All Forum Posts by: Bobby Narinov

I am not a Lawyer, financial advisor and/or accountant but most of the smart people I know are AGAINST using IRA accounts for investing. They list the following reasons:

- no leverage

- no control

- you cannot self-deal which includes, you cannot manage, fix and repair yourself.

- no access to the money

- you have to have enough money to purchase the property and maintain it for a while (i.e. a lot of money) to be able to use it as a self-directed IRA

- too strict requirements and too much paperwork

- most of the real estate income is tax free (or taxed at a very low rate) which diminishes the advantage of IRA:

• 1031 exchange - can help you avoid paying taxes as well
• RE depreciation can offset some of the taxes as well
• interest deduction
• property tax deduction

Although I have a pretty huge IRA account(s) I use them predominantly as reserves. Banks require 3-6 months of reserves in order to give you a loan which in my case comes close to $100k. But they are OK if my reserves are in an IRA account. the problem is that they only count 60% of the total because If I have to dip there I have to pay penalties and taxes.

I am not doing that but the same people I mentioned above are urging people to take their money out, pay the taxes and penalties, and buy a cash-flowing real estate. But don't take the money out if you don't have a property to purchase.  

 The majority of the Americans live in a jail without realizing it: 

• they cannot go to see a movie because they cannot afford it.
• they cannot go on a vacation because their bosses would not let them, cannot afford it, are afraid someone will take their job or all of the above.
• they live in tiny cells they call apartment because they cannot afford a bigger one
• they get robed/raped/killed because they cannot afford to move to a better one
• they rely on the taxpayer to provide for them because they cannot do it themselves
• they watch whatever their uberlords tell them to watch because they have been trained as kids to follow the crowd
• they don't think for themselves because they are told that the rules are stacked against them and there is nothing they can do to change their own circumstances. They are so much institutionalized that they don't even want to try anything different (a great scene from "The Shawshank Redemption" comes to mind.

It takes a dedicated effort to pull yourself out of it. Freedom requires work - and heavy effort. You have to earn it(take it) like the founders of this country. They didn't wait on the government (i.e. King George) to come and proclaim them free.

Staying "Free" also requires work - a constant steady fight for every step on the way. For some people this is too much: "I would rather go to school and study so I can find my safe cushy job and stay there until I retire".

I am not sure this is possible. There is a lot of vested interest in dumbing down the American public so they cannot support themselves and start relying on the government handouts: this is how you breed a stock of obedient voters.

If people become financially savvy, they will be smart enough to realize that the government is leaving beyond their means and are giving the bill to the future generations. Then a lot of the people in the government (especially the one with the cushy teacher's union jobs) would be out of a job and kicked on the street. No teacher would want that - they would rather teach kids how to work for someone.

$50,000 house in Palo Alto!!! ???

It is possible. I have seen it myself in the eastern block when the government issued the new currency which was the same as the old currency but the exchange rate was 1000 of the old currency for 1 of the new currency.

Obviously he is so far off base because he has never seen his property tax bill. If he ever bothered to open it he would have noticed that this $1M house is taxed as $700k LAND and $300k improvements(i.e. buildings). So even if the price of building a house in Palo Alto drops to ZERO (due to process improvements) the price of the land is not going to be affected. Not unless the machines are able to produce more land. This can only be possible in one of two ways: somehow the machines become GOD and/or they figure out how to fit more space into the same space (Dr. Who's TARDIS). Knowing Google, someone inside already have a billion dollars budget on that.

I have lost any hope in today's US school system: 30+ kids in a class,  teacher's unions, "no child left behind", "Common Core, a.k.a. rotten to the core" and $250k student loans - pick your poison.

Today's parents are too lazy to spend time with their kids so they try to offload their parenting responsibilities to the schools. If you want to teach your kids the things that are important to them - you have to do it yourself. Please spend 30-60 minutes a day reading and discussing economics with them. There are plenty of good books out there that with your help can be very beneficial to your kids.

I have started my kids at age 8 with books like "How the economy grows and why it crashes", The Uncle Eric series (Whatever happened to penny candy, the money mysteries, etc.) and now at age 9 we are reading Rich dad poor Dad. They enjoy our reading and discussion time and get disappointed when we have no time due to school activities.

Don't cop out, do it yourself. 

