All Forum Posts by: Douglas Pollock

@Ryan Rush After reading many of the replies to your original post, I stopped because I realized I don’t know exactly what you are asking. There’s an intermediate step that needs to be done...

How much cash needs to be freed up in order to get back to stability?

Maybe get a roommate, Airbnb your home/ spare room, or sell some stuff from the attic/garage that you aren’t using anymore.

How long until you can pay it back? Sell your car and buy a civic or Corolla. Cut your cable, pack your lunch, no takeout, no dining out.

Creative ideas: Patch the roof, tarp the roof, finance the repair through the repairman.

The problem is framed as a cash and/or cash-flow problem. How much? Or how much per month?

Also, if you are going to sell, please take property conditions into consideration. If you just did a remodel, roof, HVAC/heat it may be better to sell at ten years than now.

@Larry Spradling you NEED to use facts going forward, and you already took a great start. You are crowd sourcing information. Don't rely on our information, but do use it to inform you research, action, and speak to some professionals. Since you're dealing with an IRA, take the IRS rules into consideration.

1. Determine current rental rate. Maybe the new tenants rent rate will result in positive cashflow, or even more negative.

2. Determine market value of the home. You could pay for an appraisal as well as speaking to a real estate agent and requesting a list of all properties sold in the area for the past 12 months. Provide a similar square footage, number of beds and baths, and look for similar properties. Maybe your home is worth more or less than what your property manager stated.

3. Based on your time horizon, determine what you want out of your investment. Are you better off with a low cost index fund like VTSAX or VTI from Vanguard? Or, do you want a rental equity with cashflow? Or do you want to build wealth with paying off property and potentially increase cashflow with paid off property?

4. We’re humans, so emotion is inevitably going to be involved in our decisions. Rational thought should be used. What advice would you give a family member in the same situation? In ten years, What do you want to be able tell people you did with this problem?

5. We wish you the best. You’re not the only going through this. Thank you for your courage in facing this. A head in the sand will not fix it.

While listening to financial independence podcasts I picked up on some interesting info. For example, Dave Ramsey advises people their investments will grow at 12%, and they can safely withdraw at a rate of 8%. While I think Dave has some great points about the risks of debt, I’m gathering that his math is seriously lacking. There’s a lot of debate regarding safe withdraw rates, but most reputable sources advise somewhere around 4% as a safe rate for 30 years of retirement. One FIRE (Financial Independence, Retire Early) podcast expert states that 3.5% is a reasonable withdraw rate for retiring early. When it come to Real Estate, what do I need to consider about my rental property as I move into retirement? Are there any equivalents to withdraw rates, and expected growth rates.

@Jason Cacioppo I agree! They’re already in the property, and have been screened prior to renting. Why not charge a fee for service with severability! With minimal research, you could add an inexpensive router to your system with no password. If you don’t have one already, you can get one used for dirt cheap. Or, most service providers offer guest access built in. The benefit is that you can call the provider and request tech support! You don’t have to tell them it’s a tenant, just someone you’re not sure if you can fully trust yet.

@Douglas Pollock The adjuster quoted about $3,500 for interior repair. He says the roof looks fine, but couldn’t inspect it all because the tarp is covering it. Insurance is also saying that the wind/hail exclusion raises the deductible to a percentage ($5,400). So, if there’s a heavy rain storm, and it’s not a named storm, and roof gets in through the ridge vent (suspected culprit), then is that wind/hail... or just rain? Sure, they often go together, right? But, I would think wind damage would be tied to things like missing shingles, downed trees, debris, etc. So how does an owner have that discussion with the insurance agent? Any tips for how this discussion is likely to go?

