All Forum Posts by: Britt Griscom

On the surface, it may seem like getting a 10% return with rental property (with a property manager) is the same as getting a 10% return in the stock market. However, it seems to me that the 10% return in the stock market is really an 8% return in real dollars, assuming 2% inflation. The 10% return with rental property, however, doesn't have to be reduced to 8% because the rent (along with expenses) will increase at about the same rate as inflation. 

Am I thinking about this correctly? Perhaps I need to ask this question in a stock market investing forum, but is there a counter-argument that would make stocks as attractive as rental property?

Hi.

I recently sold a rental property on a real estate contract. I'm not sure how to record the transaction or the monthly payments in QB Online. I use the cash basis of accounting.

If you can help me with that, I would really appreciate it.

Thanks,

Britt Griscom

So would you guys by this unit in its current murky legal state for say 28,000 with all the appropriate title insurance so that if title is not clear you are covered?

I forgot to mention that the loan is so that he can pay off his mortgage on the property and evict the old buyer. This should take less than a year, and so the note would have a balloon payment at the end of the year, and that is when I would have the option to buy.

I'm looking into lending a condo owner about 22k at about 10%. The note would be backed up by his condo, which I haven't been able to see the inside of because it is currently in litigation. The person living in it bought the condo about 10 years ago from my seller on a REC and prematurely stopped paying last year. The escrow company returned the deed to my seller but the previous buyer hasn't vacated the unit.

Fixed up, the condo is probably worth about 42k. I anticipate about 7k in repairs, so in its current state, and without seeing the inside, I would estimate its value to be about 35k. I want to buy the condo and would like to have the option to buy it at about 30k. Can this option be structured into the note agreement? Can you point me to descriptions of similar offers?

More generally, would you do a deal like this, with a property that is in litigation, even though according to the court records, the seller has clear title? If so, how would you structure the deal?

When you looked at the spreadsheet, I had the interest rate at 9%. At 6%, which I have changed it to, they cashflow well.

These have been great investments for us. They give about a 10% return, and we have a vacancy rate of only 4%. The neighborhood is lower class, but not dangerous.

I'm not betting on appreciation. I just invest for cashflow. Appreciation is just icing on the cake.

We own 16 condos in a complex in Santa Fe, NM. We have the opportunity to buy 15 more using seller financing at 10% down with the rest amortized over 30 years at around 6%. We are negotiating each of these terms.

The 16 that we bought averaged about 36K each. The market has gone up, so they are probably worth 40K now. The seller wants 50K each. But since we would only be putting 10% down, we could make a higher return than if we paid cash to a different seller for one unit, which is the other option we are looking at.

Would you pay over market price if that gave you a higher return? The problem, of course, comes when we try to sell the condos. Then we will take a hit if the market doesn't go up.

Right now they rent out for about $690 per month each, but with about 5k in capital expenditures, we could get at least $725. The seller's terms are much more palatable if I just rent them as is, without fixing them up, at least initially. Then I could fix them up gradually as we save up the money. Is that a good way to think, or should I assume the capital expenditures in contemplating the deal?

Also, we would be borrowing money from relatives and credit card balance transfers to come up with the down payment. The interest rate on these loans would only be 2-3% and we would be able to pay them off in 2-3 years. Do you borrowing the down payment like this is crazy?

Here are some different possibilities:

https://docs.google.com/spreadsheets/d/1dJ_qq9lOho...

Thanks!

PS: A large part of the down payment would be financed with credit card balance transfers, which are currently running at the equivalent of 3% interest. I calculate I could pay these off within 2-3 years.

We own 16 condos in a complex in Santa Fe, NM. We have the opportunity to buy 20 more using seller financing at 10% down with the rest amortized over 30 years at 9%. We are negotiating each of the terms. 

Some of the possibilities offer a net of $100 per condo per month, and others offer only $50 per condo per month. Would you take a deal like that that offered a 26% return, but only $50 per condo per month? Would you pay 9% interest? Would you pay over market price if that gave you a 15% return?

Right now they rent out for about $675 per month each, but with about 5k in capital expenditures, I could probably get $725. His terms are much more palatable if I just rent them as is, without fixing them up, at least initially. Then I could fix them up gradually as we save up the money. Is that a dumb way to think, and should I assume the capital expenditures in contemplating the deal?

Here are some different possibilities:

https://docs.google.com/spreadsheets/d/1dJ_qq9lOho...

Let's say the LLC has revenue of 100k, and it pays me 10% to manage the properties. If I am a salaried employee, then the LLC pays 7.5% employment tax, and I pay another 7.5%. That's $1500 extra tax we pay, not including gross receipts tax. If I choose to get a realtors license instead, about how much would that cost me to acquire and maintain each year?

If I choose not to do either, would it be easier for the veil of my LLC to be pierced, because I am managing the property myself, without hiring myself as a property manager?

It looks like having the LLC is going to cost me thousands each year. Is it really worth it?