All Forum Posts by: John White

@Andy Hailey 

Let me preface my comments by stating that I'm not a CPA, and that the U.S. Tax Code makes my head hurt.  That said, those who know far more about the tax side of the business than I do have told me that there isn't a profession that gets more tax benefits than the one of being a Landlord.  For starters, you're able to depreciate the property you purchase over 27.5 years (I didn't even know about this gem), meaning that you can actually write off several thousand (obviously that number will vary depending upon which part of the country you're in.  Beyond that, most Landlords (at least the ones I know) show no profits (at least on paper), so they're not paying income tax on their investment, while someone else is building their equity for them.  There is a reason that many of the most wealthy people have built their wealth through real estate holdings.  On another note, it appears that another Investor beat me to the punch on the property that I originally posted about when I started this thread, so my search continues.

John

@Account Closed 

I've also looked at 4plexes (there aren't nearly as many in my area).  The most palatable part of this duplex is simply the location.  It's a very unique property, in that there are almost never rentals in this particular town, and it's a town that people absolutely want to live in.  I visited the property yesterday, and both units are very nice (fully renovated, with very nice kitchens and baths...definitely not "builder grade" stuff), and the property is the last house on the cul-de-sac, surrounded by very nice properties, and this is the only multi in the neighborhood.  I'm still reviewing the numbers and assessing the seller's desire to negotiate.   Thanks again for the great feedback.  The knowledge on this board makes it the absolute best resource on the planet!

Thanks @Brandon Hall and @Bill Jacobsen.  I have considered the out of state angle Brandon.  I'm just not sure my comfort level would be very high with that solution as I'm just jumping into this.  I'll continue to educate myself about the pros and cons of finding a management company to make that a more realistic possibility.  Your point about the cost of entry isn't lost on me.  I've looked at Florida (because after this miserable Winter, that's where I'd like to hang out 4 months a year), but because I'm not that familiar with the state (I've lived in the same area my entire life), it's a bit of a challenge to ascertain what the strong rental areas are (beyond seasonal rentals, near the attractions).

Thanks for the informative feedback Michael.  I'm probably going to keep looking, as I'm really wanting to start building a portfolio.  With the endless tax advantages being offered to Landlords, I almost feel silly not taking advantage of those benefits, given how long I've worked in the real estate industry.  One other question...Is there a general rule of thumb for just how "cash flow positive" a property should be for the numbers to make sense?  I suspect in my area of the country (The suburbs of Boston) that deducting 50% of the rental income toward expenses that it would probably virtually impossible to find many properties that would fall into that category.  You can't buy a slab of grass in this part of the country for $100K!

Good Morning...

I am contemplating purchasing my first rental property (I have  lot of real estate experience as both a Broker, and an Investor...on the fix and flip side).  For the first time in my life, I have a strong desire to hold onto some properties, and start building  a portfolio.  That said, I've never been a landlord, so am not sure what the numbers need to be for them to make sense.  The current deal I'm analyzing is a side by side duplex, in a nice town, and on a cul-de-sac.  The property is located in a town of mostly single family properties.  The asking price is $369K (seems a bit high, but again, I'm not usually looking at rental investments).  The property has been completely renovated, and it needs absolutely nothing.  Both units have tenants in place who are locked into a lease at $1600.00 per month, giving a total of $3200.00.  I am in a position to put 20% down, but the property taxes are $6000.00 per year, and I'm figuring in another $1500.00 for homeowner's insurance.  It looks like when all of my expenses are paid (and this is before factoring in vacancy or repairs), I would have $500.00 left over each month.  My hunch tells me that probably isn't enough, but I'm not sure if there is some sort of formula that many of you use, when it comes to this.  I will say that based upon where this property is (very desirable location), I'm not terribly concerned about the demand, and the ability to find very good tenants.  I'm also not terribly concerned about any major repairs, given that everything has been renovated in the past year.  That said, it's a property that I would probably hold onto for many years, so I'm just trying to see what makes financial sense.  Any and all feedback is most appreciated.

John

Thank you for the feedback. I appreciate the advice.

Good Afternoon...

I'm hoping that someone would be kind enough to point me in the right direction. I'm looking for a Joint Venture agreement that I might be able to alter some of the language on. The basic framework is that I'm entering into an agreement for a split (60/40) of the profits. The property will be acquired by my company and my company will hold title. The big stipulation for me is that the contractor (who I am partnering with) has agreed to complete the renovation within 30 days (property is already fully gutted). He has told me that he is very comfortable writing that language into the contract. I guess my question would be...what should the penalty be if the 30 day deadline isn't met? I would assume less of a split on the commission? Just trying to get some ideas and trying to keep things fair and reasonable between us and ensure both parties are happy. Are there any sites that can find the framework (perhaps in Word format) for such an agreement? Any and all feedback is most appreciated. Thank you.

John

Thank you for the advice, Ann.

Thanks for the feedback Jon. That was part of my dilemma. The contractor has a purchase option with the owners (who he knows, personally) and yes, the purchase has to be completed by February 15th. I was considering paying (in draws) for the renovation, but decided that I simply wasn't comfortable paying for a renovation on a property that I have no ownership interest in. Ultimately, after looking at the comps, I've decided that it's a project that simply doesn't make sense for me to get involved with.

John

Completely understood @JohnMoore. That's why I probably wouldn't take on the project, without having ownership to the property. I just thought there may be a way to protect my interest, without actually going through the two closings, and that the minds on this forum would know about them. I appreciate the advice.

John