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All Forum Posts by: David Dachtera

David Dachtera has started 94 posts and replied 4490 times.

Post: Rich Dad says a home is a liability………

David DachteraPosted
  • Rental Property Investor
  • Rockford, IL
  • Posts 4,609
  • Votes 2,990

Strictly my opinion ...

A house does not become an asset until you either own it free-and-clear or your LTV goes below 50%.

Appreciation improves your equity position and net worth, but has no cash value in and of itself. You cannot spend / invest equity until you convert it to a liability (debt) plus an expense (interest).

Everything else about your primary residence is the same as any other RE investment: liabilities and expenses. It may not fit the financial definition of an asset. Yet, it provides shelter and comfort.

My $0.02 ...

Post: umbrella policy is going up over 50%

David DachteraPosted
  • Rental Property Investor
  • Rockford, IL
  • Posts 4,609
  • Votes 2,990

An important point to remember is that if your umbrella policy has to pay out, it means someone took you to court and you lost. Your ENTIRE ESTATE is now exposed and subject to discovery in any subsequent litigation.

May as well post a list of your holdings on a billboard saying, "Come 'n get it!"

My $0.02 ...

Post: Tenant wants to break lease due to AC

David DachteraPosted
  • Rental Property Investor
  • Rockford, IL
  • Posts 4,609
  • Votes 2,990
Quote from @Nicho C.:

Hello BP community,

I am currently renting a home to a family that has been in my unit for about 3 months.  Since they've moved in there's been numerous complaints about the A/C not cooling to the desired temp and maintaining the temp.  Each time I've addressed the issues by calling an A/C company to come out and check/fix the problem.  (The tenant wants A/C to reach 65-68 in the home.)  Multiple times it has reached the desired temp but struggled to maintain due to various reasons which have been addressed (+its been 100 degrees outside for the past 3 weeks).  After the most recent A/C repair, the home reaches 65-68 consistently but now the tenant is complaining that, although the house is reaching 65-68, the master bedroom and office are not getting to that temp.

Nowhere in the lease does it state that the temp must reach 65-68. but I have an e-mail response to the tenant before they moved in where they asked, "due to wife's medical condition, temp needs to be kept around 65-68, will A/C be sufficient to accommodate this?"  To which I replied, "Yes the AC works fine."   **Before move-in I had an A/C company verify the unit is fully functional and problems started to happen after they began utilizing the system to maximum capacity. 


To "fix" the issue of room temp A/C company said would cost thousands per room to tear into the wall to check the ductwork. To me, this is not an option because the room is just a few degrees warmer than the thermostat.  Instead, I offered to install a mini-split in the bedroom and a ceiling fan in the office. 

They are insisting they would rather be released from the lease without penalty and it wouldn't be "fair" to have to break the lease to the terms.  (Penalty for breaking lease is 60 days notice + additional 2 months rent fee)

I've done everything in my power to accommodate the tenant and diligently had professionals come out each and every time in a timely manner to address the A/C issues, and even offered to add mini-split and ceiling fan but they would still rather me break the lease without penalty.

My theory: They regret renting a 3000sq ft home with high ceilings where the A/C is kept at 65 all day and night in 100-degree weather and got their first couple of electric bills and want to find a way to get out of the 1-year lease without penalties.

1. Based on my actions and my proposal to fix A/C issues, am I legally good to stand my ground and make them abide by the terms of the lease? 

2. Am I even legally obligated to accommodate a mini-split and ceiling fan to the 2 rooms although the house as a whole is reaching the desired temp? 

Thanks for any/all advice. 


This person should be in a specially-equipped medical facility.

The design of a domestic A/C system is intended to maintain a 20 degree difference between the inside and the outside air temp.

30 to 35 degrees or more difference is not a reasonable or realistic expectation.

Perhaps your attorney can suggest how to present this to your tenant. Diplomacy is not my gift.

Post: Units won't rent??

David DachteraPosted
  • Rental Property Investor
  • Rockford, IL
  • Posts 4,609
  • Votes 2,990

First guess time:

Folks looking for a 2Br are disappointed that there's only one, even though it has the loft. As a 2nd bedroom, it has no privacy being open the area below. If I were looking specifically for a 2Br, that would be a big "knockout" factor in my mind.

That high ceiling space costs a fortune to heat if any cold weather comes along and stays a while. I didn't see any ceiling fans and while the exposed beams look nice, I don't see how the ceiling is insulated. That means heat loss in cool weather and heat gain in summer. So, you may have design issues. I'm a former HVAC guy; so, my take on it may not represent the average apartment hunter.

Also, the washer being in a closet and the dryer in the kitchen seems a bit bizarre - almost an "Oops!' after-thought.

My $0.02 ...

Post: How do you do this?

