All Forum Posts by: Ben Zimmerman

Uber/Lift
Owned 20 ATMs
crypto mining
sold authorized user spots on CC's
churning credit cards / bank accounts
Wrote a book
Had a blog
Voice narrated several books
For sale by Amazon
Ebay flipping 
Sell quirky T'shirts
Owned a lawncare service business
Teaching classes on skillshare/Udemy
Youtube channel

Some of these ventures were much more successful than others, and I certainly didn't hate myself enough to try to do all of these things at the same time by working obscenely long hours.  I think it's just a matter of trying and failing at enough things until you find one that you like and are good at.

Nobody wants to try something new, often because they are afraid of failing.  But from my experience failing and failing often is one of the best things you can do when you are just starting out.  Its rare that you learn something from being successful, its when you fail that you learn and grow as a person and can use that knowledge later when the stakes are much higher.

As for 42% of mom and pop owners having a cap rate of under 5, I have little or no faith in your average mom and pop investor to be able to accurately calculate a cap rate so that they can properly answer the questions this NAR survey asked them. The 5% quoted might be accurate, or it might be wildly off target. This is especially true considering the overwhelming majority of these homes didn't have a mortgage, indicating these owners aren't too concerned about trying to maximize profits, or do any actual calculations such as figuring out a cap rate so that they can compare and contrast various investments. Instead they just want to collect a check each month.

And even if these mom and pop investors tried to take this survey seriously and calculate their cap rates, cap rates on SFR homes are largely guess work anyway as there isn't a nice neat way to calculate long term estimated expenses. Some people might try to shortcut the process by simply saying something like 5% vacancy, 10% capex or something similar but those numbers may be wildly inaccurate based on the particulars of the house.

Buying the house itself directly using credit will likely be impossible.  Nobody is going to let you swipe your card for 40k to purchase a house.  You could probably find a contractor willing to accept a credit card however for renovations.  You would likely need to use several different credit cards however due to individual spending limits per card.

However as with anything there are always workarounds and backdoors, in this case you need a cheap way to obtain cash from your credit card limit so that you can pay 40k in cash instead of it technically being a credit purchase.  You could use your credit card to purchase the $500 visa gift cards found at Walmart and grocery stores for $5.95 worth of fees.  Once you have the gift card take it to the bank and use the value of the gift card to purchase a money order naming yourself as the recipient, then deposit that money order into your bank account.  My bank a 1k money order goes for $0.99, so to buy the 40k house you would need 80 gift cards and spend a total of $515 in fees, which translates into roughly 1.29% in fees.  You will likely earn 1% cashback or something similar in credit card rewards which brings the effective fee down to 0.29%.  Not all locations allow the purchase of a money order with a debit card as a matter of store policy, so you may want to experiment with buying a single card first and ensure you can find a location that will offer these services before you go big and buy 80+ cards.

This technique of buying debit cards and money orders is the most common method used in what is referred to as "manufactured spending" in the credit card world, where you use a credit card that offers more than 1.29% in rewards in order to generate "free" money by earning more rewards than it costs in fees, typically using a card that offers 5% cashback in a category.  Just keep in mind that such activities are technically against the credit card user agreement and they will deactivate your card if they think you are scamming them.  It's somewhat hard to get flagged by the bank for doing this, but it is possible if for example you regularly spend 40k per month on a high limit card when your stated income is only 50k per year.  

Just keep in mind that anytime you try to use 0% interest credit card techniques there is always a risk that for whatever reason things go badly and you aren't able to refinance the way you thought you could and get stuck paying 20%+ interest rates when the intro term expires.

The vast majority of landlords never get sued, this is especially true for broke landlords that don't have any money.  And of those that do get sued, most don't end up owing any money unless they are actually doing something wrong.  Even if someone got upset with you, no lawyer is going to take the plaintiffs case unless they feel like the landlord has enough money to make it worth their time to litigate.

This is one of the few times where being relatively poor is actually a good thing. (I'm making an assumption here about your finances, if I'm incorrect then my apologies.)   So with either product it is highly likely that you will be spending money each year on a product that offers you very minimal benefits.

However if you feel you absolutely need to get something, then an umbrella policy is hands down the way to go. LLCs are good for separating your wealth into chunks so that you can't lose everything all at once, instead you can only lose that one compartment of your wealth. However if that one LLC contains your entire wealth (your house) then you are still screwed if that LLC gets sued.

Additionally an LLC only protects you if (among other things) the LLC owns the property. But you will likely have difficulty getting approved for a mortgage in your LLCs name and likely won't qualify for many of the good products available to first time home buyers. For example LLC's can't use an FHA loan and would likely require a 20% down payment.

As mentioned the citi double cash is a solid all around card with no gimmicks.  

