, I can give you a better answer on if you should take the money out of the San Diego house and put it back into the market in a different property.
All right. Thank you, everybody, for submitting your questions. If you didn\u2019t do that, we wouldn\u2019t have a show, and I really appreciate the fact that we\u2019re able to have one. And I want to ask, \u201cDo you like the show?\u201d At this segment of the show is where I read comments from YouTube videos on previous shows, so you get to hear what other people are saying. And here\u2019s also where I would ask if you would please like and subscribe to this video and this channel and leave your comments on YouTube for us to read possibly on a future episode.
All right, this comes from episode 699, tip from a listener regarding an unsafe tenant from Ariel Eve. On question two, call Adult Protective Services to voice your concerns. They will conduct an investigation regarding her safety to live alone. Our next comment comes from Iceman Ant. Ariel\u2019s comment there was from a person who had a tenant and they were concerned about their safety. They were afraid that the person might pass out or possibly even die in the unit that they had, and they wanted to know if they had any actual obligation to care for the person or any liability in that scenario.
Our next comment comes from Iceman Ant. \u201cLOL. He said, programs. It\u2019s cool, David. I also grew up in the VHS area.\u201d All right, this is some criticism that I deserve. I made a comment when referring to old TV shows, and I called him programs because that\u2019s what my grandma used to call them, and it was stuck in my head, and it came out when I was talking. And Iceman called me out on it. It used to be, \u201cAre you watching your favorite program?\u201d I know somebody out there remembers that people used to call TV shows, programs.
There\u2019s certain things like that that we just still say. Like someone will say, \u201cAre you filming?\u201d And I\u2019m like, well, we don\u2019t really use film anymore. Nobody\u2019s used film for a long time. Like now, we would probably say recording, but you\u2019ll still hear people say filming. All right. Our next comment comes from Brie. \u201cI\u2019m concerned about the first viewer\u2019s question as serial house hacking was also going to be my strategy getting started. However, if you cannot apply rental income from the property you\u2019re currently occupying to debt\u2019s income ratios, that presents a huge barrier to qualifying for that second house. This is my first time hearing of this. So the alternative is to move out by either renting or increasing W2 income to afford the two houses without counting the rental income. Any other tips?\u201d
All right. Brie comment and question have to do with the fact that when you\u2019re house hacking, you can\u2019t take the income that you\u2019re being paid and use that towards income for your next property. You\u2019re not allowed to use income from a primary residence to qualify for more properties and your next property in most cases. Now, I believe if it has an ADU or sometimes if it\u2019s a duplex or you\u2019re living in one unit renting out the other, you might be able to. But many times, lenders say, \u201cNope, that\u2019s your primary. You can\u2019t count the income that\u2019s coming in from it because we can\u2019t verify it.\u201d
This is also a problem when people don\u2019t claim that income on their taxes. If you\u2019re not claiming the income on your taxes, you\u2019re definitely not going to be able to use it to qualify for the next house. And I\u2019m frequently telling people to house hack every single year. The key is when you move out of the last house, it now no longer is a primary residence. It does not matter if your loan is a primary residence loan.
And by the way, if you are wondering, no. If you move out of a house, it\u2019s your primary residence, it doesn\u2019t just automatically adjust to a investment property loan with a higher rate. The bank doesn\u2019t know, doesn\u2019t care, doesn\u2019t matter. You got that loan as a primary residence and those loan terms, if you got a fixed rate, will not change for the next period of time, usually 30 years that you have that loan.
So when you move out of it, you still get a loan that\u2019s a primary residence loan, but now on your taxes, it is now claimed as an income property. You\u2019re now claiming the income that it makes, and you can now use that income to buy additional properties. So sometimes you buy a house, you house hack it, you move out of it into something else, then you start claiming that income on your taxes as an investment property, which won\u2019t hurt your DTI. Then you can buy your next house. You can repeat that process indefinitely. So it slows down how quickly you can acquire new house hacks.
But in a worst-case scenario, you can still do it every two years, right. And once you get to a certain point, you\u2019re not going to need the extra income to qualify. Your debt-to-income ratio is going to be good from the rent that you have of all the previous houses that you bought being counted towards your income. So it can make it a little bit slower to get started, but long-term, it\u2019s not going to hurt you all that much. Thank you for that, Brie.
