All Forum Posts by: Kathy Henley

@Austin B. You mentioned that the property needs to be sold because of a divorce. The property will be appraised and its value used to divide the marital assets. Figure out how to buy it. Would you get a loan to buy it? Or, could you buy out one parent and sign a promissory note to the other? If you parents aren't cooperating with your plan, don't take it personally.

Second, figure out the cost of running a business in the house. Include property management costs, estimate a budget for the furnishings, insurance, utilities, snacks, security, housekeeping, amenities. Look at the competition for guidance on market rents and degree of perks to make a success of the seasons. Can you make money? Does the income - expenses = satisfying return on the money tied up in the deal? Can you be at ease with someone else managing the business?

@Jose Chavez Some tenants have financial setbacks now and then - like an unexpected car repair or a medical expense that isn't covered under insurance. The lease agreement tells both parties what would happen if rents are late - late fees and eviction. Read it and prepare your response.

Your tenant came to you with a payment plan. Since it is the first time to happen, give this person a chance to get back on track. Whether you charge the late fee THIS ONE TIME is up to you. You must set the tone of what kind of manager you want to be. 'Dear Tenant, Sorry to hear of your money problem. I can accept your two payments as outlined, but must also charge the late fee. Please pay the late fee when you make your second payment on or before X.'  Give clear expectations. If they cannot perform, you will have a new message about being in violation of the lease and could serve notice that mentions paying up or face eviction. Or continue a bi-weekly payment plan. 

Meanwhile, find out if your state is still taking rental assistance applications for CaresAct money. If so, send link to the program's application to your tenant. In my state, tenants can apply for three months future rents.

@Justin Kanipe Co-signing? Is Uncle giving you an equity share in the property for this service? You would be on the hook if something goes south. If so, you could sign a business agreement with Uncle to memorialize the equity share. This equity share would have a market value and might be interesting on future loan applications, when asked about your personal wealth.

Will you help with the downpayment and secure your contribution with a promissory note and be paid back over time? This makes it a loan and you could brag about the interest income when applying for a loan in the future.

@Chandler Harker I have a self-directed IRA with Schwab, which is for stock market stuff. I have another with Forge Trust, which is for real estate deals. My education blossomed after listening to podcasts about self directed IRA accounts. The best podcast is Direct IRA. They teach us the legal guidelines for the many types of self directed IRAs and the many ways we can invest behind the tax wall.

@Eileen L. Yes, the pandemic has challenged many tenants' finances since 2020. Do you want to give this one a chance or, start fresh?

The rent increase is not automatic since your local housing authority needs fancy paperwork to consider the rent increase request. Since you have a property manager on your team, ask them for the particulars. Additional paperwork will be in play to change the rental assistance payment from the existing LL to new LL. Alas, you have no power until the day of close. Be ready.

What are your plans for the property? Potential income from the current tenant would be $724/mo. Is this market rent? If so, working on the rental increase and renewing for a year would avoid a vacancy. If market rate is higher, what is the cost of bringing the unit up to market standards for the higher rent? Weigh the options with your available cash, to see if you can afford the improvements.

@John B. Start by understanding community property laws. They are good. Earnings made by the married couple during their marriage years are shared 50/50; marital money. No one gets a smaller cut because they paused to have babies, or something. Your spouse should know about the family investments and agree that marital money is buying property (investment property or buying a family home). It might not be the day to day decisions, like shopping for a water heater, that you need approval on, but more Deed of Trust, nest egg down payments or awareness of loan obligations. No one should hide marital assets. The success and failure will be shared 50/50.

Does you family have goals to retire some day? To create family wealth? There are many paths on how to get there. And passive income from RE investing is a great one!!! Help your spouse face her fears by gathering knowledge. There is a risk of failure - buying a bad deal or not paying attention to your property manager. The up side is that properties are so liquid. They can be sold if there is a change of circumstances which demands cash.

I talked my spouse into real estate investing. The portfolio is a success but the marriage was not. It was a tangle to divide the property because both of our names were on the loans and title, yet we each owned 50% until day of dissolution. If I were to do it again, I would take turns with the loans and holding title, with one spouse per property. This would reduce the risk of having to liquidate, if the investment outlasted the marriage. The closing agent could have spouses sign a paper at purchase time, that the other spouse was aware of the purchase of real property, with marital funds. Family funds would/could pay the loan and the family would enjoy the cash flow, but at break up time, Deeds could be divided without having to sell. Have a lawyer on your real estate team.

@Joseph Parisi No need to disrupt your primary situ, your interest rate is handsome. 

A draw from the HELOC might be a down payment for the investment property. Would you need the whole $130,000? (Near me this would be a few down payments.) But one must have a plan on how to pay off this loan. Are you and wife living below your means? Can you pick up extra work to help pay off the HELOC? Make a plan. Talk with your banker and get pre-qualified to buy an investment property. Season the HELOC draw and find one of those $1,000 deal/mo deals.

If true, could your tenants could pay the PITI and pay down the HELOC? How long would it take? Practice analyzing deals. Does it need work ($$) or make-over ($$$). How would you pay for this? Let the numbers decide for you if the deal is a good investment. Lower the risk by using honest numbers.

@Clifford Louis So you are all going to pony up and buy a fixer-upper? Write down everyone's dollar contributions and this will be the starting capital. Who is going to find the deal, manage the project, keep the books, hire the contractors? Write down all jobs and who is to do them. What will happen when more capital is needed? Write it down. Who will manage the finished property? Does this person get a cut off the top for property management? Write it down. Express each person's ownership as a percentage. Will you continue to contribute according to your ownership percentage? Write it down. Can someone sell their share? Write it down. What if someone wants out?

All this writing becomes the operating agreement of the LLC. Have your CPA and Florida real estate attorney approve it or improve it. When all parties agree, register the LLC.

Now you are ready to find a deal and carry out the roles and responsibilities of the enterprise.

Or . . . Clifford finds a deal in Florida, plunks down his nest egg and borrows funds from family members. Clifford would sign a promissory note, with interest, to each family member and records a deed of trust for each loan. This fund buys an undermanaged property and rehabs the property. Clifford is the project manager, vets the Florida contractors and writes the checks. The family members keep their mouths shut. When the project is completed and ready for service, the property is mortgaged at 80% of the new value, which pays off the promissory notes. Clifford has complete ownership and enjoys the passive income. His family members have their capital plus interest and may want to do it again.

@Courtney Duong Communicate the unpaid charge by sharing the Tenant's Statement. Mail it like a bill (after the face to face talk). When you post CAM Reconciliation 2020 on the tenant's account, they should see the charge as due and payable. When you post CAM Rec 2021, another line item will post, right after the current monthly rent charge.

@Robin Kim How about a job in a property management office? Start your education by doing, listening and watching how others manage their real property. You need ready cash for buying or rehabbing, so set aside a bit of cash every pay day to be ready to buy your own real estate asset. 

Keep your credit clean. 

Live below your means.