All Forum Posts by: Frank Adams

welcome lonimaye,

you're off to a great start! how's the cash flow from the first 2? IMO it takes about 18-24 months to get a good feel for what kind of experience you'll have with a single family. During that time I wouldn 't buy anything else unless it is a 100% sure fire slam dunk! I would take that time to pay down the mortgage and make sure all my other financial act is in order. That means NO DEBT of any kind.

10-12 is a good number and easily managed by one person, depending on your other committments, family, additional education, job flexibility etc. 10-12 FREE AND CLEAR keeps you from the hassle of working for other people, although if you have a very flexible job it can be great for steady verifiable income and providing health care benefits.

Read all you can about financial management (Dave Ramsey is good, also "The Millionaire Next Door") and know how to do as much of your own work and finances yourself.

good luck

all cash

Well, 3 months is 25% of a YEAR, and that's one heck of a vacancy rate! IMO that's like a house FOR SALE for a YEAR. If a house sits for sale for a year with nothing we'd all say it is overpriced! So, how's the price on your rental?

all cash

I see a lot of posters here and on other sites that insist that you can, but I doubt it. Put yourself in the banker's shoes, or better still in his boss's shoes. A loan application comes in from a corporation (or an individual) with (1) no assets and (2) no credit history. What banker is going to make a loan to that entity? Unless the stockholders in the corp. sign personal guarantees.

My question is; why did you start a corporation? I've been investing in RE for almost 30 years, and I've never used a corp. for holding any of my properties.

all cash

There's something WAY wrong is it's taking you 3 months! I was sometimes lucky enough to have new tenants ready to move in once a place was vacant (usually took 3 DAYS for make-ready), but I probably averaged 2-3 WEEKS over the 22 years that I had rentals.

all cash

Well, the ABSOLUTE cheapest would be for you to draw the documents, Deed, Trust Deed (assuming you are a Trust Deed state), HUD-1 and anything else that's needed. I DON'T RECOMMEND THIS UNLESS YOU KNOW WHAT YOU'RE DOING.

The buyer's lender would want a TITLE INSURANCE POLICY which is dependent on how much the STATE LEGISLATORS in your state are in the pockets of the INSURANCE INDUSTRY. In TX that would be about $1100 if I recall.

Second cheapest (and what I actually recommend) is calling around to some ESCROW/TITLE companies, and some ATTORNEYS who specialize in RE (contact you local REI club for recommendations) and shop prices. Probably $300-$600 plus the Title Policy.

Good luck

all cash

I've always like the "one file folder-one property-one transaction" rule. I make a folder for a purchase, and keep all appropriate documents in it, Deed, HUD-1, material receipts. At the end of year one I make a folder for year one, and another one for year two. The items having to do with each year's "transactions" go into that year's folder; lease, receipts, tax bills etc.

The original purchase folder gets put into a different file drawer so all of my acquisition and sale folders stay together. My "current year" folders stay in one of those plastic file tubs, right next to my desk (actually a 6' folding table-works better than a desk for me) so they're always close at hand.

When I finally got a computer about 8 years ago it came with "EXCEL', as does every other Windows system, and it's so easy to use it's funny. However, since I still keep the file folders the main benefit for me is that in January I can print up the page on each property and hand them to my CPA, he never has a problem deciphering my handwriting thanks to the computer.

One other thing I do that is a real time and heachache saver. I have a document in EXCEL that lists each of my properties down the left side, with 3 spaces between them. In those spaces I have the NAMES, PHONE NUMBERS, SSANS of the tenants. Also the monthly rent (mortgage in my case), when the lease expires and a block for each month so I can check off when the check shows up, and if late write in the date.

This way I have a ready reference of all the CRITICAL information on my properties and who's in them, write at my fingertips. I print this on heavy weight paper as it gets a lot of use and I keep it in the drawer with my checkbook. I also keep the previous three year's forms paper ckipped to it.

Good luck

all cash

No doubt they are "looking" at it, it's the kind of small stuff that administrations look at instead of doing something major to stop the bleeding. Not even sure it would bring in "tons" of revenue, remember you'd still have the standard deduction which is what we use anyway. Also IIRC it's fewer than 20% of filers that would be affected negatively.

Getting rid of it would also cause some people to stop making "bad" financial decisions: "I'll pay the bank ONE DOLLAR to keep from paying the government TWENTY FIVE CENTS", that's a bad financial decision.

all cash

Let's take things one step at a time.

Before you invest in ANYTHING, stocks, bonds, mutual funds, real estate, or fine art, you must UNDERSTAND what you are doing. So, before you let that money burn a hole in your pocket, and end in someone else's pockets, you should hang out on this (and other) REI sites and LEARN ALL YOU CAN.

Take a hard look at your financial situation. Is this inheritance (windfall) going to make a SMALL, MEDIUM or LARGE differecne in your income for the year in which you receive it? One of the biggest mistakes made by people who get unexpected windfalls is GOING NUTS WITHOUT A PLAN. While this is especially true of lottery winners it also applies to people in your situation.

A few years ago a friend of mine in his 80s passed away, leaving an estate of about $350K-$400K to be divided among 4 kids. For 3 of them the money made no difference, but one of them commented that he had no idea his dad was so "loaded". While none of the children were "professionals", I had always assumed they were all similar in financial things. It turned out that for 3 of them the inheritance just got put into their family portfolio, for the 4th it paid off credit cards and car notes. Pretty sad when you consider everything.

In 6 months, once you know where every dollar of income and expense is going you'll be ready to invest in RE, until then, put it in a money market or CD.

all cash

OK, first things first. Forget about any costs associated with the financing, any gain is always calculated on a "cash on cash" basis.

Second thing and this is VERY DOGGONE IMPORTANT. Was this your PRIMARY RESIDENCE, or was the property held for investment? Without knowing that we can't answer, but here's the short version. If it was your residence for 24 or the last 50 months you don't pay ANY TAXES on the gain up to $250K-single, $500K-married filing jointly.

If it was investment property you take the sales price

$185K, minus the cost
$126K which equals

$49K, minus any selling expenses like sales commission, legal fees title policy etc, etc to arrive at your NET PROFIT. Based on your nimbers on average in the US your NET PROFIT, would be in the $38K. On the $38K you would owe 15%, or about $5,700.

Going into a 1031 exchange lets you postpone the taxes for a long time, but unless you want to stay in REI it may just be better to pay the tax and go on with your life.

Answer about the purpose of the property, investment or primary residence and we can go further.

all cash

Here's the way I found to stay legal, and cover myself best.

1. Get a copy of the Realtor promulgated form. The state Realtor's board has LOTS of attorney's on staff staying up with current law. Put it into your computer, in a way that you can modify it yourself.

2. Add anything and everything you can to cover yourself against any contingency that they may have forgotten. You'll find ideas on this board and at your local REI club. Some things that I've had in mine for years.
a. no unregistered vehicles
b. only as many vehicles as there are garage/parking spaces
c. names and SSNs for all tenants, including minors. any guests for more than 10 consecutive days, I must be notified.
d. they have to subscribe to and keep current with trash collection company
e. no motorcycles
f. no oil changing or any other work on cars
g. no boats, motorhomes etc.
h. must always keep the property in compliance with deed restriction
i. NO PICTURES or anything else to be mounted on walls with any fastener LARGER than a 6d nail. Tenants like to hang christmas lights with 16d nails for some reason
j. yard and shrubs to be kept trim, neat etc. on the second warning letter from the HOA, I'll take over yard maintenance and that amount will be added to the lease.

You get the idea.

all cash