All Forum Posts by: James H.

People buy what they can afford. Most people can't afford anything better than a ho-hum subdivision cookie cutter house. Or maybe they can, but they aren't willing to give up their 200/month cable bill and weekley trips to Khols and Target. That's life.

Well, that is a little better. You are bringing some money, which is really the most important thing. Now, the fact that you are not bringing as much is offest by the other qualities you bring. Since you are bringing capital (which was not discernable when you said "he brings the capital") you have do have some skin in the game. That capital magnifies the value of the other things you bring to the table. But without the capital, those other qualities are not worth much. There are a hundred thousand people who know stuff that don't have any money and never get anything done. Real estate is not complicated. From my experience, which is limited, what makes a buy and hold deal work is 90 to 95 percent wrapped up in how much money and time you have. The remainder is your knowledge and experience.

Junior,

Here are the statements that jump out at me.

"we are new to game"

" I'm just trying to get a feel for what we should do"

"we are just getting started"

"We don't have much heavy repair experience though"

"he brings the capital and a little bit more free time"

I don't see what you are bringing to the table here in terms of real dollars. No offense. I don' know if there is a nice way to say it. Plus I don't think doing business with family is a good idea.

Lets say I am wrong. What specifically do you bring to the table and how much is it worth?

This sounds like a situation for you to be a great person to give free advice, but not be a partner.

All my research indicates that Section 8 is only as successful as your screening and operatoin practices, which is true for non-Section 8. If that is the case, why add another layer of administration and bureaucracy to your life?

Bill is from up north and I disagree with his opinion regarding the suitability of metal for the low pitch in our area.. The metal roof is ideal for that pitch in this area. A rolled on or rubber roof would not last nearly as long. The minimum pitch for metal roofing is 1 to 4. You can't use shingles on that pitch.

Proof i point is that roof is already 30 years old and still has life left in it. I would wait a little bit to build some cash reserves and then do a makeover on the roof. The sooner you replace it or repair it, the sooner that new roof or repair starts aging. I don't fix leaks that aren't leaking.

Not much. I make my choices based on what I want and realize I control what I do, but not the outcome. Worrying about something won't change what is going to happen or not happen.

Occasionally I will just have general anxiety, though. Not often and not paralyzing. Owning rental property is a big responsibility as well as a potentially big risk. If owning rental property doesn't humble you a little bit, then I don't know what would.

Taking good care of your property, screening tenants well and having a good cash reserve are alway soothing to any worries that may crop up.For instance, a windstorm blew a couple shingles of one of my roofs and the roof needs to be replaced soon. Do I worry abou tit? No because I have enough money to replace it once I am ready to or once I absolutely have to. Really, there is no substitute for haviing a good cash reserve.

I will accept the deposit to hold the rental for up to a month and if they back out, the deposit is non-refundable. If they move in, the deposit converts to a typical deposit. I am picky about who I rent to, so once I approve a tenant, I am willing to forgoe a few weeks rent to hold the unit so they can finish out there lease where ever they are moving from or whatever other reason I deam legitimate. I have no problem helping someone honor their existing agreements and still rent from me. A good sign of a good tenant is one who does not want to break their current lease. Just because I am willing to do this doesn't mean it is necessary and that I am constantly throwing away up to a month of rent, either. I consider it on a case by case basis. If I can get good tenants that will stay for a year or two and not tear up the property, it was money well spent in lost rents.

They don't get keys until fist month (or the prorated amount of the first month if it is more than three weeks) is in my hand.

Don't worry about making excuses. If they don't understand they have to pay for the time they live there, they probably don't need to be living there...

1.5 years is not that long to save to buy your second rental. The first few acquisitoins are usually the slowest for most landlord investors. Then it starts snowballing from there. This is what I have learned from speaking with several local investors - and some on BP.

Anyway, do whatever makes you comfortable. I personally don't see the point in reviving debt on a free and clear asset, but have no qualms generating new debt on new assets. I guess it's just psychological/emotional if not logical. As the saying goes, "Its better to have a bird in hand than two in the bush."

It doesn't sound like your property would perform well with enough debt against it to really help your future investments. Plus you need to consider that banks will see that debt and count it against your debt to income ratio when determining if they will grant you a new mortgage. If you are having a hard time paying off CC's and saving money, then my guess is that your DTI ratio might be a little tight. Plus you will need to season that money you pull out for at least 6 months so a new mortgage banker does not see it as borrowed funds being used for a DP which most prohibit.

So, look at the functional analysis as well as the numerical analysis before doing anything. Have a clear and complete plan of what you will do with that money before you borrow it and only then can you do a functional analysis.

John Chapman, my student loans vary from 4.75 to 6.8 percent. I will be paying several of the loans at 6.8 percent. Although, yes, I can probably find a better return in a rental, the student loans count against my DTI ratio and I have deferred them for several years - so it is time to start paying them. Student loans are the only thing that can't be dissolved in a bankruptcy, and we have an opportunity window to pay some off, so now is the time. I wish I could refinance them at under 4 percent (or even 5), but when I have looked at consolidation, they just consolidate under a weighted average of existing interest rates, so the savings is minimal and then the debt is lumped into one big loan rather than a bunch of small ones that you can chip away at and reduce your monthly obligation as you go. If I calculale a first year "COC return" on paying off the student loans, it is about 15 percent. Not a perfect analysis, but another way to see the benefit of paying them off. If you know of any way to refi SLs at lower rates, I'm all ears.

Jon Klaus, yes the new house is in Arlington also - near Arlington High School in the South Davis neighborhood. We bought the house in time to attend the annual block party put together by the neighbors (no HOA) and they barricade the street off. How is that for good neighobrs?