All Forum Posts by: Ben Williams

Using BP Calculators, I run the expenses with 9% vacancy, 7-9% for repairs, 7-9% for Cap Ex, 10-14% for property management. Also add in insurance and taxes and usually with a little discount on the asking price it gives me 5-7% COC.

I'm looking at buying a rental in Sherman or Denison TX. The purchase price compared to rental prices seems to be right, providing about a 5-8% COC return with minimal to no rehab. Does anyone out there have experience in those or nearby cities? I live about an hour and a half away in Denton County and have little knowledge of the area.

Wondering if there are locals or landlords who could describe the community, job market, and rental industry. 

Thanks everyone. 

I found that 1% is not too difficult to achieve. However the tax rates and all of these areas tend to be high enough to make that 1% need to be a 1.25% 

I'm having trouble understanding all the numbers in the Analysis Over Time section of the Rental Calculator.  Can anyone point me to a resource that explains it all? I've searched BP and on Google but can't find a detailed explanation. 

I'm particularly interested in understanding how the Annualized Total Return is calculated and what it means (or what to compare it to) and why it trends downward over the years, event though the Cash on Cash return trends upward. 

I'm typically making the assumption in my area that Expenses increase at 2%, Income Increases at 3%, and Property Value increases at 4% (all on an annual basis).

@Jenifer Levini  If you were oversimplifying things before, I think you're now overly complicating things. It's pretty well established that people do this a lot.  Some of the veteran investors on this thread have done it dozens to hundreds of times without a peep from the banks.

Just because the new owner (the LLC) may get new members and maybe the original owner leaves the LLC, the original owner is still the one responsible to pay the mortgage. The foolish ones in this scenario would be the remaining members of the LLC because their ownership of the asset would be at the mercy of the original owner paying the mortgage!

The tax payment is an interesting twist, though most personal mortgages now (if not all?) require an escrow account and the contracted payments include taxes and insurance.  So the banks are protecting themselves already. This is why almost all tax auctions are on homes that have no mortgage.

I also think the word "breach" is strong.  When you go and sell your personal residence do you call up the Bank and let them know first?  I've sold two of my personal residences and I never did that.  I just sold it then the title company sent them a check with full payment.   The bank does have the option to foreclose if they'd like.  They just usually don't like, even if they find out because they still are making their money from the payments.   

That's how I see it anyways. 

@Vernon Miller, you said, "If I was buying and holding for long term then true crane set modular would be the better choice."

For what reasons?

@Jenifer Levini You're assertion that the bank is screwed because some other entity has control of the property is not correct. The mortgage is a lien on the property, not the owner. The lien is still enforceable through foreclosure if the mortgage payment doesn't get paid.  This is one of the main reasons Banks and individuals do title searches on properties before buying. Not just to see who actually owns it, but to find out what liens exist on the property.  If one of the lien holders does not get paid, then that lien holder has the right to begin a foreclosure, no matter who owns or controls the property. 

If a title search paid for by a potential buyer of property came back with liens on the property, the buyer would back out because they know the lien holder could come and demand money, and if money isn't paid a foreclosure could happen. Moral of the story... If you're buying a property, be sure to do a title search to guarantee no liens are on the property, or someone may come and foreclose on you for payment. 

However when a person who has title of a property, then transfers that title to a Trust or LLC which which he also controls, he's not worried about the "clouded" title, because either way he's ultimately responsible for paying the bank. Nobody is screwed out of their money. The same human being is paying the same payment to the bank. And if payments stop, the bank still has the right to foreclose, just as they always did.

@Luka Milicevic the only thing that bothers me is that we are predicting "near" future based on past experience. And the loan may have a 30 year life. 

@Luka Milicevic that is true for the past couple of decades as interest rates have been falling.  What are your thoughts though in a rising interest relate environment? There would be incentive to call due so they could re-lend that money at higher rates. 

@Brad Noe My attorney said the same thing. And you reduce the chance of anything happening at all if the transfer is actually to a Trust that owns the LLC with the same individual as the a beneficiary. Trusts are specifically protected by federal law (in most cases) from the DOS clause. I think there is a technicality in why the lender still has a right in this scenario but it requires far more work and research on the lender's side to realize/verify this technically exists. I get lost in the legalese, but that's the gist.