All Forum Posts by: Jim Stardust

I didn't think many buyers still consider a lease to own as an option anymore, and there are a ton of new regulations surrounding this practice that is making it even more unattractive for both buyers and sellers...

I'm in a similar boat though my numbers are not as tight as yours, not many people lease to own these days but I guess it depends on your area. The townhouse is likely (well, most likely) be a rope around your neck and it doesn't seem like there's a turnaround in the housing market anytime soon to expect a relief.

You're really underestimating your costs, that $1232 doesn't have the cost of insurance, possibly utilities, the 10-12% typical estimate for repairs and maintenance. The cost of vacancies and if you run into a bad tenant you need to evict, you're probably looking at an average of $1500-$1600 easy, can you afford to feed that "alligator" $300 a month, and if so for what reason, what's your goal?

Unless he has ample money available, he's likely waiting until the last second to show up and pay you the money, expect a call on Saturday night at 9 p.m. or Sunday morning! ;-)

This is the true definition of an "Alligator" property, you should sell it and move on. Even if you raise the rate to $3000 or even $3500 a month, you would still need to feed that alligator, it will continue to take money from your other sources of income, this property is like a thief stealing your money earned from your other jobs, how can you allow it to happen? There's no upside that I can see, properties are not going to appreciate that much, you won't have enough money to be worth a 1031 and you don't want to mess around with depreciation recapture tax if you don't sell soon.

I don't know if this would work for anyone, but some things that have worked for me in the past to boost my score quickly:

1. Move CC debt from your name to spouse's name, we shared a CC and then opened one with 0% in her name alone and transferred the balance to it, improved my score by 18 points in a matter of several weeks.

2. Borrow money from a retirement account to pay down your debt, I know it's controversial, but it worked.

3. Get your credit report and see what your utilization rate on some of the cards, you can shuffle things around to bring down the utilization rate (pay a large amount on some cards and minimum on others)

Grace, I don't see how you can afford to continue at this rate, I assume the property has been draining money from your other sources of income for a while by the look of these numbers, what were your total annual expenses last year (PITI+expenses+repairs+utilities or whatever else)?

What's the use of this "yield rate"? Based on these numbers, your cap rate is in the 4% range which is pretty bad IMO, do you actually have positive cash flow on any of these properties?

How do you all deal with hanging stuff on walls and such, do you go back and re patch and paint everything, or do you leave the walls empty of any decorations?

Hi Jason,

It's a 200K SFH property, with around 80K in equity, it was my previous residence and I moved 1 mile down the street so I'll be taking care of managing and maintaining it. I just don't want to sell in the current market. I currently have a 3.75% rate 15-yr mortgage on it, I figure it would rent for around $1600. My PITI is $1200 with the 15-yr loan, probably go down by $300-$400 if I refinance to 30-yr loan.

The numbers look fine if you eventually rent both units assuming it's true that the units are well maintained and not very old.

While I generally agree with the 50% rule (isn't 45% more like it?) a lot of things depend on your particular situation and your operating expenses may come even lower than that, I arrived at 38% (check numbers below).

If you break down the numbers:

-Your taxes and insurance are around 13%. -No utilities (except landscaping) means 0-1%
-Vacancy and collection losses probably around 13-15% (and that number may be even lower since you'll probably secure a tenant before you move out).
-Maintenance should run you around 10%

I assume no management fee or other administrative issues to take care of a 2-unit building, so you're looking at 38 - 40% of operating expenses. Appreciation and tax savings should help you in the long run to make the numbers even more appealing in your favor.