Next comment comes from Austin. \u201cI think there is something Eli, who asked the house hacking question, could do. You can buy a primary house once every year. So if he\u2019s coming up on that year, let\u2019s say his one year into his house is 12\/11\/22, he can get the roommates to sign a new lease that just isn\u2019t a rent-by-the-room lease, but the entire house lease. Then get the roommates to sign it for, let\u2019s say, January 1st, 2022. Even though it\u2019s December now, they can agree to a new lease now. So he can be living in the house from 12\/11 to 12\/31, trying to find a new house.
He can go to his lender now and show his January 1st lease, and they will count 75 or 80% of the rent as income. Or if all his roommates want to move out December 31st, he could just rent, pre-lease the entire house to a family and get a signed lease. Take that signed lease to lender, and they will count 75 or 80% of the rent as income to help the DTI. The other thing Eli could do is to try to buy a duplex. Let\u2019s say the duplex has side A rented at a thousand and side B is vacant. The lender would count 75 or 80% of the rental income from side A towards his DTI. Curious if anyone has other ideas. I am house hacking as well and looking to scale.\u201d
All right. Well, thank you, Austin, for your contribution there. I would\u2026 It may be right, but we would need to verify this before we assume that any of the advice you\u2019re getting would just work. So whenever I\u2019m in a scenario like this, I just go to a loan officer, and I say, \u201cHey, how does this work?\u201d Now, most of the time, the loan officers aren\u2019t going to know either. This is just way too granular. So they\u2019re going to go to the lender, and they\u2019re going to say, \u201cHey, I need to talk to an account executive. What are your rules for underwriting when it comes to these scenarios?\u201d
And they\u2019re going to go talk to an underwriter. They\u2019re going to wait to hear back. The underwriter\u2019s going to look up the conditions that they have for all the different loan programs and let you know can it work, or can it not work, or what would work. And then we get back to you. This is why I have a loan company, the one brokerage, and this is why I go to them and say, \u201cHey, this is my problem. How can we fix it?\u201d And I let the professionals work it out. It is tempting to try to figure all this out on a YouTube column, but it\u2019s not wise. There\u2019s no way that anybody here is going to be able to know, and these rules shift all the time.
So your best bet, if you have questions, is to actually contact a loan officer or a loan broker and ask them, \u201cHey, this is my problem. How can I fix it?\u201d Let them come back to you with some answers. And our last comment comes from Kelly Olson. \u201cDavid, you keep saying, accountability partner. Try saying accountabilabuddy. It rolls off the tongue and is fun to say.\u201d Accountabilabuddy. Okay, that is easier to say, and it is also a little cheesier, and I don\u2019t know how well green cheese is going to come across. So, for now, I am going to use the very square-ish accountability partner, but I will say, Kelly, accountabilabuddy is probably going to take off. It\u2019s going to be very popular.
And if you guys prefer accountabilabuddy, please let us know in the comments by just writing in accountabilabuddy. All right. We love and we appreciate your engagement. Please continue to do so. Like, subscribe, and comment on this YouTube channel. And if you\u2019re listening on a podcast app, take some time to give us a five-star review. We want to get better and to stay relevant, so please, drop us the line if you\u2019re at Apple Podcast, if you\u2019re on Spotify, Stitcher, whatever it is. We will not stay the top real estate-related podcast in the world if you guys don\u2019t give us those reviews. So that\u2019s why I\u2019m asking for it. Thank you very much. All right. Let\u2019s get back into the show. Our next video comes from JJ Williams in St. Louis, Missouri.<\/p>\n
Hey David. I\u2019m under contract with a seller finance property. It\u2019s a historic home that we\u2019re going to look into turning into\u2026 It\u2019d be three units in the main house, and then there\u2019s also a tiny home associated with it. It is zone multi-family and commercial. So we\u2019re looking to do two Airbnbs on the lower level as well as the tiny home. And then we\u2019re looking to do either an office space or long-term rental in the upper level.
