All Forum Posts by: Benjamin Aaker

Nice to see all these SD people here. I grew up in Spearfish.

@Mitchel Foster congratulations on starting your management company. I have a little motel in Garretson and over the pandemic we have seen guests less than a week almost dry up completely. We have marketed to what I call medium term rentals, < 1 year and greater than a month. That's something to consider going through these hard times with little travelers during the pandemic. Good luck to you.

I'm not an accountant and the best advice is to speak with your accountant.

That being said, each of these people made income over the year and need to pay income tax on that. The government won't know how much they made without those pesky 1099s and may never know, but if found out, you could be in some hot water for not submitting them. I think it is a small monetary penalty. I don't think Uncle Sam will look at it any differently if you paid out of your personal account vs your business account.

Another bit of advise is to get that W-9 filled out before paying any money. Some contractors are hard to track down after. Some don't want to be found because they are trying to avoid paying tax.

As an investor, I would be excited to have a built-in tenant. I'd like to know the seller's motivation for this. A tax benefit as he has depreciated the place out? If he wants a great price on the rent, I'd want some concession on the sale price. As an agent, I might suggest talking about a contract for deed rather than a sale and leaseback. This would give more protection to the buyer if he trashes the place and then sets up monthly payments for the seller and seems cleaner. I'm not sure what the laws allow in California around CFD though.

Congratulations on the successful fix and flip! Even with a nasty setback.

Hi Alec,

First off, make sure you are budgeting for the additional repairs you have to do with tenants. For me, it's 5% of the rent plus another 2-5% for big things (capital expenditures). You might want to consider getting a property manager to help you. Getting into those properties is hard but only because you are like me and your time is better spent elsewhere. It's best to pay for someone to do that for you. I think getting pics is a good idea, but it seems like it wouldn't take too much to show you only the best parts of the property. And then you are taking a bunch of time replying to them to tell them to take a snap of the furnace from a different angle or whatever.

Tenant screening could also help you. Another thing I hate doing, and pay for someone else to do, is calling references. If they didn't take care of the previous property, they won't for you. I suggest taking that neflix money and getting someone to help you.

Hi Chris and thanks for posting. Welcome to BP. I'd suggest networking in the Vancouver area as much as possible (during the pandemic). I'm in multifamily and love it. You might want to consider house-hacking a 4 plex. This can be the most efficient way with little money to bet back into real estate. Glad to have you on the forums and good luck!

The market is going to dictate what the typical percentage of purchase price you can reasonably get per month. In the multifamily space we talk about cap rates, which are somewhat similar in idea. You are just getting an idea for how much you have to put in (if paid all cash) in order to get a certain monthly rent. The 2% rule doesn't take into account any expenses you have and the demand for your area, so certain areas of the country will have different returns and it wouldn't be prudent to apply a rule everywhere.

You are also talking about Single Family Residences. These are usually purchased by residential homeowners, with different likes and needs from investors. They are much more numerous so they will sway the market. If their demand goes up, then the prices go up and your percentage return goes down.

Figure out your expenses for a typical property, the average rents in the area, and work from there to find how much you can reasonably pay for a property. Do this enough times and you will find how much you can pay for properties in your area. This percentage will be your x% rule. You then use that to quickly weed out properties before doing more diligence on them. Remember, just because it passes a rule such as this doesn't mean it is a great deal, it just means you can devote more energy to evaluating it further. 

We are aggressively helping our tenants get financial support, something we haven't done in the past. We have had success in getting people on assistance, usually lump sums every 3 months. It's a headache but with the eviction moratorium I think it's the next best option. When those sources get depleted is when we will have the real problem. Now that the moratorium is extended to Jan 31, the new administration will be in and I expect we will see a big extension. You need to prepare for the long haul.

Great idea to use other people's money. Just be careful on buying that dream home. It's easy to get a bunch of fancy upgrades and wind up spending all that money you would have invested on the monthly payments. Could you put off the home for a year or two? It'll do wonders for your investing.

Congratulations!  Have you considered not cashing out at year 1 and waiting a little longer? The mortgage will stay lower.