My advice to you - pull the money out of those properties and invest them elsewhere. No-one is going to target a property(file a frivolous lawsuit) that is 80% owned by a bank. And the banks have pretty good lawyers too.

Finding your total net-worth is difficult especially if it is spread across the 50 continental US states.

Yes, I would evict her. I evicted two single mothers with 3 kids living for free in my property. And because I was trying to be a good landlord they owe me 2.5+ months of free rent. Now I know: how can you trust someone to deliver on their promises when they just broke them.

The landlord does not singlehandedly evict people - he files an eviction with the courts. And if the courts decide that the woman has to be evicted she is. And if she refuses to leave the premises a policeman is sent at the due date and she is taken out to the curb.

It looks like there are a lot of people that protect the rights of the pregnant woman so if any of them disagrees they can take her in their own homes and support her. But I don't think all those people that are trying to tell you how to manage your properties are willing to take this pregnant women to live in their personal property and not pay any rent.

On the other hand, where is the father of the triplets? What about the mother and the father of the woman? If her parents are not willing to put up with her why should anyone? What about her friends and relatives?   

I have not purchased any MF home so far but my research so far has produced the following pitfalls:

I) incorrect rents
a) the owner does not state the correct rent. he lists the rent he would like to get or
b) He lists the ongoing rate for a SFR with the same number of rooms/baths - they are not comparable at all or
c) the owner lists the correct rents but "forgets" to tell that those rents are based on a yearly contract with the first one or two months free. This makes the actual rent 10-20% smaller or
d) not all units are rented and the owner forgot to mention this.

II) incorrect units:
a) some of the units are in immaculate conditions - they are usually shown to the investor for inspection but 90% of the units require major fixes
b) converted non-permitted units: those come in two flavors: units that were illegally added and units that have been illegally modified on the inside, e.g.: illegal unit addition or creating an attic or a basement unit for the first one and converting a large 1Bd1Ba to a small 2Bd1Ba or even converting 2Bd2Ba to 3Bd2Ba. There is nothing wrong with that but if the work is done without permission you may face a huge penalty and/or you may be asked to restore the building back to the original design.

III) incorrect misc. information
a) the property has the same number of meters as units but the renter does not pay utilities
b) the property just got determined to be in a flood zone and the insurance doubled
c) the owner was managing the property himself so he was not spending any money on: - management, maintenance, accounting, etc.
d) a drug dealer just moved in and now your property is his workplace
e) the owner is asking for a too low CAP rate. e.g. he is selling it at CAP 8% while the neighborhood sales are at 10-12%.

All of the above is done because the large multifamily properties are sold based on CAP rate and every dollar of expenses saved brings a multiple of dollars in sales price. This is why a thorough inspection of everything is needed during the escrow period.  

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I only accept the application fees in cash or money-order/cashier's-check and I make them sign a sheet of paper stating that those money are non refundable. 

If they want to give me a deposit check, I accept personal checks ONLY if they are going to move no sooner than 14 days (It takes my bank 10-14 days to clear the check). Otherwise I go with money-order/cashier's-check. In both cases I tell them that their check will be deposited to my bank the moment they leave(take a picture with my phone and upload it to the bank) so they must have funds in their account. I cannot waste my time verifying them if they are not serious. One may think that a $35 non-refundable (per person) application fee would make people more serious but about half of the time they are not. 

I fully refund their deposit check though.

In CA we have some strict laws that govern the screening fees, so you may want to check your local state resources about that. Here is what they say about it in CA(http://www.dca.ca.gov/publications/landlordbook/lo...):

"The application fee cannot legally be more than the landlord's actual out-of-pocket costs, and, in 2012, can never be more than $44.51. The landlord must give you a receipt that itemizes his or her out-of-pocket expenses in obtaining and processing the information about you. The landlord must return any unused portion of the fee (for example, if the landlord does not check your references)."

I am not sure whether the screener's time can be counted as a cost but screening a candidate does take time: running a credit check, contacting all previous landlords and current place of work. I may spend 60+minutes on that. 

Why would you use an agent for that? I use Postlets.com that uploads my listing to over 20 WEB sites and let me cut-n-paste the listing to Craigslist. But even with that, the biggest number of tenants I get from the For-Rent sign I have printed on a 2x2Leter size and posted on the property window(s). 

10+years ago I used the MLS (I didn't know better) and then my posting agent split one month rent with the agent that found the renter. I would consider this to be the highest amount one can pay to an agent.