All Forum Posts by: Michael D.

I'm also a fan of HRS Law. Chuck is the attorney, but Grace does the real work. :-)

They've been great for me.

I'm fond of Garth over at Spodek Insurance.

@Jon Holdman , what you say makes a lot of sense. In fact, it's hard for me to figure out a good reason to do yearly leases as an ordinary residential landlord - and yet, most landlords (including myself) and property managers use yearly leases. Why? Are there any real benefits to using a yearly lease? Should I tell my managers to start doing month-to-month? Is there an incentive for the non-owner manger to want a yearly lease, rather than m2m?

Michael

@James Sinclair , you're confusing a couple of important ideas. The 50% rule is just a rough-and-tough way of figuring out the NET INCOME that a property will generate, which is entirely separate from debt service.

Take the gross rent, divide it in half, and that's your Net Operating Income (NOI), which is what you have left after paying all expenses (except debt).

(Sidenote: Multiply by 12 to get annual NOI, then divide by purchase price to get the CAP RATE - another very important measure.)

Separately from that, you have to consider what the debt load will be. Obviously, if you can pay cash, then all the NOI goes into your pocket. But if not, then you have to figure out what your mortgage payments will be and take that out of your NOI. If you pay a lot for the property compared to the rent, and don't put much down, you may get a negative value - no good. NOI minus mortgage payment = CASH FLOW.

So, back to your point about some people being able to make a property work that others can't - that's kinda true. If they can afford to make a higher down payment, they can get the debt service down and cash flow up. This doesn't necessarily make it a good deal for them though - it's using a lot of extra money to "force" the cash flow to be positive.

That's why the CAP RATE is such an important measure. It allows you to compare investments apples-to-apples, outside of debt considerations. It's like the yield on a bond.

Sounds like he's extorting you (a crime) by threatening you (a crime) with vandalism (another crime). Especially with testimony from the nice officers, I bet you can do a lot better than sue him if he damages your property.

Take on another partner with more money.

I recall renting an apartment where the landlord required that I get renter's insurance through a specific company that they had an arrangement with. It was my policy, but they were specifically named as additional insured. In case of excessive damage they could make a claim against it, and they would be notified of a lapse in coverage.

Now, as a landlord myself, *I* want that for my tenants.

What is it called? How can I find out more about it? Have any of you done something like this?

It seems straightforward to me: Your friend agreed to sell something that doesn't belong to him. He needs to apologize to the buyer and ask them if they still want to proceed without those. He can't sell your stuff. That would be stealing.

I think. I'm not really an attorney though.

@Chris Adams , you need to consider that you're really doing two different things, and you need to take them separately:

- Flipping a house

- Investing in buy/hold

If you don't consider them separately, it's possible that profit on one side can mask a loss on the other side.

For example, you might take a $50k purchase, put in $20k of work, and have a house worth $100k at the end. Then you rent it for $1000/mo. But that might only be a 6-7% cap rate at that price (50% rule = $500/mo = $6,000/yr = 6% cap). You may well be better off selling it to somebody else, rather than "buying" it from yourself to hold as a rental.

@Fernando Leal , lots of options for sure, but I think you should consider out-of-state rental investing. I personally like Pittsburgh, but there are lots of options. It also depends a LOT on your overall financial position. How long would it take you to save another $13k with your current income level? How much other wealth do you have?

That said, don't just go buy something. There's a lot to consider to avoid losing your shirt on the first deal - no matter what strategy you choose.