All Forum Posts by: Carl Fredrickson

If you have shares in a publicly traded company, their contribution to your net worth calculation is the number of shares you hold times the price per share. 

If you have a house, it’s contribution to your net worth calculation is whatever you could sell it for minus what’s owed on the mortgage. 

How do you factor syndication investments into your net worth? Do you just include your initial investment minus whatever capital has already been distributed, or will the syndicator provide periodic updates/reports with enough information where you can mark to market?

My approach has evolved over time, and will probably continue to. 

When I first started full time employment, my fear was that something would happen where I would end up in a situation where I couldn't save, so my goal was to get to a point where I could theoretically stop contributing but the investments would continue growing to where they could provide a bare-bones retirement. I contributed 10-12% to my 401k, more than enough to get the full company match but not enough to reach the cap. Beyond that I set up a Roth IRA and a separate investing account. My first 3-4 months of non-401k savings would go to the Roth until it was maxed out, and then the rest of savings went into the other account. I realize I was giving up some tax savings by not maxing out the 401k, but I wanted the flexibility of not having the majority of my net worth constrained by the 401k rules.

In the beginning, real estate wasn't in my plans at all, but several years ago I shifted a chunk of my Roth over to a REIT, and that's the extent of my real estate investment to date.

A couple years ago, I reached that theoretical point of having a bare bones retirement covered (assuming it continues to grow at a reasonable pace), and I upped my goal to $1M. At about that time I upped my 401k to the annual max, but those two events aren’t otherwise related.

I was considering turn keys for a while, but now am leaning towards syndications, which typically require investors to be accredited, another reason to shoot for $1M.

Once I get to $1M, ideally I’d like to be able to not touch that nest egg and just contribute future savings towards real estate syndications, investing in one every 1-2 years. In reality, there will be some mental shuffling going on in that as money gets contributed to my 401k, an equal value of stocks and index funds will no longer be considered part of that untouchable nest egg (dividends and appreciation of the assets within the nest egg stay to keep it growing though). And I’ll actually have to get up the nerve to commit to a syndication deal. But that’s the plan. 

Lessons:

- It’s not for everyone... it can take a looooong time to get to $1M this way

- In certain situations, you may be better off renting an apartment than buying a house for your primary residence. I don’t want to get too much into detail in this particular forum, but if you can manage living in a smaller space, smaller space leads to less rent, less utilities, and less volume to fill with purchases, so less incentive to spend. For the argument that rent money is basically thrown away, compare the rent payment to an amortization table because I claim interest is basically thrown away money, too. If the rent is lower, continue to rent, save the difference and use it to put down a bigger down payment. And we still haven’t discussed the fact that most homeowners remodel or otherwise upgrade the house over the years... new fence, new deck, remodel the kitchens and/or bathrooms, update lighting fixtures, replace flooring, it all adds up so the longer you can stay off that path, the better off you’ll probably be. 

@Account Closed - I was starting to think about that too, and I would guess the place would need be condemned in some way in order to be deemed uninhabitable, and that would probably at least partially depend on how long the power would be out. 

I can’t copy and paste the relevant text on the device I’m currently using, but I would argue 11-H and/or 12 (as “other nuisances, hazards, or circumstances” and assuming the entire neighborhood is affected). 

@Will Johnson

Why’d the sheriff tell you?  Were they looking for the neighbor, or is it just common procedure to let all the neighbors know that there may be some excitement in the future?

@Will Johnson

Some of it looks to have a horizontal pattern with fairly regular spacing, and I would guess that those widths match up with the slats that go under the old plaster and lath walls (what they used before sheetrock).

I’m also going to guess that wall has no or little insulation in it (as the entrance to a duplex, it wouldn’t be living space that needs to be heated)

So I would guess it’s being caused by moisture that’s condensing on the interior surface of the wall. 

Stain color isn’t always a good indication; the yellow comes from contaminants the water acquires and/or moves. Use a white towel to wipe up relatively clean water from a relatively clean surface and it should dry white. 

I actually asked this question earlier this week (as a hypothetical in my case). See:

https://www.biggerpockets.com/forums/432/topics/756761-raising-rents-to-market?highlight_post=4448428&page=1#p4448428

As somebody who may end up on the tenant side of this question in next year (I’ve been in the same apartment for ~13 years and the base rent has been the same for the last 9 or 10), I’d argue/request you spread it out over 2 or 3 years, maybe more. 

When I have received rent increases in the past, they’ve typically been on the order of 2 to 5%. I think my rent is now 10-15% below what they would rent it for if I were new off the street, and if my landlord were to raise it all in a year, it’d be a bit of a bitter pill to swallow and burn some good will; it would certainly send me at least looking for another place.

$650 / $500 = 1.3

For those 2 tenants, you’re wanting a 30% increase in what they pay in rent.

$650 / $425 = 1.53

For that one stable tenant, you want a 50+% increase in what they pay in rent. 

Percentage-wise, those are HUGE jumps, especially for something that’s not totally optional and probably makes up a significant portion of their monthly expenses. 

Are you doing anything to justify that kind of increase? I’m talking more than just slapping on some paint or fixing up the landscaping. I’m talking re-doing/modernizing kitchens and bathrooms, fixing persistent structural issues, and/or evicting the local crime wave. 

If not, that’s a lot of extra money for little to no additional (perceived) value. 

Now, as a tenant, my feelings probably matter a lot less to you than your wallet. 

But if I were the tenant in that scenario, I’d much prefer the increase being phased in over a couple of years. Even then it’d be a bit of a gut punch.

(Edit/p.s. Several posts had been added to the thread between when I started and when I finally submitted, and some of the questions have at least been addressed. If the tenants are asking why the rents aren’t higher, they’re more open to change than just having drifted for a while and the real world brings in a wake up call).  

If your rents are below market (say 10+%) and you’re doing a value add, do would you bring the them up to market in one move or spread it out over a couple of years?

What would affect your decision? Would you act differently if rents were ~10% below market versus ~30% below market? Incorporate as improvements are made or wait until the improvement plan is completed? New tenants vs existing tenants? Other?

My lease expires at the end of the month, but I hadn’t heard anything from the management about renewal. I contacted the front office today and the person I talked to let it slip that they’re about 2 months behind on sending those out. 

My monthly payment is a combination of rent and water surcharge. 

They said since I’m initiating the renewal before the lease terminates, the rent and water surcharge will stay the same, but if I had waited to receive the paperwork from them, both would have gone up, which to me makes sense because the lease had expired and so I would be signing a new lease. 

The thing is I’ve lived in this unit for 13+ years. When I first got there,  there was only a rent payment and it went up the first couple of times I renewed. Then it was split out into rent and water surcharge; the rent has stayed the same but the water surcharge has increased a few times over the years. So there’s a history of having to pay more through a renewal process rather than letting the lease fully expire and then signing a new one. 

I do get the sense that the current set of owners is doing a value add, and I would expect the rent and/or water payment to go up over time anyway due to inflation. 

Maybe I’m reading too much into this, but it almost seems like the new owners are purposefully letting the leases expire. Even if there is a 30-day notice for rent increase (another thing the person I talked to mentioned), why not communicate the renewal with the new terms 30 days before the lease expires like they used to? 

Is there a benefit to doing things that way compared to just doing a conventional renewal (e.g. rents can be increased faster).

It may depend on state; this is in Kansas.

The warrants also could have had a jurisdiction or extradition issue. Sometimes the jurisdiction that issued the warrant will only extradite from within state or from adjacent states, they may even be able to limit it to a given radius/distance. If the person with the warrant is found outside of that area, the police aren't going to use the warrant as the basis of an arrest.