All Forum Posts by: Josh Johnston

@Ley Nezifort generally speaking it is a bad idea to give gifts to tenants. Your role as landlord is to take care of the property and allow them quiet enjoyment. The only time they want to hear from their landlord is when you are fixing a problem.

The problem with giving gifts is it gives the perception that you have extra. Tenants can feel frustrated when a landlord raises rents, then gives them gifts. It sends mixed messages. Tenants may also feel obligated to give gifts to their landlord in return. There also becomes an expectation of a gift every year. In the future when you have a bad year and choose to not give a gift, it appears you are being cheap. 

Tenants don't expect gifts and whether you give them a gift or not will have no effect on how long they stay at your property. No tenant is going to think to themselves, "I was going to move out next month but after getting this $25 gift card, I will stay another year." People move when their needs change. When they want to upgrade their life style or need to change location.

There is nothing wrong with sending a holiday card thanking your tenant for their loyalty, but I wouldn't do any more than that.

Me: "Where do you want to invest?"

Them: "Anywhere."

Me: <dies inside and throws up in mouth>

Them: "Cashflow, you know."

- - - - -

No. This is not how you invest in real estate. You are just asking to be sold a bill of goods with no real value. New investors get so eager that they will react positively to anyone who tells them a deal has good cashflow, or cash on cash return, or <insert acronym that no one uses in real life>. Don't go to real estate meetups and be open to any investment. You would be better served leaving all your money on the counter and letting pigeons peck at it for a while.

If you want to be a real estate investor, you have to know which markets are good or at least ask smart questions of experts about why some markets perform better than others. This is the reason many fully open to the public RE meetups are boring for seasoned investors. Because even when you try and help, you get vague answers or regurgitated nomenclature from the BP forums.

There are always new investors in the forums asking questions. Some very good, with background of where they are and how much they know, and some very bad, literally "How do I invest?" The only way you will find a mentor in RE or at a RE meetup is to bring something to the table. Maybe you are new, but what skills do you have that could help someone? Are you willing to bird dog? What can you do for a seasoned investor besides just take their knowledge. If you know this, you will do way better than this guy did last night.

@John Kaspar - I typically reinvest all of my proceeds, however there are numerous ways you can pay yourself.  The best way to do so will depend on your business structure as well as your personal tax position.

If you operate an LLC, then you'll use some combination of a salary and distributions. I do not take any salary from my businesses (typically results in higher taxes) so any payments I receive are via distributions from the LLC.

Here's an example:
I own ABC LLC which has net cashflow of $50K during 2017. ABC LLC has taxable income for 2017 of $15K after taking into account depreciation. Regardless of whether I take a distribution, the $15K of taxable income flows through to my personal return and I have to pay taxes on it. Let's say I'm at a 30% rate, which means I'll owe $4,500 in taxes for 2017 which have to be paid to the IRS regardless of whether or not I get paid from the LLC. Note, the LLC is not paying taxes, they are passing the income tax liability to owners even if cash is not distributed.

From here, I could decide to "pay myself" enough to cover my tax liability...I would then have ABC LLC distribute $4,500 to me. If I also happened to be in the market for a nice used car, I might have ABC LLC distribute $24,500 ($20K for a car and $4,500 to pay taxes).

There are scenarios where you may want to explore a salary, but it's unlikely that would benefit you as you are just getting started.

Bottom right corner assessment y/n and then Sid/lid y/n (a charge in my area when building new houses to cover streets/lights/gates/other public areas. These can easily be over $10k)

Is it an assessment against the house? If so was it listed on the mls? In Vegas those kind of assessments are easy to see and become the buyers responsibility. (Under property taxes it says assessment amount and taxes with and without it.)

If it is, I’d pry say eat it as it was disclosed and you agreed to it. If it wasn’t as a non-lawyer it feels like the seller should pay it because it was addressed to them during their ownership. BUT, on the other hand, you will be the one enjoying the new sidewalk. Maybe bring it up and just ask for some satisfaction, some kind of win-win. Split it? You’ve always got small claims court if it will make you feel better win or lose that at least it was “fair” for a very small cost. GL and let us know the results. 

Since prices range from different areas, you need to learn how to do it in your area. To start, get a repair list form with all the possible repair items, then find out what each item costs either per item or per task. You can get some pricing for materials from box stores and other general pricing from other investors in your area. For example, talk to 5-10 rehabbers in your area and find out what their average spend is on a bathroom remodel or standard 6X12 L shaped kitchen. Plug in the numbers as you go. Then go to as many open houses for listed homes in need of repair “handyman special” or “needs updating”, etc and walk through each house noting which items need to be repaired or updated. Then go back and fill in your worksheet for each house. Doing this over and over again will get you experience. After awhile, you should be able to divide the home up into sections, I.e. kitchen, bath, windows, doors, stucco/siding, flooring, paint, landscaping, etc. Once you know the average price for your average home in your area for each section of the home, you will get good enough to walk through a home and in 15 minutes, come out with a number in your head.

On the BP file place, I provided a free form you may download here: https://www.biggerpockets.com/...

There are many other valuable forms you may download in the BP Fileplace as well. My form was provided about a decade ago so it likely needs some updating but it will give your a great start.

I recently got denied a refinance loan on my property due to losing my job whilst this was in the process. I have no desire to go back into the work force I wanted to know what could be my other options of obtaining large funds without a job? As I’m hoping to obtain investment properties in others state’s that are cheaper than New York. I’m hoping to do the buy and hold strategy. 

@Josh Johnston

Debt to income ratio is always considered (DTI) for those loans - 1-4 unit properties. 75% of the rental income from a current property will be used to underwrite the next but you'll likely need 6 months (can be more or less) of reserves (to fund the PITI on any property you own) to qualify. Best strategy is to pay off all credit cards, use them for only necessities, pay them off 100% each month. Drive a car that's paid off - Id stick with Toyota, second choice is Honda civic or accord or anything built on those platforms. Ive driven Audi's, Mercedes, Porsche, and I've worked on cars extensively and nothing beats Toyota. Honda is a close 2nd. Make an income statement to see what you're spending and on what, get creative with necessities to further save, maximize and optimize. That goes for your bank- if you are paying fees, get out, groceries, credit card rewards. Save as much as you are serious about getting out.

Most of all, look for opportunity. Not your MLS properties, not in the current economy. But look for the properties that need work and for motivated sellers. Buy, fix and rehab, and refinance and get some or all of your money out. The worse condition, you'll likely need cash to buy. Also cash is truly king when it comes to motivated, desperate, sellers. After you fix, you get the building fully occupied at market rents. Which anything 5 units and over, will increase value, therefore the money you can pull out on refi.

This all takes knowledge and with that will come the confidence