All Forum Posts by: Christian Carson

Wickliffe is OK, and Lake County is probably one of the most dynamic and growing counties in the state.

That said, this deal is way too expensive for me. Given your numbers and a few other standard assumptions for the area, it works out to be an 8% cap. Throw in the substantial risk that your maintenance will run far higher than $720 a year for a 1935 house and the deal can be a real loser. On top of that, I don't expect any appreciation in this area. 

As a rule, I will automatically discard any deal where the price is more than 60 times the monthly rent.

I would take my $78k and try to find a duplex. For that price point you can be in a B-C suburb with a duplex or triplex. Heck, you can buy two SFRs if you buy in Euclid just two miles to the west with five figures to spare - but beware the risks of doing this.

 Wasn't it just a few years ago that Canadian banks stopped offering 0% down mortgages to owner/occs?

I've been screaming from the rooftops about the real estate bubble in Toronto since 2008. Vancouver, I hear, is equally looney. How many of those new condo towers are empty? I'm thinking now that the bubble might be in the Canadian dollar itself.

Similar malinvestments are still happening on a massive scale in China. We've all seen pictures and videos of the ghost cities. That government will never let their speculators default, which means that real estate development basically has become a legal form of embezzlement for the well-connected. But we keep chalking up those bad projects in the "win" column and add it to the GDP. According to the central banks of the world, there is no such thing as a bad investment -- any money spent is good money spent.

I think the world should take a hard look at Japan, because I think that's our future if we don't boot the monetarists out of power. When we spend massive amounts of public (or printed) money on huge infrastructure projects of marginal value and financing huge corporations at obscenely low rates while charging small businesses a huge risk premium, society at large suffers. 

I'll get off my soapbox now. We were talking about commercial??

I have used both erentpayments and WilliamPaid, and was pleased by both. Honestly, I'm thrilled whenever a tenant pays me in any method that doesn't involve me handling a check. I'm actually considering making electronic rent payment mandatory for my tenants.

I tried using Buildium for a bit, but I couldn't justify the cost. It felt like half of an accounting system. Many of the expense line items were hardcoded, and it's not quite a double entry system. I'm an accountant by background so that system drove me nuts when I realized I couldn't customize it like I could any standard accounting system. So now I use Wave, which automatically imports my bank transaction activity. I run through it once a month and categorize all the activity.

Rentecdirect's ACH system drove me nuts. They billed me $30 per month for PCI noncompliance for about six months even though I submitted all the paperwork up front. I had to call every month to get the charges reversed. When I realized that I was paying a monthly fee for nothing (as no new tenants were using the system), I tried to cancel and they hit me with a $100 early termination fee. Their contract didn't assess a termination fee so they got an earful from me about it. I would have loved to have an integrated system, but it just didn't work out.

If all you have is a W-2 and one rental property, there's probably no reason to get a tax preparer, but if you're like me and you managed to create a 75 page tax return from a week's work of fighting with TurboTax, then you've probably come to the point where you need to hire help. 

Be aware that TurboTax and the other services sometimes just get it plain wrong. I submitted a return one year and was pretty surprised to get a notice of penalty from the IRS about a week later because the program had failed to file a necessary form regarding quarterly payments. A full-time tax preparer would have instantly recognized that this form would have been needed.

As the complexity of your business increases, so does the risk of audit. Hiring a tax preparer that knows how the IRS likes to see things reported will reduce your audit risk by quite a bit. Some expense line items and some forms will increase your chance of getting flagged if you don't know how they work internally. I don't mess around with the IRS.

FWIW, I use both Rentecdirect and Wave for my accounting of rentals. I like Wave because I can shuffle journal entries from personal to my various businesses with a few clicks, so I can assure that everything is filed in the right place.

I dropped my Econ major to a minor in college after I decided that I couldn't see any use at all for the IS/LM model or any other theory they teach in college econ these days, so you might as well call me ignorant about Federal Reserve activities. But as every fool has their opinions, I have one too. The Fed has everything to do with driving this "upturn" with stuffing the marketplace so full of hot money that the institutions have no choice but to dispose of it as fast as possible -- which then messes up our signals because it looks like permanent prosperity is here. The more astute of us realize that real-world conditions are not as the market says they are.

When it comes to the interest rate arbitrage of 5- and 6-cap investments -- those truly big players have tools in their toolbox that we don't have access to. The amount of collaboration between lenders and investors can be so close as to approach fraud or conspiracy.

We live in a totally new marketplace, where moral hazard is the name of the game. Who cares about underwriting standards if the Fed and the Treasury are just going to backstop you in a downturn?

 Those investors are going to take a nice haircut when their rate resets in 5 years. If rates rise, they'll be left holding an underwater asset with negative cashflow. There will be blood in the streets for commercial -- it didn't really happen as it should have back in 2012. I suspect the lenders are kicking the can with workouts of those deals written in 2006-2007.

You can synthesize any good accounting system in Excel, but it won't allow you to pull reports like income statements and balance sheets. I've found that it takes a great deal of discipline and system implementation in order to keep all the data straight.

I like my accounting system because it automatically pulls my bank transactions into the system. All I have to do is pick the right account they go into, and most of the work is already done.

Timothy,

I'm in Cleveland Heights, and grew up in Chagrin Falls. Feel free to reach out.

Welcome to BP.

You're a little late to market. I can name three software companies in the Cleveland area who specialize in mid- and large-cap property management solutions, and we're not exactly known for our teeming startup culture. ;)

My biggest complaint about my property manager is the lack of updates during the leasing process. I don't know whether they're doing anything to show properties in the background or if they're not answering the phone at all when it should be off the hook with inquiries.