All Forum Posts by: George Pauley

I'm not a flipper but I think the math you did just shows the deal isn't a good one (unless the seller agrees to $425k).  Isn't that the purpose of the 70% rule, to help you see if a deal is worth doing or not?

This reminds me of something I heard Kiyosaki say recently.  While he is a huge fan of leverage and using other people's money, he noted that once he became financially independent his goals switched from creating wealth to preserving wealth.  I suspect we all have our income/wealth amount that will flip that switch in us.

I am using a turnkey service in Memphis.  I, of course, went out to Memphis and examined their operation before I invested.  One thing that really made an impression on me was a giant map of Memphis on the wall with large sections X'd out and labeled "War Zone".  They informed me that "We don't invest in the War Zone!"  As I read this thread I keep thinking about that map.  :)

As an buy-and-hold cash-flow income investor I don't worry too much about bubbles popping.  

Here in Phoenix the RE market didn't pop, it exploded in 2008.  With homes getting down to around 50% of their high value.  But rents actually went up during that crash.  To this day, homes have not gotten back up to their pre-crash value.  But if you go back to 2000, you'll see that Phoenix home prices have averaged 3% growth over those 18 years.  A long enough time-frame evens out the bubbles and the crashes.

If you're buying and holding for the long term, and your financing and markets (ability of renters to pay) are solid, crashes shouldn't be that big of a problem.

Strangely, managing taxes on my rental business wasn't that hard.  But the taxes on my stock options drove me to a professional years ago!  :)

Seriously, rentals aren't too hard to do taxes.  I found Turbo Tax to be more than up to the job.

Moreover, CPA's are indeed expensive.  (And more often than not, worth every penny.)  And, as I said, rentals aren't that hard.  You may not need a full fledged CPA.  An enrolled agent, or even a certified tax preparer with a good history and reputation will likely do the job for you.  That said, H&R does NOT have a good reputation.  

Funny story: My tenants do not know who I am or how to contact me. But my tenant's neighbor does. The rental in question is under an HOA and the neighbor likes to make lots of improvements. The HOA requires him to get my written permission for many of them. My property manager put us in contact with each other years ago for this purpose, and we have corresponded many times over those years. He has never "spilled the beans" to any of my tenants. :)

What @Bryan O. said about arbitrage is spot on.  Do the math and the math tells you what to do.  But...

Yes your home is a liability.  But so are your groceries and utilities.  You have to eat, and you have to live somewhere.  You're home is a special liability that you can't escape.  Its not a doo-dad as Mr. Kiyosaki likes to call frivolous expenses.
One of the things I like about Bryan O's example is it's VERY typical.  Mortgage the house for 5%, invest for 10%, and make 5% on the arbitrage spread.  A lot of folks might not be too comfortable risking their home on a 5% spread.  If you are, great!  But if you're not comfortable, well 5% aint that much.  You're not being TOO conservative.  Just more conservative than others.

Have a separate business bank account for the LLC. All business related transactions occur through that account. No non-business transactions go through that account.

Have a separate email for the business.  All business emails go through that email, etc.

Make sure the LLC, not you, are on the leases.

There's different types of investing, so the question is a bit open ended.  For buy-and-cash-flow I'd recommend the central US, Memphis, Davenport, Indianapolis, Springfield, etc.

Learn to say "next".  

Dishwasher goes out?  Call a repair man and move on to the "next" problem.  Renters skip town in the middle of the night?  Put a for rent sign up and move on to the "next" problem.  Lender wants a letter from your boss saying they don't intend to fire you in the next 2 years?  Take your boss out to a nice lunch, explain the situation, hand them a letter to sign, and move on to the "next" problem.

The idea is to not let setbacks and frustrations put you in a mental state where you stop moving forward.  Problems aren't nearly as big as they usually first appear.  Just do what needs to be done and keep moving forward.