All Forum Posts by: James Mc Ree

Why are you doing this, @Laura Casner? That is what you focus on.

Focus on your dream. It could be freedom from a W2, travel, new cars, college for the kids - whatever your dream is, focus on that. Focusing on cash will not motivate you long-term, especially through the trials you are facing now and will face in the future.

Keep chasing the dream. Dream on!

I think most of what you are asking is impossible for anyone here to reliably answer without more information and you should probably consult an attorney if you think it is worth it. You are disputing a condo agreement we do not have and we know nothing of your paint and vent beyond what you say.

Regarding amending the lease, it can be a simple document you and your tenant sign stating that you are amending the term of the lease to be 2 years, and the tenant has an option to terminate the lease at 1 year.

Regarding the bathroom, if it has a tub or shower and no other ventilation, I would go with the vent fan as the root cause. If the existing ceiling paint is damaged, the ceiling must be scraped, repaired and painted. Obviously, they should use the correct type of paint when they do it. I think you are both right: fix the vent fan and paint.

"Better" can be defined in terms of risk and return.

Risk - You told us nothing about the investment nor GP, so it's impossible for us to really comment beyond lower risk might be better. The agreements I've seen basically say you are guaranteed nothing, you could lose all your money, you might not be paid on time or ever, you can't rely on any representation made by the GP, you have no control over the operation and other terms and disclaimers to that effect. The GP will say that is all boilerplate stuff recommended by the attorney. It basically means you know nothing if your only source of knowledge is what the GP said and wrote. Consider getting references from past investors with the GP.

Return - 11%. LOL! Return should always be thought of in the context of alternatives with regard to risk. You are taking a risk to get 10%. Nearly risk free investing in a money market is about 4.8%. The stock market is returning 6-7% over a long term average. How much risk are you taking for that additional 3-6%? As @Greg Scott mentioned, this is on the low end of deals like this and remember nothing is promised (check you docs on that).

I own SFR homes that have far exceeded 10% returns due to their appreciation over the past 10 years or so. No one can see the future, so who knows what the next 5-10 years will bring.

10% Is not an extraordinary return, but not bad either. Find something you are comfortable with because you have done strong due diligence.

You need to know what they changed and why. That part of the story isn't here.

They really shouldn't be changing the ledger entries at all. For example, suppose they charged $100 for a fee in 2023 and they found through audit it should have been $500. They should write you a letter explaining the error and that they are going to charge you the additional $400 now. There should then be a ledger entry dated today for "Additional 2023 fee" for $400. That way, your records are consistent and they should never due something that causes you to reopen prior year taxes.

You would know what a tenant's voucher is worth for their current property as of the time it was issued. That doesn't mean it just transfers right over to another property.

The tenant's income may have changed or possibly more or fewer family members move along. The property could be more or less efficient with utilities. It may or may not have central air, deck, porch, etc. The landlord could provide appliances and you do not or vice versa.

It probably won't change radically if the tenants' income and family structure haven't changed, but probably won't be the same unless the properties are very similar.

There are 2 drivers for what you will get in Section 8 rent:

1. The property's market value in rent. This is what is governed by FMR. You are very likely to get in the range of $1,300-$1,400 if that is the market. The $2,000 max FMR is just what it says - the max regardless of the market. You can appeal it, and they will get a BPO for the property.

2. The tenant's finances determine what they can afford. Your property might be legitimately worth $1,500 and the tenant qualifies for $500 in assistance, but can only afford to pay another $500 for a total of $1,000, they won't approve $1,500.

Unfortunately, you can usually only find both of these out when you have an application and lease signed from a prospective tenant and submit it to the local housing authority. This is one of the cumbersome parts of Section 8.

@Dawn Miller That's not a problem. Your listing should say the property is being sold tenant occupied if that is the case. Prospects who want to live there will know they need to end the tenant's lease or get you to end it as part of their offer. Prospects that don't want to deal with a tenant or lease at all won't see the property, but they wouldn't see it anyway if it isn't listed, so no loss to you. Investor prospects will be delighted to know they have revenue on day 1.

Here's another perspective: Insurance is for liability protection. Use your rental's homeowner's insurance plus a liability policy to get $1M in protection. That should cover you for liability unless you plan to manage the property very poorly.

A trust owning an LLC seems to be overkill for a single rental. It could be great planning if you intend to add more properties. Alternatively, you can own the rental directly, take the income directly and simplify your life, taxes and everything. Your children can inherit the property as well.

I think you will owe transfer tax on your QCD and fees for the trust and LLC as expenses to keep in mind. I would change the above language about doing your best to keep personal and LLC transactions separate to ABSOLUTELY do that with no exceptions or your LLC is a waste.

Pay off the credit card debt first. It costing you 15% - 20% or more on the carried balance if you don't have a promotion. This will get you $600/month back.

Check how your plan handles 401k loan payments. I believe most (all?) plans have you paying your principle and interest back to yourself. If that is the case, the $1,000 per month impacts your operational budget, but is really a transfer into your savings. You can use this money to pay off the credit card debt if you haven't already spent it.

Maybe you got a steal of a deal, but I am suspicious that you spent $100k for a rehab property and it is actually worth $200k. Did you mean it will be worth $200k after the renovation? If so, your $100k purchase + $100k renovation isn't actually making you a profit. Otherwise, if it is currently $200k and will be $300k(?) after renovation, consider selling it to harvest the profits and get out of debt.

The rental property looks like it is covering itself. You can get a lower rate now, but it may be worth waiting until around the end of the year to refi. You will get a better refi rate if you don't take money out, but the refi will cost you closing costs.

The OP's premise is these properties are managed by a property manager versus the owner. I would think your first stop would be with your property manager to see what data they can share.

One of the reasons for hiring a property manager is so you don't have to deal with all of this stuff. Think about how you will use that data besides just scratching an itch and decide if it is worthwhile.

For example, if you have a lease for $2,000 per month, how important is it to look back over the past couple years to see how much the tenant paid each month versus what your property manager already provides and knowing you got $24,000 in rent last year?

Data geeks like me get into this stuff, but often find it consumes time and has little or actually negative economic value if your manager is already doing it. I self-manage and have a pretty efficient network of Excels to show this data.