All Forum Posts by: John Clark

"I don't see how the length of time matters . . .. "
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Try walking normally on a carpet -- regularly cleaning and vacuuming it, no stains (shoes on or off, your call) -- for 1 year. Do it under identical conditions only this time for 7 years.

Then tell us which carpet has more wear and tear.

"There is no such thing as normal wear and tear! "
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I defy you to name a single state whose landlord/tenant law, or any accounting method, that does not permit and allow for normal wear and tear.

"Main risk as I see it is if the borrower stops paying after a very short time, and the money I have put in is close in value to the as-is property value."

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The opposite is true. Your main risk is that the buyer makes all his payments and gets the property. Then he gets all the appreciation and the house, and all you've gotten is the amount of interest on the note. If you're going to do that, then you might as well simply buy bonds backed by mortgages.

You'd be better off with a buyer who defaults quickly, so that you can keep his down payment, foreclose, and start all over again.

Don't touch Chicago, or Illinois for that matter, until they both get:

1. current covid-19 deficits/budgets under control (not really their faults on that one) and you find out how much taxes will rise on that issue, AND;

2. their pension deficits under control (essentially never, but we can dream) or at least stop having to make $800 million yearly payments due to their criminal neglect of the pension problem, AND;

3. at least for Chicago, ridiculous pro-tenant laws are modified/eliminated. I don't mind looking after tenants, but Chicago's going off the deep end.

I’m envisioning a larger family that isn’t in a position to buy such a big property would be very happy renting for a while.

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The big question is why is the family not in a position to buy. If it is because if the transient nature of the job location (e.g. military) , fine. If it is a family that just moved to the area and wants to look around before buying, fine. If it’s a welfare/section 8 family, no. You’re a businessman, not a social worker, and the odds say that someone chronically unable to buy won’t take care of the landscaping.

So that leaves you with constant turnover. Military might stay for two or three years, and new-to-the-city-and-looking-before-buying will stay for a year, two if you’re lucky.

As for the upkeep, everyone else has told you: keep the landscaper. Do NOT let the potential tenant try to trade upkeep for a reduced rent. If nothing else, tell him it means that you’d hold him responsible for plant injuries, etc., and you want to avoid that issue.

Unless someone is a farmer, people don’t rent land, they rent buildings. Use of the land might help raise the quality of your tenants, but that is different from taking care of the land.

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Interest rates are super low and the inventory is low so I feel those two factors are carrying the market for now but how long can that last? "
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You have to ask yourself why inventory is low. Prices are supported because people aren't putting houses on the market (fear) and therefore the buyers -- who are buying because they have to buy, not because they want to, bid up what is available.

You have the appearance of liquidity and strength, but that's using a small base of sales. One simply cannot extrapolate from a small base with the accuracy one gets from  large base. The marginal buyers and sellers are absent. Now you're simply using motivated buyers and sellers. Given that sellers have foreclosure halts and postponement programs, supply shrank faster than demand -- there's no "program" to take away the need to buy like there are those to take away the need to sell.

The market is unsustainable. If real wages do not keep pace with house prices, then eventually there has to be a correction.

Call the buildings department and ask. Since you're legal, there's no harm, and all you are asking for is the definition.

"I was there at 7pm and I knew I was leaving very shortly. . ."

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And you expect people to read minds? Let me tell you: EVERY person who expected me to read his mind didn't have a mind to read.

Then there's the small matter of "shortly" meaning different things to different people, and the small matter of people's plans changing such that "short" become "long," et cetera.

"(only debt besides the vehicle is our rental/pri res/boat) "

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Vehicle interest is 2.5 percent.

What is your interest rate on current rental's mortgage?

What is your interest rate on primary residence mortgage?

What is your interest rate on boat loan?

What is your view as to the next election and its potential effects on rental prices?

What is your view as to Covid 19 and its potential effect on rental prices?

What are the rates of return on alternative investments at the risk levels you find acceptable?

What is the rate of return on the potential rental units you would buy?

What amount of cash flow do you need for your monthly cushion of reserves, etc.?

Answer those questions and they will give you the answer you need.

Maybe the City requires a permit for ads and you didn't get one?