The deal it\u2019s 125 doing 10% down seller finance, and then it\u2019s going to cost about between 70 and $80,000 to rehab everything. I\u2019m just curious. I have stocks to pull all the money out of to do the rehab. Is it smarter to take out a loan against those stocks, or should I just pull them out, use the money, and then, that way, my cash flow\u2019s a little bit better? Let me know what you think. Appreciate you.<\/p>\n
Wow, JJ, this is a very interesting question. I don\u2019t get these very often, which is funny because you started off your question giving me all the details of the deal itself, and then when you ask the real question at the end, I realize none of those details are actually relevant. But congratulations on the deal you\u2019re putting together and for explaining how it\u2019s going to work. That\u2019s pretty cool.
All right. The real question here is, \u201cI have stocks. Should I sell the stocks and use the money towards the down payment, or should I take a loan against the stocks to do this?\u201d This is going to come down to how strong your financial position is. If your position is strong, it might be better to take the loan against the stocks. Now, of course, this is assuming the stocks hold their value or go up. If the stocks drop and you take a loan against them, you just went into double jeopardy there. You lost money on the stocks, and you\u2019re losing money on the loan you\u2019re having to pay, right.
And we don\u2019t ever know exactly how it\u2019s going to work out. So most financial gurus like myself are going to give you advice that\u2019s conservative. Almost everyone\u2019s going to say, \u201cDon\u2019t do it.\u201d Okay. This is put on my little Dave Ramsey hat here. \u201cDon\u2019t ever leverage against stocks. In fact, you shouldn\u2019t have leverage on anything. Sell it all and pay cash for the house, sell it all and pay cash for the house. Don\u2019t be stupid.\u201d Now, he might be right because I don\u2019t know enough about your situation to be able to tell you. But I will say if you\u2019re in a strong financial position and you believe in the stocks, it\u2019s not a terrible idea, in my opinion, to take a loan against him to go buy the property.
It is a terrible idea if you can\u2019t make both the house payment and the payment on the loan against your stocks, assuming everything goes wrong with this rental. All right. Now, this is advice I would give to everybody. Assume the worst-case advantage. You can\u2019t rent the property out, nine months go by where it\u2019s vacant. You have to make the loan payment to the person that sold you the property, and you got to make the loan payment against the stocks, and the rehab goes high. Can you still cover all of your debt obligations with the money you have saved up and the money you\u2019re making at work?
If the answer is no, don\u2019t borrow against the stocks. Don\u2019t do anything extra risky if you don\u2019t have that extra money. If the answer is, \u201cYes, David, I\u2019ve been living beneath my beans for five years. I save a lot of money every month. I work really hard. I\u2019m good with cash.\u201d Well then, my friend have earned the right to use leverage, and that\u2019s just the way that I look at it. Leverage is great. It\u2019s not great for everybody. It\u2019s meant for people that understand how to use it. There\u2019s a lot of things in life that are like this.
Okay. Cars are great, but we don\u2019t let nine-year-olds drive them. We don\u2019t even let 25-year-olds drive them if they haven\u2019t passed a driver\u2019s safety course and pass the test and understand the rules of the road. You got to earn the right to drive. You got to earn the right to play with fire, right. There\u2019s people that use fire in their jobs. There\u2019s welders. There\u2019s different types of people that use heat to conduct certain things. But you don\u2019t just give them the tool and let them go play with it right off the bat. You got to earn that right. Leverage is very similar. Be wise about it. If you can handle it, use it. If you can\u2019t, just wait and use it in the future.
Let me know in the comments what you guys think about my approach to using leverage. All right. Our next question is rad, and it comes from Claudia Dominguez in Coral Springs, Florida. \u201cI purchased a property in late 2021 serving as my primary residence until I can rent it out later in 2022, one-year owner occupancy requirement per the association.\u201d So it sounds like Claudia here bought a property in HOA. \u201cBeing that this will be my first rental property, I have several questions I would love help with.\u201d
All right. It\u2019s a three bed, two bathroom, 1800 square foot house. It is a corner unit, single-level townhome with a two-car garage purchased for 322 with 10% down on a 30-year mortgage. Claudia believes that it could rent for 2,500 to 2,800 per month. \u201cOur monthly expenses, including association fees, are 2100.\u201d So what we\u2019re really looking at is 400 to $700 a month in cash flow before we look into maintenance and everything else. All right. Question. \u201cHow would I calculate my potential ROI on the property? Our down payment and closing costs came to 50,000. We spent another 5,000 on new floors after move-in before there was damage to laminate that was there before.\u201d
All right, let\u2019s start with that. You don\u2019t calculate the ROI because you\u2019ve been living in it for a year, and it doesn\u2019t matter what you put down. It matters how much equity you have in the property right now. So subtract the realtor fees, the closing costs, any cost of sale from selling this home, and find out how much money you\u2019d have left. All right. You\u2019re then going to take the 400 a month that you\u2019d get if it rented for 2,500. We\u2019re going to go conservative. We\u2019re going to multiply that times 12. Okay. 12 months times 400 a month is $4,800 in a year.
