All Forum Posts by: Frank M.

An LLC is a good idea, but it takes very little time to set up. The priority is the decide what you plan to do, and how to do it.

Are you buying to rent, renovate and rent, flip? How will you finance the deal? Are you going in with a cash offer, or will you make an offer subject to financing?

How are you looking for the house you want to buy? A good chunk of your potential profit comes from buying right.

Michael - I'm a big fan of learning how to do this yourself. At some point if you have a dozen flips and multiple rentals, you can go pro as you might value your own time more.

But, I believe as a new investor, ask questions, and learn to do it yourself.

By the way, a $10K profit should net you more than half after taxes. Of course, it depends on your Federal and State marginal tax rates, but 30% total is more like it.

One can gift a friend or relative (anyone, actually) up to $14,000 each year with no consequence. If he and his wife own the house, they can each gift you $14K of value. More than this, and he has a gift tax issue. He must file a Form 709 and apply the excess against his lifetime gift amount. No money, just paperwork.

Gifts to anyone who is not a non-profit are never deductible.

Sorry, this answer contradicts Bill's correct answer. One can't just reinvest the profit, the whole sum must remain invested. My original answer $700K stands, given the OP's choices offered. As Bill points out, the expenses can come off the top. So not the full $700K.

Not a simple bit of tax code. One should read the IRS docs to be 100% sure of what they are doing. A mistake can be costly.

When the dust settles, what makes the author so sure that the average house still wont cost a week's pay for the rent or mortgage?

There are bubbles and pops, but I'm pretty sure that in a decade or two, I can't tell you the price of a median home, car, or bread, but the rent will still be a week's pay, and if you have 6 or so paid in full doors, you'll have a full median income after expenses.

I had a couple ask if they could rent a 3BR, and include two grown daughters, one of whom had 3 children. It sounds like I'd be in violation of some housing rule if I accepted their application.

Are the maximum rules per room federal or state? I've run into similar situations, less concerned about the wear and tear, as to whether the health department has a limit. Say a group of college buddies decided they can bunkbed 4 to a bedroom. Would the board of health be calling me?

I agree with Brianna, 30 year loan. On about $26K net (after vacancy) rent, the difference between 15 and 30 year payoff is nearly 20% of the rent.

Even if qualifying weren't any issue, by going 30, you can build a reserve to protect your self against the worst set of events, repairs evictions, etc, then if there's extra money decide between building up the next downpayment or paying down principal.

When I add your numbers now, taking 10% off rent, I see net of $6762. $3K to expenses? That leaves $3762, not even enough to pay the 15 yr payment. I'd really advise against the 15. I hope to hear from others on this.

Terry - There are spreadsheets here, at BP, that suggest a range of expense ratios depending on age and last full update. For you, 10% might be right, I'd rather make the numbers work estimating too high, and be happy coming in under each year, than the opposite. I'm looking at a $120K cost after rehab, and about $2250 rent. I'm not going to project swimming in cash.

Also, have you called an agent to find out what insurance will actually cost? I was surprised to find the insurance company requiring a per square foot cost that was far more than what I was paying for the house. No offense to a real estate broker, but I'd call the agent I'll buy the insurance from to verify.

I see 5% vacancy. Will you rent it out (list it) yourself? A typical turnover costs an empty month and a month's rent to the listing agent. So I believe 10% is closer to reality.

I see no repairs/maintenance at all. 3 sets of appliances, plumbing, etc. Stuff breaks. 10-20% of rent according to the numbers I see here.