All Forum Posts by: Dan D.

About $3,000 for a 4,000 sq ft SFH in Mpls third ring suburb. 5-6 BR house, 4 bath.

I have a tax person who I started using last year and I think I may have annoyed them with my lack of organization on this.

I'm trying to set him and her up better this year with a little more organization.

Just wasn't sure whether the pre-rent rehabbing was more improvements or repairs (like fixing a furnace that wasn't exactly functioning 100% or paying to have other items taken care of that would seem like maintenance, but it's the first time we're doing it.

I am getting prepared for taxes and I'm reviewing many of my expenses for a property in the last year.

Do I need to categorize my home depot and Lowes expenses based on whether the item was purchased was used for a repair, such as painting something, or an improvement, such as backsplash tile?

Or since I was rehabbing the whole house prior to renters moving in, does it count all as improvements?

Also, how about the purchase of tools?

Sanders / paint brushes?

Thanks in advance!

 Depends on your own personal risk level, cash on hand, and other assets.

50% is conservative, but you're portfolio would be extremely unlikely to go underwater.

Regarding the amount of debt that is out there, our economy is a debt-based economy.  It's just the way the system is setup.  So as a nation, we'll always be in debt.  There are some good youtube videos on how the fed works which will explain it.  Basically the whole system is a ponzi scheme, but pretty much everyone is in on it.

Our debt based system is the number one driver of inflation and in some cases appreciatation.

It's the reason why you make more than your parents did.  It's the reasons why the land under your house is worth more now than it was years ago.

So yes, as we incur more debt as a nation, our property values increase with it.  If it retracts, so will the prices on houses.  It's a self-fullfilling systems.

Why have people made so much in real estate over the years?  Use of debt and inflation.

Isn't there a saying about trying to time a crash is like trying to catch a falling knife?

My thought on the market is this.

1.  Be diversified.  Have some cash.  Have some property.  Have some stocks and have some debt.

Second question.  How do you want to take advantage of the drop.  Do you just want to survive it, or are you going to pounce.

Pouncing

If you want to pounce, you'll need the most cash available to buy at a discount.  Problem is you might have to wait a long time holding cash while inflation is still on going causing  property prices to rise.  How much better off are you waiting to purchase at a 40-50% discount if you wait 7-8 years at 9% annual increases to do it.  Answer is nothing.

Regarding surviving a crash

When people are worried about a crash, fear sets in about losing what they have. To prevent that, be smart with your LTV ratios. If you are running the most extreme, you'll feel it. If you are at 50% across your portfolio, if the market crashes by 50% you should still be okay and not forced to sell as long as the income can still cover the properties.

Even if the market tanks, people will still need a place to live so your rent might be worth a different amount even if you can't sell the house for what you purchased it, if you still cash flow you should still be fine.

Keep in mind with all of this, there are different factors at play.  It's hard to predict one of these factors let alone all of them. 

• Value of property (based on demand)
• Value of the dolllar (usually compared to other goods / property / metals)
• Demand for rent
• Value at which money can be borrowed (interest rates)
• Availability of that money to borrow. (government imposed lending rules)

Whether purchased with four different loans or with one loan across all properties, the loan to value measurement will be a key factor in whether you can take money out.

In your case, if you bought in a market that appreciated, you may have more value now than when you purchased, but probably unlikely.  But as always, talk to banks and other lenders for options.  No one on a forum can answer questions that the lender can answer specific to your situation.

Send us pictures of the property you buy in Hawaii, and let me know when I can bring the kids out for a free week!

Ah...  in that case when the toilet flushes, wherever your waste pipe runs, it's getting wet and it probably runs along the pipe and maybe resting on a joist, then coming down to those three spots.  (Do they line up with your joists?)

I'd pop that vent cover off and feel around.  Get a flashlight in there and take some video with your phone.   Or just cut it out and have a plumber fix it for a couple hundred bucks and have someone patch it back up.

Actually, I might just tell the plumber to do whatever is necessary to fix it and get someone out to patch the drywall just to correct the issue and put it in my rear view mirror.

It's hard to say why there are three water spots like that.  They could all be along the same joist, or maybe an area where there are drywall screws and thus the water is coming through more there.  I'd pop that vent cover off and feel around.  But first you want to stop the leak wherever it is.  It sounds like you need a new seal between the toilet and the tank if it leaks when it flushes.  

Dry the toilet off.  Put paper towels or newspaper around when you flush it to help determine the area of the leak.

Hi Bo,

Best thing you can do is spend the $500 for a plain ticket, and $200 for a rental car to drive through the areas of Detroit.  Detroit is coming back, and it's wonderful to see, but having spent a fair amount of time there, there are a couple things really unique about it.

1.  The good areas and the not so good areas are a block away from each other.  So yes, the area you are describing might be a nice area, but you could literally be walking distance from a bad area as well which will affect your long term potential for appreciation.

2.  You need to be aware of what you're buying seeing it in person.

I think you can make some decent money in Detroit because it's becoming revitalized, but you will likely be looking at more of a cash flow play than an appreciation play.

The best investors in Detroit are the ones who have the ability to buy into the area because they have the influence to change the area.

Dan Gilbert has invested in Detroit, and it's smart for him to do it, because he's literally buying blocks of downtown area, and actually buying his own security force (basically to double a police force) to monitor and control the crime in the areas he buys.

If you are just buying one house in an area, you better go check it out.  Otherwise be ready to deal with possible break-ins, tools being stolen daily, while you try to rehab in the wrong areas.