All Forum Posts by: Account Closed

There is good reason to pay off mortgages earlier. It depends on what else you would do with the cash. If the cap rate return on a paid off property is risk adjusted better than what you would do elsewhere then nothing wrong in parking your capital in home equity. For example a 1%/50% rule home generates 6% cap rate. Risk adjusted that's not so bad for a predictable income stream. A fixed annuity might give similar but you are drawing down your capital. In the case of the house it keeps and grows equity.  For retired people paid of mortgages absolutely makes sense.

In the case of the OP if the 1300 rent generates 650 in actual cash flow after 50% expenses then his cap rate is about 4.5% after the mortgage is paid off. His risk is reduced as he has no mortgage payment. And rents will grow over time as will his equity. If he doesn't want to grow his portfolio anymore that is the correct end game.

Exactly! I asked my PM who manages thousands of doors for dozens of years and he couldn't quote one example of an owner being sued for anything other than security deposit in small claims court. I am amazed by the paranoia of some investors. Where is it coming from? Is it from "asset protection" seminars and gurus? If you are that scared then just dont be a landlord. 

@Leela Gutta Lots of cash flow markets out there. Sadly most of them the cash flows in the wrong direction.

I would think long and hard about your goals and why this is the best way to accomplish them. Buying one or two houses in the midwest or south, especially at todays prices, will not generate any real cash flow and no, you cannot manage them remotely. With the returns on rental properties so low, I personally dont think they are worth the risk and hassle any more unless you plan to scale to a large number of units and spend the time, energy and money to set up systems and processes to manage them efficiently. This is a lot easier said than done. Buying one local property even if cash flow is zero to negative today will probably yield you a better long term return. Or just buy into a syndication or put it in an index fund. 

All those options are better than buying OOS properties in overheated markets today. Just my opinion but I have owned and sold a number of such OOS properties. And I would never buy into the market at todays prices and rent ratios knowing the true expenses of owning them. 

In California at least Earnest money can be kept only if the seller can prove actual damages. If they put the house back on the market and it sells for the same or more, they cant really claim the Earnest money except maybe the carrying cost for the extra time. The earnest money is held in escrow and sellers cant just take it unilaterally. And like others have said, you should have had a finance contingency anyway.

First off its, border not boarder. A boarder is someone who rents a room from you. International taxation is very complex and you should not handle it on your own. Generally the US taxes all global income but you do get credit for taxes you paid abroad. How much depends on the country, whether there are tax treaties, your tax residency status etc etc. Im not a CPA but lived abroad long enough to have generated 300 page tax returns (that is not an exaggeration, one year my tax return was really 300 pages long).

In reality those assumptions are actually conservative! Assume even higher expenses. Anything less than 50% of rent (not incl mortgage) on rents of around 1K is just not going to happen in the long run. 

@Nicholaos Koufoudakis I have no idea where people get this irrational fear of being sued. You dont need one LLC per property or even an LLC at all if you are the sole owner. You have insurance on each with liability coverage right? Add a 1m or 2m umbrella on top and you are totally protected from lawsuits which are very low probability to begin with. Each llc will have annual fees and record keeping and its own tax return. What a nightmare! I'm sure your lawyer is salivating at the ongoing fees!

First of all  billionaires operate at another level so lets not compare. For large multis (like 200 unit apartments etc) it is actually quite common for banks to want to see net worth of the sponsor equal to the loan amount they are asking for. This is in addition to the underwriting of the income numbers from the apartment. Plus there are reserves etc banks will demand. Now you may feel rich with a net worth of $250K but in the world of commercial real estate you dont even register as a tiny dot. So I dont know what size loans you are talking about but in your world debt to income is most certainly a real limiter. You can certainly leverage your equity and cash to buy properties but probably no more than $1M worth, assuming you have income to support a 4-5K/month mortgage payment.

A turn quote is what you get when a tenant leaves and the property has to be turned over for a new tenant.  You will likely be shocked by the total. This is the part of OOS turnkey investing that nobody talks about when trying to sell you a property.