All Forum Posts by: Jon S.

@Evan Polaski

This makes sense. I have just been taking a straight 10% (5% and 5%) for maintainance into my projections. I have not looked at the difference between keeping long term vs keeping for 7 yrs before large maintenance items start occurring. My hunch has been that its less expensive to hold long term and keep a house repaired than it is to gold 7 years, sell, and buy another, but perhaps I should be more detailed in that assumption and compare projections. I wish I had a software that would do this sort of analysis on a single property and on a portfolio, does that exist?

You are correct. No exceptional headaches. Some repairs of course, but with PM, I just get partially involved, not totally involved in how repairs are done, they will ask me if I prefer to send my own plumber, or if I want them to send one. Sometimes I have to override them on choosing a plumber, when its just a handyman job, ie, when the handle set screw comes loose on the shower hot cold water handle, that does not require a plumber, but the PM was all set to send in my plumber, and I told her that a handyman can do that.... of course she agreed, and got me a handy man within 24 hrs. So I have found I appreciate that PM contacts me and consults on how I want a repair handled. Other than that sort of thing, or deciding how much to charge for rent, I don't get involved in the day to day, I don't even know the tenants. So I would agree, this property is not a headache at all. On the flip side, I am looking at doing larger investments, specifically looking at developing townhouses on raw land, and capital is king in that zone. But I'd rather keep my cash flowing rentals and leverage their equity, even if I can only leverage 60% of the capital I would have if I sold. Having the cash flow just feels like a safety net, especially if I am going to venture into deeper waters like development. But that being said, I also was wrestling with the fact that cap rates are in favor of sellers right now, and it might now be as low a cap rate a year from now. sort of worrying about missing out on these crazy low cap rates.... and crazy high equity. 

When comparing sell or hold options, what formulas are most helpful? What is the ratio that drives you to decide one way or the other? I have a bit of equity on a property with very low debt, and it looks like prices are high enough to consider letting go of one property, the one with the lowest debt and the highest equity, but it is cash flowing very nicely, and will only cash flow better over time. It is an SFR with a detached in-law suite, so it has two rental incomes, just like a duplex, but has the LT equity growth of an SFR.

Option 1: Refinance and hold. I have a cash flowing property, that generates $1557/mo ordinary income BEFORE debt. Debt is low, only $72,000, so if I refinance at 4% amortized 25 yr, payment will be $380/mo. This would leave $1177/mo income after paying debt. Combined rents will probably increase $100/mo in the next 12 months too. 

Option 2: Sell the property, pay off the debt, for an after tax net of $220,000. 

Prices won't be this high forever. Property is in Tampa Florida and prices are very high in Tampa right now. Tampa is becoming known as an up and coming tech hub, and people are flocking here like crazy. So prices in Tampa are going up up up. The property in question is in a low income boring neighborhood, 1 block away from very low income area, a block from the bus route, but for some reason it is a little street that has mostly owner occupied houses, that are kept up nicely, and it is a quiet street. 

It's under property management, and the numbers quoted above are net of property management fees, so I no longer actively manage it, which makes it more attractive as a keeper. But I don't see anything exciting coming to that neighborhood, it really is a low income neighborhood that will probably always be exactly that. But again, its quiet, and well maintained street. I did a full renovation 6 years ago, and since then just about every repair possible on the house. So the house in in good shape, including a new roof 2 years ago. 
  

@Eric Turner

Take into account the loss of participation in Equity when you analyze the cost benefit ratio of owning. Lets say you had a $300K house and you put down $60 K. Your loan is $240K. Your cash invested is $60k. If the $300k home goes up 3%, thats 9K equity. If the mortgage goes down 2% thats $6k equity. $15k equity on $60k. Are you sure that extra $1k/mo your saving by renting is a bargain?

-2nd, I encourage you to by a duplex, triplex, quadplex to owner occupy; get an incredibly low cost loan with almost zero downpayment. Live there rent free and cash flow positive. Thats the smart money move for first REI property.

3rd- Don’t quit your jobs. You’ll need to finance a lot of properties and banks like W2 income and income that shows on your taxes filed. If you want to grow your portfolio, keep the taxable incomes.

