All Forum Posts by: Joseph M.

@Logan:  I think it is best to talk to at least 2 CPA's that understand what you are attempting to do.  You not only have to be concerned with "THE MAN" (IRS), you have to be concerned with "the man" (State taxation).  Get a good CPA and they will help you achieve your goal.  Remember, it is not how much you make; it is how much you keep!  

@Yazan Ayyash: For me it is simple. My net MINIMUM before tax cash flow (as in every expense has been paid + money set aside for future repairs + Vac Factor + CapEx) is: $300/mo for a SFR; $200/door/month for multi-units. If my deal will not produce that NOW, then I will pass on the deal.

The key is to do an excellent and detailed job on your DD and market/rental analysis. Never "make" a deal work. It either stands on its own or it does not.

Hope this helps.

Don't forget to send pictures of the fine work that you are doing.  We would all like to see the final outcome.  

@Mike Sola: While all of the above comments are true about depreciation and you can do a whole other discussion on Cost Segregation to "juice up" depreciation in the early years, you are missing one thing. You are NEGATIVE cash flowing. Depreciation cannot pay the mortgage, utilities, HOA, maintenance/repairs, CapEx, PTAX, insurance...! I, personally, will not touch a deal unless I make money on it at or shortly after closing on the property. Raw land or a strategic flip are the only exceptions and the flip is short term. I know more than a handful of "RE Investors" that went negative between 2007-2010. Guess what, NOT ONE of them was able to stay afloat for long. All but one are still renting their primary residence. It is called feeding the alligator; and he is always hungry.

Point being, it is one thing to understand how depreciation works within RE investing.  It is another thing to invest in such a way as to rely on the tax laws (ex. depreciation) to make your investment become profitable.

@Amy W.:  I have a tenant that always paid late.  After the 3rd time in a row, I decided to speak with her.  The issue was not that she forgot, it was the timing of her checks from her employer.  Here is how I fixed the situation.  I had her pay that months late fee, then, I made her pay 1/2 month on the 1st and the other half on the 10th.  She not only has paid well since then, she saw that I was understanding and that has built up loyalty.  She has been there going on 3 years now, including 1 rent raise of $25/mo.  Win-Win in my book.

Find out why and see if you and the tenant can agree on a solution.

@Robin Grimes: Great post. My personal favorite is... "Does that include the late fee?" NEXT!

@Jon Klaus: Definitely the Glock for that one!

@Zantiago Zurita: Hi, I have a few rules. Among them, NO pools and NO trampolines. Period! While I am sure they are great tenants, all it takes is one accident (or worse) and the "rich landlord" is going to be hiring an expensive attorney.

I use the excuse, if ever asked, that my insurance company prohibits them. It is just not worth the risk, even if you were to get a tenant to stay longer.

Joseph M.

@Debbie Zimmer: If you are going with a high end look and feel, and this is what the area is calling for, then I would create a backsplash out of the very material that your counter tops are made of. For me, I only use granite counter tops on my mid to higher end properties. I factor in the costs of the backsplash at the same time as the counter top. I also make sure that I get sequential slabs so the look, color and grain are similar.

I have found a solid backsplash to be about the same as a tiled backsplash. However, there are no grout lines to keep clean, which I tout as a huge bonus.

Hope that helps,

Joseph

@Evan:  OK.  I think you should slow down.   Below are some of my reasons, and they are direct, so please do not take offense.

First, when I read "I have a financial backer so I can tap $500k.", that tells me that YOU do not have $500K.  Your financial backer has $500K. Big difference. Have you asked what the financial backer thinks of your idea?  What is his/her expectations (in terms of capital security/preservation as well as yield on capital)?  Is this backer going to be a partner and share equity or just a money person?  What are the terms for this $500K?

Second, look at your track record from your stated past.  You LOST IT ALL.  It reads like you went all in and did it too fast.  Maybe lost a little focus too.  It was one hell of a time.  I would slow down, focus and strategically purchase quality deals.  You also want to build a team if you are planning on growing.

Third, when you find a bank that will give you a 90% LTV on an investment property, please let me know. You will at best get a 75-80% LTV on your first few, then after that it will get progressively harder. Once you get over 5, some banks will not even look at you. Reach 10 mortgages, most banks will shy away from you unless you have a good relationship with them.

In closing, I would leverage your ability to purchase in cash. I would start by looking for a quality property in your target market that hopefully has a motivated seller. Offer all cash, 5-day DD period and 15 day close. You WILL get a very nice discount. Once you close, make the property "Gucci" and then get a solid renter in there. Start a dialogue with a banker showing him/her what your business plan is. Season the property for 3-4 months, then do a 65-75% Cash-out ReFi. Rinse repeat. This is not theory on my part, it is experience. On June 28th, I just closed on my 3rd property this year using this model. For me it is WAY safer, still have good cash flow, good CoC ROI, albeit slower. If 2008-2010 demonstrated anything, the RE business is not a sprint, it is a marathon.

I hope this helps.  I wish you success and please keep all of us posted on what the outcome was.

Joseph M.