All Forum Posts by: Greg Scott

I'd check with a lawyer/CPA that what your company is doing is legit.  It sounds like they are trying to avoid paying payroll taxes by paying you through your rental.  What liability do you have?  You don't want the IRS chasing you for that money.

Aside from that, it shouldn't matter if your Property Management company pays taxes or your LLC pays them directly. Personally, I like having as much control as possible. I know of two instances where a Property Management company was going out of business and failed to make payments on behalf of their clients.

Good luck.

John:

I would think that adding ducts into a 1930s build house could be crazy expensive.   Baseboard heat is usually pretty efficient so I've never heard of anyone that has made that change for cost savings.  It is usually driven by the fact that they want central AC for themselves or a retail buyer.  Plus, you never know what you are going to find when you open up a wall.

You can probably save a ton by efficiency upgrades.   I would check with your local utility. Often they will help offset costs of these upgrades.

In the apartment space we often bill-back utilities as RUBS to the tenant.  I've heard from those that have done it that they often find that total utilities drop by about 30% after they do that because the tenants start paying attention.

I think with a combination of energy savings actions and RUBS, you can probably make that problem go away.

Good luck.

Melissa:

Keep plugging away!   

When you say 5% for vacancy, repairs, capx & management, are you saying 5% for each or as a whole?

I usually budget for 8% vacancy (one month per year) although that should be conservative.   In my experience, most property management will cost you 8-10% of revenue depending on location and property.  On my SFRs I spent an average of $150/property/mo long term on Cap-Ex / repairs.  I would think that would be slightly higher on a quad.

If the property is in good condition, you are probably paying market value for it. You may find the best deals are the really ugly properties, especially if they are in such bad condition they cannot get a conforming mortgage. Those properties have less competition so can often be bought and rehabbed for below ARV, driving up CoC returns.

Good luck!

Are you looking to take a course to get your real estate license or to learn how to become a real estate investor?   Those are two very different things.

If you want to become an investor, I recommend Lifestyles Unlimited.  I've been a member since 2011.  They have lots of online classes, but also live in-person events.   Most of their live events are in Texas but they are expanding nationally.  For years my wife and I have been flying to Dallas and Houston to attend events.

Ideally you have thought of your exit strategies BEFORE you buy.  

The beauty of buy & hold real estate is that it usually has multiple options, assuming you bought it right.  Generally the options are as follows:

 - Continue to hold and collect cash flow

 - Sell it

 - Cash-out refinance to get your equity out

I recommend you check out Jason Hartman's organization. He does a great job in turn key rentals and isn't wed to any particular city or state. He has several podcasts, but he Creating Wealth Show is largely dedicated to SFR.

Andrew:

That is a stock market mentality.  You need to think about real estate differently.

Find good cash-flowing properties at a discount.  Profit is built-in, regardless of how the community performs.  Buy one.  If you like the direction the community is headed, hold long term.  Otherwise, sell at a profit.  You will outpace your friends that try to guess what is the next hot spot.

Don't speculate.

Ross:

Check out Lifestyles Unlimited.  They have a physical office in Austin.  My wife and I fly into Dallas about 3 times a year to attend events in their office there.  We also attend their Houston Expo every year.

Best bang for the buck in real estate education!

Good luck.

Thanks Mac.

So, let's just assume they want 20% down.  (You may be able to go lower which would boost your returns.)

Cash out of pocket is $200Kx25% = $40K

Yearly Cash Flow is $900x12 = $10,800

Cash on Cash return is $10,800/$40,000 or 27%

If your numbers are right, I don't care about property valuation, that is a pretty good CoC return. In four years you've gotten back all your money and still own the asset. No brainer.

Tim:

Your steps are fairly high-level.   You could probably create a 100-step process if you wanted to be detailed.  Staying at this high-level, I see one flaw in your thinking...

If you have a really good deal, you don't want to waste any time. you want to get the deal LOCKED UP. 1 & 2 should be simultaneous and immediate. If you cannot afford to buy it yourself and need someone else to bring cash or partner with, then you need to learn how to write your contracts. In most states you can have a clause that allows you to assign the contract to others. That allows you to lock up the deal immediately and later figure out the LLC or person(s) who will be the actual end buyers.

Good luck.