4th- no more courses - no more gurus - buy books!!! Books!!’ Books!!’ You can read. You dont need 19 years plus another year pf people reading to you. Use Bigger Pockets for guidance. Save your money for the real investing. You’ll need your money. Don’t toss it to the wolves on education. Youre smart enough.

5th - LISTEN!!! The people giving you advice are experienced investors. They almost universally have the same opinion. That should be a big clue.

6th - if you cant listen to the experienced investors and have to do it your way even when warned, you better have deep pockets to cover the cost of newbee mistakes, this might be a very costly

7th - We’ve all been there! Don’t be hard on yourself. Dont take this the wrong way. We are trying to hand you your first success!!!

8th - find that multi-unit and buy it to live in!!! You can buy your dream home later.

:)

@Michael Benanti

Following

@Rae Ashleigh @Anton Ivanov

Same question as Rae. How is DealCheck different from and an improvement over BP Pro?

Thanks

@Derek Sommers

Following

Have you seen this? Banks that keep their mortgage loans in house can delay appraisal for 120 days after closing. What if appraisal comes in lower than the loan? Just wondering

https://www.housingwire.com/articles/banks-can-now-postpone-some-appraisals-until-120-days-after-a-mortgage-closes/

@Whitney Hutten

Thank you Whitney for the heads up on scam calls. I’ll definitely watch out. Good luck on getting funded.

Am I eligible for either SBA program loan? 

Background: Out of 9 doors, I have 6 doors occupied with LT leases, 1 door ready but vacant, and a 2-door renovation nearly complete, which will be available to rent in a week or so. 

I am structured as an multi-member LLC partnership with my spouse. I have no W2 employees, and all the 1099 income I paid was to independent contractors who did work on my properties, but they do not have an employee employer relationship with me.

My business tax return for the LLC is filed as passive income, since my income is derived from rental income.

For April, I collected 91% of rents. All but one tenant paid their full rent. The one tenant paid half his rent and asked that the other half be taken from his deposit, to which I agreed with the understanding he replaces the last month rent deposit at some future date when he goes back to work.  

I'm expecting May or June to possibly have fewer tenants able to pay their rent. I'm hopeful that is not the case, but it seems like a clear possibility. 

I have mortgages on all my properties, which were all BRRRR properties financed for as much as I could obtain - 75-80% of ARV - after they were renovated, so I definitely still have mortgages to pay.

I also continue repairs and maintenance on properties, as well as taxes, insurance and property management fees, for those few doors that I assigned to a PM. 

I have some utility bills for the vacant and under renovation properties. 

I have storage rent expense for business equipment. 

I have online services, ie, cloud subscriptions. 

I have accounting fees. 

I don't pay myself or my wife any salary, my business tax return claims a profit or loss, and that is my taxable business income for the year, which this past year of 2019 had a slight loss, while 2018 had a small profit.

So I have no payroll, just 1099's to independent subcontractors who do not work for me on a regular basis.

And I have no payroll to ourselves. 

But I am at risk of economic injury. 

And I have suffered the economic injury of my renovation being slowed by at least a month, due to the city closing its city building and permitting offices, and the injury of losing the opportunity to flip this property at a small profit. The virus made it impossible for me to flip this house, as loans and buyers are afraid to buy, so I would take a haircut, ie, there would be no profit in flipping, it might break even, and that would mean a waste of a year of my time. So the alternative is to plow forward to finish the 2nd door, and to get them both rented, but there are economic injury costs associated in this choice too.  But how would i show such injury,  I doubt I could, as it would probably fall under investor risk?

And I can't know the full extent of that actual injury until May or June or July, right? I can only guess a potential worst case scenario where none of the tenants paid rents? 

Meanwhile, once the SBA gets these loans funded again, there won't be time to actually experience any economic injury, as there will probably be 1 day or less to apply, before funds run out again, so if I'm eligible I would have to base the numbers on a negative worst case forecast. Otherwise, there won't be any funds left if I wait and see how it goes. 

Any solutions? More importantly, do I have any any eligibility?