All right. You\u2019re going to divide that by the amount of equity that you have in the house right now. So it\u2019s purchased for 322 with 10% down. So you really don\u2019t have hardly any equity at all, most likely. Okay. Because if you sold the house, your closing costs are probably going to be close to 6%. So that leaves you with only 4% equity in this property, which is probably 12 grand. So let\u2019s say it\u2019s gone up a little bit, and let\u2019s say that you have say\u2026 Man, let\u2019s be helpful to you here because Florida had a good year, and let\u2019s say you\u2019ve got $40,000 in equity in this property.
So if we divide the 4,800 by 40,000, that gives us a return on equity of 12%, which is pretty good in today\u2019s market. Okay. But let\u2019s say that you don\u2019t even have 40,000 of equity. If we divide that 4,800 by\u2026 Let\u2019s say your house hasn\u2019t got up at all, and you only have about $12,000 in there. Well, now the return on your equity is going to be 40%. So the less equity you have in the deal, the higher the return on your equity is, which means the more sense it makes to rent it out rather than sell it and put the money somewhere else.
So, before I get deeper into your question, it\u2019s already looking like moving out of this property and renting it out is going to be a no-brainer for you, but let\u2019s keep going. \u201cHow can I confirm if it makes financial sense to update the bathrooms?\u201d It probably won\u2019t. Just the amount of money you\u2019re going to have to spend update bathrooms isn\u2019t going to increase your rent by as much as you\u2019re thinking. But your question wasn\u2019t, \u201cShould I?\u201d It was, \u201cHow could I know?\u201d And so my answer to you is going to be if updating the bathrooms is going to increase the rent that you can bring in by a positive return on investment, it makes sense to do it.
So if you could bump up the rent from 2,400 to 2,800 just by updating the bathrooms, and it was only going to cost you, say, 15 grand to update the bathrooms, and you\u2019re going to hold it as a rental for enough period of time to make back the 15 grand, that\u2019s how you determine that question. \u201cI\u2019m struggling with my own bias that I would not rent a property outdated bathrooms. I\u2019m considering a low-budget remodel because I can get more modern used vanities, and I found that tubs can be painted. I\u2019m just not sure if I should keep spending money on this.\u201d
Okay, first off, good job on you for recognizing your own bias. It probably isn\u2019t as big a deal as you think. However, you\u2019ve swayed me. If you\u2019re looking at doing a low-budget remodel, some of it yourself, where you\u2019re just getting new vanities and painting a tub, yes, that can actually make sense for you to do. I assume this was an entire bathroom remodel that we were talking about.
\u201cIf the market continues as it has been the last few quarters, it will mean spending considerably more on the next property I purchased with the intent to rent it out. What criteria should I take into consideration to assure I am purchasing a good investment at what feels like inflated prices? I believe I\u2019ve heard that appreciation should not be an immediate, or do I rate factor for long-term holds? I\u2019m not sure how to estimate the increase in rental rates that might otherwise support purchasing the next property in a tight market.\u201d
Again, the interest rates don\u2019t matter when you\u2019re making this decision. I know that feels weird to hear, and the purchase prices don\u2019t matter. What matters is it going to go up in value from when I paid for it and is it going to cash flow? Now, interest rates and purchase prices do affect cash flow, and they\u2019re relevant for that purpose only. Meaning the higher the purchase price and the higher the rate, the harder it is to cash flow. But in and of themselves, they\u2019re not important. So the criteria that I think you should take into consideration is it will be more of your time and more of your effort spent looking for another deal to replace the one you have.