David DachteraPosted
  • Rental Property Investor
  • Rockford, IL
  • Posts 4,609
  • Votes 2,990
Quote from @Nick Camizzi:
Quote from @John Cardinale:
Quote from @Nick Camizzi:
Quote from @John Cardinale:

have you considered a HELOC instead of a cash out mortgage? That's what I've used in the past and the flexibility of it is really nice.

The HELOC is 11% I’m not doing that 
The thing to consider is your opportunity cost. What do you plan to do with your $150,000 once you get it, because you'll be paying $1400/month having borrowed it all at once. If you just want access to your equity and will figure out where to invest it later, the HELOC allows for this. You only owe on what you have borrowed at that time. 

If I see a property I want, I use it. Also the interest is simple interest only so its not so hard on your cashflow. I.E. if you need $50,000 to close quickly on a renovation opportunity, you can do so. The cost to you at 11% would be $458/month in interest only payments. You can pay back the loan principle when you have exit the project via Cash out refi or flip.


Thank you John, so it could be easier with a HELOC in some cases then huh? I’m still a little unfamiliar with it which makes it nerve racking. The book’s & podcast say HELOC but when I hear 11% interest I’m like omg lol. 

As other posters have indicated, those numbers are off - WWWAAAYYY off! The numbers you stated work out to a loan amount of $308,357.36 according to my financial calculator. At 80% LTV, your FMV would need to be $385,446.71. You'll want to revisit that with the lender.

My $0.02 ...

Post: Deductions for repairs following move out

David DachteraPosted
  • Rental Property Investor
  • Rockford, IL
  • Posts 4,609
  • Votes 2,990

Depending where the property is, there are areas of the Country which have experienced drought ranging from unusual to unprecedented. Check whether local watering restrictions have been in  place preventing normal watering of lawns and such.

Post: Question on fees when tenant hasn't paid their rent...

David DachteraPosted
  • Rental Property Investor
  • Rockford, IL
  • Posts 4,609
  • Votes 2,990

@Tammy Helble,

My experience with landlord friends in Metro Chicago is that judges will award back rent, but not late fees.

I was renting from one of them for a while. His strategy is to offer a discount if rent is paid on time. For example, if the rent is $900, he gives a $100 discount for paying on time. So, the actual rent you pay (on-time) is $800. If he has to go after a tenant for non-payment, he is able to claim the full $900 rent without the judgement hassles.

My $0.02 ...

Post: Owner financing: interest due on sale!

David DachteraPosted
  • Rental Property Investor
  • Rockford, IL
  • Posts 4,609
  • Votes 2,990

@Meredith Mihm,

It sounds like the seller may be trying to take advantage of you or doesn't full understand how loan repayment works.

A $100K loan over 30 years - depending on the interest rate - is going to have total interest paid somewhere around $120K. Your 50/50 P/I payment would be about the same as an amortized P&I payment at a fixed interest rate. So, no real benefit there unless the equity build up is somehow figured into the repayment plan. As another poster pointed out, the interest rate changes per payment.

I'd have to say no myself, but see what your attorney and accountant have to say.

My $0.02 ...

Post: Why do people use LLC for "buy & hold" rentals that have mortgages?

David DachteraPosted
  • Rental Property Investor
  • Rockford, IL
  • Posts 4,609
  • Votes 2,990
Quote from @Dan N.:

I am confused on this topic and I would like some input. I am going to acquire a few long-term rentals over the next few years. All properties will be acquired with a mortgage. Initially, I was sure I was going to create an LLC (for legal protection) for each.

But over the past few weeks, I have discovered:

1. LLCs that are owned by one person don´t really provide any protection

2. Umbrella insurance seems to cover you and your assets better than an LLC in case of a lawsuit.

3. If I buy a house under my name, and transfer it to an LLC owned by me, there is a slight chance it could trigger a due-on-sale clause (especially if interest rates rise).

What am I missing? Why do so many people purchase long-term rentals (with a mortgage) under an LLC?

Thanks in advance for your feedback.

 #1:

For best protection, an LLC should have multiple members and none of them should be a human person. If your business entity structure is designed for maximum protection from liability, entity ownership should be as difficult as possible to determine.

#2:

If your umbrella policy pays out, it means someone took you to court and you lost. Your ENTIRE ESTATE is now exposed and open to discovery. May as well post your possessions on a billboard saying "Come 'n Get it!"

#3.

The LLC should be able to actually buy the property and have it transferred into the LLC's name and credit. That said, banks aren't going to incur the expense of a foreclosure as long as the payments keep coming in.

My $0.02 ...

Post: First STR Need Advice!

David DachteraPosted
  • Rental Property Investor
  • Rockford, IL
  • Posts 4,609
  • Votes 2,990
Quote from @Henry T.:

Like James Brown soul brother #176284 says, don't be a drop out. I would get that college degree first.


... but, only if you can afford to pay cash for it. If you don't need a degree, no point taking on predatory, usurious debt that will hound you the rest of your financial life.