All Forum Posts by: Jonathan Taylor Smith

@Michael Kotylo - Everything depends on your situation and the specifics of the property. For me, when I first got into REI, I was paying ~$14K year after year in ADDITIONAL federal taxes beyond what was already being deducted from the paychecks of my wife and I. We bought our first two rental properties (one on December 30th of the year) and upon filing our taxes in the following year, we got a refund of $6,000! So that is a $20K difference in our tax situation. Now they didn't - but would they not have still been good purchases for us on taxes even if they had negative cash-flow? And we also got a state tax refund on top of that. Plus, both of those properties currently rent for about $600/mo above what they originally rented for... Now I am by no means telling you to IGNORE cash-flow or to proceed with a negative cash-flow deal. I am simply suggesting that year one cash-flow should not be your only determination of what is or is not a potential good deal. There are also other aspects that should be considered. I missed out on a LOT of what today would be excellent properties to own because the YEAR ONE cash-flow was not good enough for my calculation at the time - and today they would all be strong cash-flow performers... Just my $0.02.

I can't speak for certain on every state/housing agency, but I believe it is a general HUD rule and per the HAP contract that you cannot take any amount above the maximum payment standard as approved for that market/tenant. So, if they approve $2,500, that must be the rent - and taking anything above that from the tenant "on the side" is a violation. Now the part about utility deductions, in my market that has never been subtracted from my rental income, but it is used to determine the overall affordability of the home on a tenant-by-tenant basis. So, if the max approved rent were $2,500, and utilities deemed to be $200/mo, I would still get $2,500 if that tenant is deemed to be able to afford $2,700 with the subsidy assistance, which could be anything up to the full $2,500.

Inquire with different lenders as your current lender is apparently making their loan discussion based upon what should instead be an insurance concern. What difference does it make to the lender if it cannot be rebuilt as a quad if it is insured for at least the loan amount (which they certainly will require)? And when going to alternate lenders, do not give them a ready-made reason to say NO as well by volunteering the zoning concern of the prior lender - let them determine if that is an issue for themselves.

Cash-flow is certainly important, but it's not the only way you make money from rental properties - there are at least 4 others. Also, it should be called "first year cash-flow", as you can raise rents, get better priced insurance, dispute taxes, rehab the property to lower future repairs and capex, negotiate property management fees as you bring more properties onboard, improve processes and marketing to lower vacancy expense, refi when rates decrease, etc... And for me, the tax benefits alone may still make a property worth buying even if cash-flow is -$500/mo. So, to answer your question, I do not look at cash-flow alone... I consider all 5 ways a given property makes money to determine if it will be profitable overall, along with what cash-flow is likely to be 2 or 3 years out.

Embrace the "slow" and tedious... If REI was as quick and easy as buying stocks, EVERYBODY would be doing it and you'd never be able to find a property. All those things you named are barriers to entry (among many others) that are often GOOD things for those who are in it and can deal with them effectively.

Maybe more than what you need, but I use Realeflow.com (competitor to propstream and others), which has a feature called "Moby" that allows creation of text campaigns. So, you could create a "Cash Buyers" campaign and opt-in people to which you can then send text blasts as needed. I use the feature for a number of such functions, including blasting out rental vacancy texts to everyone on my tenant waiting list. But this is a full CRM, property lead and marketing system that may be overkill if all you want is text blasts.

I never know what to actually think about "global warming", "global cooling", "climate change", "sea level rise", etc... Is it all a hoax? Or are those who think it's a hoax all fools? And memes like this don't help me to know which side to land on...

Regardless, I love the Tampa Bay area, and it is one of a few places that I target for investment, including desiring beachfront property. And I'm willing to bet that if SLR does put it all under water at some point, there will be any number of COVID style bailout programs coming from the government. But if SLR is a hoax (or just greatly overestimated in impact), then I'll also be good when the areas continue to appreciate, and I own lots of properties there.

I fund my rehabs with either private lender funds, hard money lenders or my own cash / heloc funds.

Not aware of any books specific to Section 8, but a Section 8 rental/tenant is not essentially different than any other type, but that the source of income is from a third party, and you have an inspection requirement - both of which can be good things. So, it is really just learning the specific process(es) of your local housing authority and making sure your unit will pass the HQS inspection. There will be both potentially good and bad tenants with vouchers seeking your home, so you'll need to screen well (which you should be doing anyway). And you'll need to be VERY clear and professional with how you handle all matters, including going over your lease to set the correct tone and expectations right from the start (AGAIN, which you should be doing ANYWAY).