And this is not uncommon in real estate. In fact, this is probably closer to a healthier market than what we\u2019ve been seeing since the last crash. I know that sounds crazy, but we got spoiled. We got used to buying a property that appreciated every single year that needed very little work that wasn\u2019t intended to cash flow in the first place. This was mostly residential real estate. We\u2019ve all been buying. That cash flowed from day one, and not only cash flow, but cash flowed in double digits. That\u2019s just us being spoiled. And now that we\u2019re not spoiled anymore, we\u2019re angry about it.
But traditionally, the way that real estate is structured, it\u2019s meant to make you money over the long term, not over the short term. So it\u2019s okay if it\u2019s harder than what we thought to make it work. Real estate is still a good investing decision. Question two of three loan options. \u201cWhat are the best loan options for purchasing a property? I have a W2 job that pays above average for my area. And I have good credit, but I only have enough for about a 10% down payment on the next property. Since I already own one property, I believe that will be forced a conventional loan requiring 10% down.\u201d
All right. So the best loan option for you is to do the same thing on your next house as this first one that you did that we just talked about. You want to use a primary residence loan and put as little down as possible. You don\u2019t have to put down 10%. You can actually put down 5% in a lot of instances or three and a half percent if you don\u2019t already have an FHA loan. If you\u2019re not buying it as a primary residence, meaning you\u2019re moving out of the one you\u2019re in and you\u2019re not going to buy another house to live in, you\u2019re going to go live somewhere else. You can put 10% down many times as a vacation home. Okay.
So these are like a house that you\u2019re going to rent out some of the time. But you\u2019re going to rent out to other people, or you\u2019re not going to live there as your primary resident. So hit us up if you want us to look into finding a vacation home loan for you or go to somebody on BiggerPockets, use their tools there and find a person that\u2019s a member that does mortgages and ask them, \u201cHey, what options do I have if I don\u2019t want to burn my vacation home loan? I want to buy a primary residence.\u201d But I don\u2019t assume you got to put 10% down. You can very likely get into something for three and a half to 5% since you\u2019re moving out of your current primary residence.
A lot of people think you can only have one primary residence loan at a time. That is not true. You can usually only have one FHA loan or one VA loan at a time. But you can have more than one primary residence loan at a time because not all primary residence loans are VAs and FHAs. You can get a conventional loan, often with 5% down on a primary residence. Question three of three. This is a family-related question.
\u201cI\u2019m house\u2019s hacking to start. I live with my kids in the property that will be rented. We just moved from an apartment that we were only in for seven months after moving from the house we sold in 2021. My intent is to purchase another property and live in it for a bit before renting that one out and then ultimately purchasing my long-term home. I feel as if forcing my children to move every one to two years might negatively affect them, but I don\u2019t want to use my kids an excuse for not carrying out my goals. How do you reconcile some of the demands of real estate investing, in my case, house hacking, where I move my kids around every year to a new place with what feels like shortcomings while raising family?\u201d
Ooh, this is a good question here. And, of course, you\u2019re asking a guy that doesn\u2019t have a family and doesn\u2019t have any kids, and yet I\u2019m still going to sit here and do my best to mansplain away this difficult conversation. First off, I just want to say I understand actually, I can\u2019t literally understand, but I empathize with what you\u2019re going through, and I think you\u2019re a good person for even asking this question. Because, on podcasts like this, we always talk about the financial components to real estate. It is why people are here to listen. However, we\u2019d be foolish to not acknowledge that there\u2019s an emotional component to real estate as well.
This is a part of the process, and if you want your subconscious to get behind what you\u2019re doing and support you in it, you got to satisfy the emotional side of you. So I\u2019m glad you\u2019re asking this, and if other people have been wondering the same thing, don\u2019t feel bad about it. This is totally normal and something that all of us have to work through as investors. In fact, one of the reasons I think I took longer in life to go start a family was because I knew how difficult my law enforcement career, my hundred-hour work weeks, my commitment to building businesses and making money through real estate would affect a family negatively. It is harder, and I think that was in the back of my head, and I just pushed off starting the family because I wanted to build success in this arena first.