Bank of America has their Unlimited cash rewards card. It's a flat 1.5x cashback card, but depending how much money you have invested with BoA, or Merrill, you can get an increase of up to 75% additional cashback which makes this a 2.625% flat cashback card which is easily the highest flat cashback on the market.  It turns into the best flat cashback card on the market if you have at least 50k invested (2.25% cashback) and maxes out with 100k or more invested (2.625% cashback)

Vantage West credit union has their Visa Signature card that earns 5% in the category of your choice (set it to home improvement).  The down side is you need to open a checking account to apply for their card which isn't terrible but it is an extra step and will cost you $5, and the points are capped at 1500 in spending per quarter which isn't ideal if you have lots of expenses.  But depending on your spending habits it can still be useful.

Partially correct, although a minor point is the house is depreciated over 27.5 years, so your numbers would be $7272 per year instead of 7407.

You first need to add up all the income from rents, and then subtract any real estate expenses that you have for the year such as closing costs, mortgage interest, property taxes, insurance, property management fees, HOA payments, minor repairs, depreciation, and any other misc business write-offs that you are using such as maybe a home office deduction, milage to check up on your property, or anything else that you can legally claim as a business deduction for your property.

Once you have figured out your properties total gain/loss for the year, it will often show a financial loss because of all of the things that you can deduct as expenses.  This final loss for most people is capped at 25k per year can be deducted against your personal income if you earn less than 100k per year.  If your losses are over 25k for the year any amount over the 25k is carried forward to future years where you can potentially use it later.  This ability to offset income starts to phase out if you make over 100k per year.

These business deductions are separate from personal deductions that you might have.  Most people claim the standard deduction of roughly 13k if you are single, so you can still claim the standard deduction and also claim these business deductions.

Lastly keep in mind that this depreciation is a phantom expense and the amount that you depreciate needs to be repaid when you eventually sell the house.  This is known as depreciation recapture and is taxed at a rate equal to your ordinary income tax bracket up to a maximum of 25%.  So hypothetically if you sell the house after roughly 14 years and you had written off 100k in total depreciation and you are in the 30% tax bracket, you would owe 25k in recapture tax.  This recapture tax can be postponed indefinitely by not selling the property, or selling the property under a 1031 exchange and keep postponing, and repostponing the tax until you eventually die at which time this tax debt effectively dies with you and goes away entirely.

In Soviet California, Tenants lord you!

I think there may be some confusion, YOU can't borrow money from your SDIRA, however you can use your SDIRA to make business loans to other people so long as they aren't a disqualified person (family).

https://www.advantaira.com/sel...

I would never agree to any management company that wants to run regular credit checks on the owner.  Its simply none of their business what my credit score is and may impact my credit score and thus ability to buy additional properties depending what type of credit report they are pulling.

The rest of the stuff looks fairly standard, if you don't like the $600 limit you can likely negotiate that lower as previously mentioned.  Mine is at $500 which is fine considering I don't want a phone call to authorize a repair every time a plumber needs to be called.

One big thing that I would check is their fee structure, both to you and to the tenant.  I've seen numerous management companies keep pet deposits and pet rent for themselves even though it is the owner taking the additional risk from potential damage.  I've seen companies keep early termination fees for breaking a lease early, and then of course turn around and charge the owner full price to place a new tenant.  I've seen companies charge a 10% fee to 'supervise' even the most basic of repairs done to the property.  I'm sorry but you don't need 10% to supervise a guy coming to the house to plunge the toilet, that's what I pay you a 10% monthly fee for to handle basic items such as this.  Supervising major renovations is one thing, but not for a toilet.

The more fees that a management company charges the tenant, the less rent you will ultimately be able to charge, else you risk tenant turnover every year once the tenant realizes just how expensive living in your unit is once all fees are accounted for.

I'm no lawyer, but I'm confident that "because they were arrested" is not grounds for an eviction, ESPECIALLY in tenant friendly states such as California.   Just because someone is arrested doesn't mean that they are guilty.  Filing eviction papers for a non-evictable offense could cost the landlord many thousands of dollars in a lawsuit.  However as important as the legal aspect of the situation is, it actually doesn't really concern me.

Instead, I am concerned about a more basic matter, which is that the owner and PM appear to not be on the same page.  Is the PM actually not managing the property very well, or is the owner being overprotective of their investment and naively assuming that every tenant will take just as good of care of the property as the owner did?  Things breaking is a natural part of land lording.  Unless the tenant is purposely destroying the property then it's likely not grounds for eviction in the first place.  Bill the tenant for damages, fix the damages, and move on with life.  They need to sit down together and figure out where the disconnect is with management expectations.

Why are they paying a PM company if they aren't going to let them manage it?  Either fire the company or stay out of their way.  While the scenario provided lacks way too many details to make an informed decision, my gut reaction is that they need to stay out of the way.