All Forum Posts by: JD Martin

 Keep in mind that you are mortal and have a limited number of years to employ that strategy ;)

What is the interest rate and remaining interest to be paid on the car? If you are at 0% or close, and have a high income to expense ratio, and are not upside down on the car, I don't see a problem. You should *never* exchange liquid cash for non-liquid assets or objects without a significant cushion set aside to pay actual expenses, and that goes for anything - living expenses, investment expenses, etc. If that $30k represents all your liquid assets, I wouldn't touch it either way. 

Monthly Rent x 3 < Monthly Gross Income. This is less important in hard numbers the higher you go up in scale, and more important the lower you go, as ratios are less important than hard dollars. Example, for the places I rent ~$600-700, it is very important that they minimally meet this threshold, because there is a somewhat fixed cost to simply existing - buying food, gasoline, etc. If I was renting a place for $2000, it would be a little less important because the ratio isn't necessarily the same - people might have a more expensive car, or eat better food, but not strictly in a ratio formula. $4000 gross income free to pay for everything else is better than $1200 gross income, any way you look at it. 

I would definitely do it if I had the material to do it already, i.e. I wouldn't buy anything but would take things out of storage, and if the property was odd so that people would understand how their furniture could fit. If you have to pay for it, I wouldn't bother; moat renters expect a property to be empty when they see it.

 I have been following your project, its really interesting! I do have a question: how did you get closing costs so low? Just a couple of cash deals I recently did had title costs of about $500, $350 or so for title work and $150 for title insurance, which isn't required here on a cash deal but insurance that I think would be crazy to skip. 

 I use cozy for a tenant that wanted to set up automatic payments each month, which is free with cozy. She just got it set up so I can't tell you yet how well it works.

 I use it. I think it works well. $35 per application. I have the tenant pay it directly.

 I agree. Some breeds have more propensity for territorial behavior, which is generally the prerequisite for being more aggressive, but it is whether or not that behavior is encouraged that determines whether the dog will be forwardly aggressive. I had a Rottweiler and she was a sweet dog. She was definitely more territorial than my Labs, but she was the furthest thing from vicious. I have no doubt she would have torn someone apart coming through the window of the house, but she played well with kids and other dogs in public places. But she was fixed, had a good owner, was socialized, and was well-trained. 

Back to the original question, sometimes I think people are far too panicked over "what might happen". Risk management is taking reasonable steps to protect oneself. If your insurance policy excludes breeds of dogs, then it would be reasonable to exclude them from your rental. If not, and you have good insurance, I wouldn't lose 5 minutes of sleep over it if the dog (and the tenant) met my standards - that generally means if the tenant meets my standards, the dog is most likely to meet them as well, and that has played out. I have 2 units with dogs in them, one with 2 big dogs, and all of the dogs are well behaved, cared for properly, are not damaging the house in the least, and are quite pleasant to be around. But so are the tenants ;)

 Great post. I agree wholeheartedly; there are some things that I can do that the last few years I started farming out - your roof example is a good one. I can replace my own roof, but I'm not as limber and have a real fear that I may come tumbling off, which will severely limit my ability to make money or do any other repairs - so I farm that out. I also don't like working in nasty basements or crawl spaces anymore, so I farm that out too. 

You are right in the satisfaction part. Also, I spent 20 years accumulating all the tools under the sun, and doing jobs myself not only saves the labor but also repays the tools many times over. And I enjoy it. 

One thing I didn't mention that I disagree with in the book is the idea that every hour is, or can be, a profitable one at the same financial level. They mention how few millionaires do anything themselves, as they see it as a financial waste of their time - but what if that time was going to otherwise be spent watching movies, searching for sliced golf balls, or generally doing other activities that are money-negative? I think it unrealistic to believe that every waking hour can be equally financially productive, and I like to think of the time I spend doing some of this stuff as my "hobby", rather than something I'm doing because I absolutely have to do it. 

 Not really, I think it just has to be done in an intelligent manner. You make some good points, and I would be fearful of having all properties leveraged - that said, I think it makes absolute sense to "harvest", as you put it, your equity in something that is paid for/largely paid for in order to obtain more properties, especially if you plan to hold the properties. Why? Because of the nature of compounding. If everyone was immortal, and could work forever, you could simply save your way into never working again. But there is a real limit as to how long you have to make the numbers work - this is why every investment professional I know of recommends people start heavy-duty saving/investing as young as possible; you need the magic of compounding returns to end up with anything at the end. Let's say you save up enough money to put $30k down on a $100k house that you are going to rent out. If you keep working to pay it off, and use whatever rent you get to pay it off, and then once that is done save up another $30k to put down on another house, you are going to be constantly running to catch returns until such point as you are too old to keep working to put your own money into the pot. The point of real estate investing should be, primarily, to make money. If you can make 1.5% the return by splitting your money into two pots, with low risk, why wouldn't you? 

All that has to happen at the end of the day is that the numbers have to work. If you have a fixed mortgage of $500 on a property that easily market rents for $2k, you have a whole lot of room to play with before you are in a negative cash situation. Where most people, I suspect, get into trouble is that they do not bankroll the wads for a rainy day, and instead use the returns to either create an empire with too many risky properties, or use it to fuel a consumption lifestyle that isn't warranted with a decent amount of debt to service. The saying that you can't eat equity works both ways - it doesn't make a lot of financial sense, unless you are at your final point, to have loads of equity in houses sitting there, but if you don't have lots of equity you better have lots of cash.