It\u2019s obviously a different position I\u2019m in now. So now, if I wanted to start a family, I think I could without some of that guilt. But you\u2019re right there, smack dab in the middle of some of this mom guilt. So let\u2019s work our way through this one. Claudia, the first thing I think about is you want to have an honest conversation with your kids and share why the decision will be a benefit to the family in the future. It\u2019s a teaching tool, right.
So maybe your kids aren\u2019t old enough to understand math, but if they are, you could explain to them, \u201cThis is what our house payment is. Now, if we move into the second house, it\u2019s only going to be this much. That means mommy doesn\u2019t have to work as much at work, and I\u2019m able to be home with you more if we move again.\u201d I wouldn\u2019t say, \u201cThis means mommy makes this much more money,\u201d because if I was a kid, I heard that, I\u2019d be like, \u201cOh, cool, so you can buy me more toys now,\u201d which isn\u2019t where you want the conversation to go. So make the correlation between the more money you save, the more that you could be with them.
The next thing that I would do is I would try to find a way to make it fun. Nobody likes moving. It\u2019s a pain, right. So can you make it fun? Can there be some kind of reward that you could give these kids that doesn\u2019t cost money, that will make this less of a\u2026 I don\u2019t know if traumatic is the right word, but less of a negative experience. Can you guys all get together and have pizza or popcorn on the floor when moving, sit on bean bags, and share stories of your favorite part of the new house?
Can you take an adventure as a family and walk around the neighborhood and point out the houses that you like the most or see how far away the restaurants are, the ice cream shop, or the movie theater? Can you take them to the new movies and say, \u201cHey, kids, let\u2019s compare this to the other movie theater and see what about this one might be better.\u201d Right. Can you turn it into a game or a system or a pattern where, every time they move, they learn what it takes to move and so they get better at doing it? Now, I don\u2019t know that if it\u2019s a moving that\u2019s super hard on kids as much as it is changing schools, that\u2019s what I would think. It\u2019s having to lose some of their friends.
So if you\u2019re able to house hack in the same school district, that would definitely be better. If not, I would have a lot of conversations about what they\u2019re going through at school. A lot of parents make the mistake of assuming that everything is good for their kids because their kids aren\u2019t saying anything. But when I was a kid, I wasn\u2019t going to go home and talk to my mom or my dad if I was getting bullied or if I had a issue going on. That didn\u2019t happen very often, but I definitely wasn\u2019t going to go talk about it. And the times I did try to talk about it with my parents, they sort of dismissed it because they had other stuff going on in their lives that they were more stressed about.
So I was like when we did move, it was a very, very, very hard move for me. I was going into seventh grade, so I went into junior high at a new school with a bunch of kids that had way more money than the kids at the last school. And I didn\u2019t dress very good, and I was getting teased, and I had never been teased because I was very popular at my first school. I just didn\u2019t know how do you handle this type of a situation. And there was no one to talk to.
So I would be open with them about are they extroverted? Do they make new friends? Are they introverted? Are they having a hard time making friends? And just give them some advice of what they can do to be more likable in general so that the transition isn\u2019t as difficult for them. Of course, I want to recognize you\u2019re making some sacrifices here. It\u2019s going to be harder on them because you\u2019re doing this. So kudos to you for putting your family first, even though it\u2019s going to be difficult in the short term. All right, our next question comes from Jack Graham.<\/p>\n
Hey, David. My name is Jack Graham, and I have a big question for you, which is, should I bonus cost segregate some of my properties, so I don\u2019t have to pay income taxes on my regular income? And just for context, I have about five properties worth about 2.5 million in value total. About 40% of that is in equity, and I\u2019m trying to get some of these properties, which two of them I purchased this year, and I looked into YouTube, some videos, everybody brings up a bonus cost segregation.
Being a full-time realtor and ultra investor, I do work more than 75 hours a month in real estate. So I could technically use that part of the tax code to offset my personal income. And this year, I\u2019m supposed to pay about probably 300 to $350,000 in taxes, and I really don\u2019t want to. So my question was for you, \u201cHey, should I do this? Should I use those two properties that I purchased this year to bonus cost segregate them so I can keep the money in my bank and hopefully purchase new properties in the future, and I could make better use of my money right now versus keeping it\u2026 giving it to the government?
