All Forum Posts by: David J.

I would only do the incremental if it was something I wokred out specifically for the needs fo the tenant. 

1.  If you paid for the property based on the current rent, increasing it is just gravy.  If on the other hand, you got suckered into buying it based on a "pro forma" rent, your cards are played and you need to get the rent up.

2.  If you have to make any capital improvements to the property I would increase the rent to market for that level of improvements. 

You could simply have a discussion with her about what she is paying and what the market is charging.  Maybe she can afford to get a bump.  Maybe you could increase it by $50 every 6 months to get her up to market. 

I know everyone says you have to run it like a business, but remember you are in the people business with real estate, not the real estate business with people.

I had a buddy that would screw people over and say "its just business" all the time.  Now no one will do business with him and no one is his buddy.

That is just an estimate.  Owners title policy will be around $1,100 and lender policy will be closer to $400.  Also, title company fees will be more in the $3-600 range.  You should have had the seller pay for the owner's title policy.  Such is customary in our neck of the woods.  Like so customary that even some of the local wholesalers will bend on it.

Other than that, pretty standard fees.  4-5k to close a conventional loan is pretty much the cost of doing business.

I would shop carriers.

You just need to file for a Texas LLC and draft an Operating Agreement for the LLC. After that you grab a taxpayer identification number from the IRS and set up a bank account. After that you deposit money to the bank and buy stuff. At the end of the year you file a tax return for the LLC and each member gets a K-1 to file with their personal returns.

Message me if you have any questions.

The only time you STOP making money in real estate is when you sell the property.  You make money whenyou buy,  You make money when you hold.  You make money when you lease.  As soon as you sell, you are done making money off that property.

Clearly the example used here for $150 cash flow or $40k cash is garbage.  If you were talking about the same exact house it would be $150 cash flow and $40k equity at the same time.  There is no either in buy and hold.  It is both.  That is the point.  You get both the equity when you buy and the stream of income (and pay down and appreciation and tax benefits) when you hold.  You can have your $40k anytime you want.  You just have to give up the rest to get it.  Depending on your financing, you could have all three.  Just ask @David Krulac

He and I have similar models.  But a house with 40k equity that cash flows $400 a month and then find a bank (or private lender) and refinance the 40K out (or 30k or whatever).  Then you get all thee.  You keep the cash flow (reduced but still there) and you keep the equity (reduced but some still there) and you get the immediate cash.  On top of that, you don't pay any taxes on the cash you pull out because loans are not income.  On top of that, the amount of equity the bank makes you leave in the house would be lost to taxes if you sold anyway.  So the argument that the bank won't let you have all of it is crazy.  They are the only way you get to keep it all sheltered from taxes.

All I ask is that you stop selling your houses unless you have a great reason to do it (you absolutely can't get the cash out any other way).  You sell = you kill the golden goose.  Some gooses have got to go, but you better dang well be sure the goose is done laying golden eggs.

If you just bought wrong, you won't have cash flow or a $40k assignment fee coming your way.  At least compare apples to apples.

@David Krulac 

Your numbers are right where mine are.  I was just giving a general idea of how little capex acutally costs on a monthly basis.  @Ben Leybovich 

is just trying to score high thread counts and stir the pot.  pffew.

@Jeff S. 

I agree that I was only including capex.  That is just because I was referring to all the "what about the roof" folks.  I also agree that you have to look at everything.  A blanket statement that you need 1,000 a month to make any money is just blatently wrong.  I have purchased more than a couple $40,000 houses where my stretch of the flyover states that rent for $750-$800 and i am happy witht he returns I get.  $300 a month on a $40k investment is about 9%.  Lever it up and you would do a bit better.  You are right though, you have to know what you are doing, and have a little experiance, because 3k can disappear pretty quick on a turnover.

Roof = $4,500 (1 every 20 yrs)

HVAC = $9,000 (@ $4,500 - 1 every 10 yrs)

Water Heater = $1,500 (@ $750 - 1 every 10 yrs)

Total = $15,000

$15,000/20 yrs = $750 a year = $62.50 a month.   You can increase the prices by 60% and still come out to less than $100 a month for the capex on those 3 items.  I think my son drinks that in go-gurts every month.

I never really looked at the costs of hard money, but it is really hard.  From the website above:

On a 6 month, $100,000 loan you are looking at $15,050 in financing costs alone.  Better be one hell of a flip.