@Matt Gilroy If that’s what you want, go do it. Just be aware of the risks and costs associated with that plan. Appreciation only matters at the time of sale, refinance, and tax day. Depreciation matters on those days two. If you’re able to factor in vacancy, CapEx, Taxes, Insuramce, repairs, etc then you should be able to base your decision on the numbers. Being that you’re asking on BP, you may not be experienced enough to know all of the risks and adequately mitigate them in the event of a downturn. Being that a mortgage usually spans 15-30 years, you have to look at your property over time and not just today. If the local business closes its doors, is there another one standing ready to employ your tenant? If a hurricane, flood, tornado, mud slide, fire, windstorm, or some other event happens, do you have the means to recover? If it happens twice a year, two years in a row, then what?

@Jared Newsom the PM sent a contractor to assess, and they state the 7 year old roof is in bad shape. I don’t understand how a 30 year roof could be bad. He did say it was missing shingles, which it was not last year when we had it checked. The insurance adjuster plans to do his assessment either today or Monday. He said they use drones now. I’m a little Leary about the quality of a drone inspection compared to the human eye. The adjuster states that the interior damage will be covered by insurance, but not the roof itself. Any tips on working with the insurance to cover the whole thing? I suspect the rain, wind, or possibly a tree limb caused pre mature failure of the roof.

@Nicholas Gray I too long to travel the RE investing path. I’ve pondered the thought of switching to a job in RE, but have been stymied by the potential loss of income. I support my family of five, with young kids, so my responsibilities reduce my maneuverability. I find myself working on spreadsheets when Inshiukd be doing my job. If you explore the RE industry, you may consider starting it as a side hustle/moonlighting. Closing agents, title companies, real estate sales, working for other investors, flipping, wholesaling, CPA, lawyer, title companIes, bookkeeping, loan agents, HUD, city planning, etc .... all have their hands in RE. I recommend looking into the fire movement in order to determine if financial independence and retiring early are really what you’re looking for. Many will tell you that real estate sales aren’t as easy as one would hope. As an engineer, there’s a good chance that you are a little introverted. I see people were quick to squash your urges without consideration to what you really asked. If you aren’t happy doing what you’re doing, then change paths before you are encumbered by the trappings of life. BUT, and it’s a big BUT, we would caution you to measure the risks. You certainly don’t want to end up on the streets. Always leave your employer on good terms. Consider asking your employer for part time work, so you can do part time RE until you have your legs under you or maybe find out whether that’s the path you really want. How long could you be gone from your job and still return to it? What is your true end game? Is real estate a path to what you want, or is real estate what you want? If you want to find “the most lucrative” job in real estate only so that you can start learning and networking, then you don’t have to leave your job. BP, and countless others will tell you that you don’t have to quit your day job to do either. Join a local RE investment association. Read books.! Find others who enjoy your passion.

Should I contact the insurance company? I just received a call from my PM. The tenants reported a roof leak and it’s still raining. The PM recommends I call the insurance company tonight if possible. The property is in Georgia and is due to receive more heavy rain on Wednesday as the hurricane that’s in the gulf moves across the US and toward the rental. I found out during a hurricane a couple years ago that the deductible goes up to a percentage of the home’s value during a named storm, so my gut says I should contact the insurance company. Is there any emrsason I should wait? I don’t know the extent of the issue at the moment. The tenants are still in the home. Does rental insurance usually cover any costs associated with the tenants if they need to leave?

I know of two ways to listen to the BP and BP Money podcasts on my Amazon Alexa Echo Dots. 1. “Alexa, PLAY Biggerpockets podcast.” ‘Response: Getting the latest episode of BiggerPockets podcast...’ {as of a few weeks ago, defaults to episode 295 - it seems stuck} 2. “Alexa, OPEN BiggerPockets podcast.” ‘Response: I’ve found a few matches. Do you mean BiggerPockets, or BiggerPockets Money.’ {Plays the most current podcast - which is 299 - four episodes have elapsed since the ‘play’ command stopped working.} Is anyone else having the same issue? The problem may have occurred after installing the Biggerpockets skill on the device. How do I report this issue to BP’s tech support team?