And what are the consequences? Do I pay more taxes in the future? If that\u2019s the case, is that something I should still do?\u201d Let me know what your thoughts are. Big fan of BiggerPockets, big fan of you and what you guys do. So thank you so much for everything, and looking forward to your response.<\/p>\n
All right, Jack, thank you very much for this. What a great question here. So I\u2019ll give a gist of what you\u2019re describing for anyone that\u2019s unfamiliar with bonus depreciation, then I\u2019ll do my best to answer your question. What Jack is talking about here is, normally, when you buy a property, let\u2019s call it a residential property, the government lets you write off a portion of that property every 27 and a half years because it\u2019s going to be falling apart. So they\u2019re saying the useful life of this property is going to go over 27 and a half years. So you take the total price of the property, divide it by 27.5, and you get to write that off against the income that property generates. So if it makes 500 bucks a month, but the number that I just described is 400 bucks a month, you only pay taxes on $100 a month.
If you are a full-time real estate professional, they will let you take the losses. So sometimes what happens is you get to write off 700 a month, but it only makes 500 a month. So you have $200 a month that is extra that isn\u2019t being covered. If you\u2019re a full-time real estate professional, you can take that $200 and apply it against other ways that you made money through real estate, commissions, income-flipping houses, I believe. Pretty much all the ways that you make income, you can shelter against that 200%. Now, when you combine that allowance with bonus depreciation, you\u2019re actually able to not wait 27 and a half years to take that money. You can do a study where they let you take it all in year one. It\u2019s called a cost segregation study. It\u2019s a little bit more complicated than I\u2019m describing, but I\u2019d be here all day trying to talk about it.
So without giving you the details, the overall strategy is that you look at a property. You determine, \u201cOkay. Well, this much of it is going to wear out much quicker than 27 and a half years, so I\u2019m going to take the loss from that all off the upfront in year one.\u201d When you combine the strategy of taking all your losses into year one with the fact that you\u2019re now able to shelter income from other things full-time real estate professionals can end up avoid paying income taxes. Now, this is how people like Robert Kiyosaki and Donald Trump and me when we say, \u201cI don\u2019t pay any income taxes. I don\u2019t pay taxes at all. I\u2019m not stupid.\u201d This is really what they\u2019re getting at. Okay. It\u2019s not that they\u2019re avoiding taxes like they\u2019re breaking the law is that they\u2019ve reinvested all of their money into new real estate, so they have all these new losses to take against the money that they\u2019re making.
Now, it sounds great, and that\u2019s why we do it because we don\u2019t want to pay taxes. Jack here, you don\u2019t want to pay taxes either, but there is a downside. There\u2019s actually a couple of downsides that I\u2019m going to describe before we know if this is the right move. First off, you can never stop buying real estate when you do this. I say it\u2019s like taking the wolf by the years. As long as you\u2019re buying new real estate\u2026 Like I got to buy real estate every single year to offset the money that I made, and sometimes I have to spend close to or sometimes more than 100% of the money that I earned has to go back into real estate to not pay taxes on it. Okay. So if your goal is to save up a big nest egg, this doesn\u2019t always work. Sometimes if you just want cash in the bank, it\u2019s better to pay the taxes.
Second off. It\u2019s not free. Actually, when you take it all upfront, you lose the ability to take it over the next 27 and a half years because you took it all in year one, so that depreciation is gone. You don\u2019t get to shelter any of that income after you\u2019ve taken it right off the bat, which means you\u2019re going to pay higher taxes on the future income that that property makes. Now, as long as you take that future income, included in all the money that you\u2019re making as a real estate professional, and keep buying more real estate, you won\u2019t pay taxes on it. But do you see what I\u2019m talking about here? You\u2019re getting sucked deeper and deeper into this world where you can never stop buying more real estate.
