All Forum Posts by: Dee Guzman

To tack on to the conversation. The depreciation always counts against your rental income. So as you raise rents and payoff the loan eventually your rental will start to “show” a profit. At that time the depreciation you have piled up will knock that back down to zero until you use it all up. 

 I calculate my numbers and determine what price I need to acquire the property at to meet my capitalization rate requirement (or whatever other financial metric you use to determine whether or not a deal meets your needs). Once you have this offer in mind; this should be your new max offer that you are willing to close at. Offer a bit below this max (10-20k under maybe) so you have some wiggle room in negotiation. This is assuming that this property is being offered at fair market rate. If the owner is not not willing to accept an offer at your max offer rate or below then it is likely time to move on to the next offer. There will always be other deals to be made so have to avoid getting dragged into a bidding war or getting emotionally invested in a deal. 

@Dee Guzman

One strategy that I employ is placing a VERY heavy emphasis on location. I would much rather buy the ugliest house in a great neighborhood than buying the best house in a bad neighborhood. Fixing a single house may cost money and time but it can be done. By fixing up a house in a good neighborhood up to the standard of the other houses over time, there is a much higher probability of enjoying substantial equity gains through forced appreciation. 

To give two examples, one of the first rental properties we purchased: we decided on the area of town we wanted to purchase by identifying two locations of town that were currently very affluent. One was in the central portion of town and was expanding to the southeast and the other was in the southern section of town and expanding northwest. We picked the region and neighborhoods between these two sections to invest in with the mindset that there is a high probability these regions will eventually merge with continued expansion which will increase the value of our property through association. In the mean time, we would benefit from increasing values as these two neighborhoods fund high-end school districts, public works, sports complexes, and shops.

Another property we acquired, we intended on using as a short term rental. Once again, we emphasized location heavily. We identified neighborhoods that were in attraction tourist destinations with attractions and highly ranked restaurants within walking distance. At the same time, the neighborhood was near two major universities and central to 3 major hospitals so that we could tap into multiple short term rental markets ranging from tourists to traveling medical professionals to student housing. 

By heavily emphasizing location through careful research and selection, we give ourselves multiple options to pivot to over the years as the industry and environment shifts.