All Forum Posts by: Jim Herbst

I appreciate the feedback everyone.  I assumed it would be mostly negative.  The only reason I posted the question in the first place is because I had a surprisingly positive experience with one and I was wondering if it was an anomaly.  I received a home warranty from the seller when I purchased my primary residence and it worked flawlessly to replace a leaky water heater.  I called them after hours on a Tuesday night and they were over Wednesday afternoon to replace it.  No cost or hassle at all to me.  From what I am hearing though, this experience seems to be a rarity.

To be honest, I'm not even sure if you can carry an annual warranty policy on rentals, but is this an avenue anyone utilizes?  The benefits would certainly be to stabilize fluctuations in maintenance costs and to streamline repairs, but at what cost?  Obviously warranties are a negative proposition cumulatively (otherwise all warranty providers would be out of business), but would you pay a premium for this peace of mind?

What are your thoughts on investing in condominiums as part of a buy and hold cashflow strategy?  Specifically, what do you estimate maintenance costs to be when a condo association covers exterior maintenance, lawn care, and snow removal?

Even though you can find condos at bargain prices in top-tier school districts in Columbus, I am often hesitant to commit to condos simply because you are at the mercy of increasing condo association fees.  

I would explore refinancing with a goal of finding a low closing cost bank.  If you could decrease the gap between your holding cost and your rent, I think that would be preferable to walking away or eating a significant loss.  The principal paydown and tax shelter still seem preferable to bringing 20k+ to closing IMO.

I agree with the other comments regarding the mentor.  Zero maintenance fees and minimal vacancy is obviously ideal and best case scenario.  In an isolated year it could be achieved, but to consistently rely on these numbers will undoubtedly result in disappointment and increased probability to over extend yourself.  Personally, I plan for worst case scenario and build in 2% PP Maintenance costs/yr and 8% vacancy into my cash flow analysis.  If you still meet your cash flow goals with these allocations, you should find that this will provide a decent buffer year-to-year when maintenance costs are abnormally high.  Best of luck.  Real estate is a great addition to a diversified investment portfolio.

@Christian Lautenschleger One of my favorite aspects of this forum is that people feel comfortable enough to admit their reservations and missteps publicly. I would imagine that many investors on this site can relate to your feelings of buyer's remorse.

I currently only have 4 properties, but looking back to my first, I still say to myself 'what was I thinking'. Knowing what I know now, I certainly wouldn't have purchased my first property in the same manner. I am, however, thankful for that first property because it enabled me to become a more savvy investor and more efficient and effective landlord.

It is far better to make a big mistake on a small investment (duplex) than to even make a small mistake on a larger scale project (apartment complex).

Where is your property located in Columbus? Your cash flow and appreciation may be stagnant and you may have tied up working capital, but you still can take advantage of your tenant's debt paydown and duplex's tax shelter. Also, it seems as though you can still eat the earnest money and walk away and move on.

I would be up for it.

Dan,

Great decision to join the site. I wish I had your thought process and thirst for knowledge at that age! A lot of people start out by owning a duplex. It is a versatile and fluid investment and can serve the purpose of being both a primary residence and a source of passive cash flow. You can rent one side and use that cash flow to help you make improvements on the other side as you live in it. As an owner-occupant, you would also have the benefit of getting the best rates and have exclusive opportunities (home path first look, etc.) that aren't available to investors. Some of the podcasts seems to align with your goals and knowledge base and would be a great benefit to help get the gears cranking.

Thanks for your service Jeremy and welcome to the site. I've found the information on the podcasts and the forums to be invaluable to me as I grow my real estate investment portfolio. Great networking opportunities as well.

I could not agree with @Jon Holdman more. Real estate, regardless of your level of knowledge or competency, should should be a piece of your retirement puzzle (some here may argue a large piece). I personally know many people with 'successful' careers who completely overlook real estate and label it as 'too labor intensive' or 'to prone to market fluctuation' or 'more complicated than a target fund'. That is primarily why I became interested in BP, because I too was unfamiliar with real estate as a mechanism for wealth generation or protection. I appreciate diversification and while I agree that to get a 20% COC return it will be highly leveraged, thus greatly increasing risk and that appreciation should be treated like a cherry on top rather than as a guarantee, real estate is versatile. It allows you to take those calculated risks and while you can never truly eliminate external factors, real estate ownership does provide a bit of control that is lacking from investing in a 401k.

Basically, I enjoy the intellectual discussion and insight from those significantly more experienced than I.