And when you do stop buying more real estate, you\u2019re going to pay taxes on the money you make, and you\u2019re going to make taxes on the income that those properties are making, and that income is not going to be sheltered by depreciation. The last downside that I can think of off the top of my head is the fact that this isn\u2019t free. You actually have to pay for cost segregation studies, which can be anywhere between six and $10,000 a study in my experience. So not only are you not getting to take the depreciation forever, you\u2019re only getting to take it right off the bat. You had to spend six to $10,000 for the luxury of doing that. So yes, you will save $350,000, but you will also take some losses in some of these other ways I describe.
That all being said, if we\u2019re going into a market like right now where I\u2019m expecting to see better opportunities than we\u2019ve been able to see, that extra 300 to 350,000 that you would be spending in taxes is going to do you more good than it normally would. If we were going into a market where prices just kept going up, up, up, up, up. And it didn\u2019t matter how much money you had. You just weren\u2019t going to be able to buy anything, and if you did, you were going to lose money when you bought it, or it might be crashing. That\u2019s a different story. But we\u2019re in a situation now where you could take that 350,000 and wait out to see is it going to dip more. Is it going to, quote-unquote, crash? Having capital right now is more beneficial than having capital in other scenarios where real estate just keeps exploding because of all the money that the government is printing.
So I kind of do lean towards the fact that I think that you should do this, right. Another thing to think about is that if you\u2019re investing for the future wisely and you are growing your equity, there\u2019s ways to make money in real estate that are not taxable, that are not cash flow. So you have to report your cash flow as income because it is. This is why when people are like, \u201cCash flow, cash flow, cash flow,\u201d and they just get the little dollar signs in their eyes like Scrooge McDuck, and they\u2019re just obsessed with cash flow because it\u2019s going to solve all their problems. It doesn\u2019t. It doesn\u2019t. Now, it\u2019s great. I\u2019m not saying avoid it, but I\u2019m saying it\u2019s not as good as we hype it up to be.
When you get equity, you can do cash-out refinances that are not taxed, not at all. And the cool thing about a cash-out refinance is usually it takes you a long time to build up equity. So usually, during the time you\u2019ve been building that equity, the rents have been going up on the thing you bought. So by the time you do a cash-out refinance, the rents have increased enough to support the additional debt you\u2019re taking out on the cash-out refinance. So you don\u2019t actually take any danger. You don\u2019t lose money when you do it. The property continues to pay for the loan that you took out. You get a cash-out refinance, which is not taxed. You can either live on that money, or you can reinvest that money into the future real estate that you have to keep buying if you\u2019re going to use cost segregation studies and bonus depreciations.
The very last point that I just thought of that I\u2019m going to throw as a little cherry on top for this for you, Mr. Jack Graham is that bonus depreciation will not be around forever. In fact, I believe in 2023, it is set to scale back to where you can only take 80% of the value and in 2024, only 60%, and so forth, until eventually, it\u2019s at zero. So if you\u2019re thinking about doing this, I would say you should do it now because every year, it\u2019s going to get progressively less beneficial until it\u2019s not there at all. Thank you very much for your question. Please let us know what you decide.
All right, and that was our show for today. But what you guys got a little bit of high-level stuff right there at the end with some fancy words like cost segregation, bonus depreciation, some cool stuff there, and then you also got some stuff from beginners like, \u201cHey, what loan can I use to buy my next house, and should I buy a house at all? How can I keep my debt to income high if I keep house hacking?\u201d And that is what we\u2019re here for. We want to give you as much value as we possibly can so you can find financial freedom through real estate just like many of us, including me, did. And we would love to sit here and root for you guys, guys to watch you on the way.
So thank you very much for following. If you want to know more about me particularly, you could follow me on social media @davidgreene24. Go follow me on Instagram right now. You could also find me on YouTube if you go to youtube.com\/@, little @ sign, davidgreene24, and subscribe to my channel and check out the videos that I have there where I do a little bit more personal stuff. You can also follow us at BiggerPockets on YouTube as well. You can follow us on Instagram. You can follow us all over social media. So look us up there and follow as well.
Look, get rid of some of the crap in your life. Okay. Get rid of some of the stuff that isn\u2019t helping you with anything. Just the mindless scrolling or the doom scrolling that you do, and start actually listening to stuff that\u2019s going to give you a better future than what you have right now. Thank you very much for your time and attention. I love you guys. If you have some time, check out another video, and if not, I will see you next week.<\/p>\n