All Forum Posts by: Michael D.

What do you guys think about solar panels? I'm considering them for a primary residence that we just bought for ourselves.

Salient points:

- One of the more expensive homes in the neighborhood at a little under $900k

- 3000 sqft, two story.

- Shingle roof as old as the house - about 14 years.

- SF Bay Area neighborhood, but not particularly "hipster"

- Our neighbor has solar panels, but I haven't talked to her about them yet (it's high on the list though).

Do solar panels add to the value of the home? What are some of the downsides? I'm not sure what else to ask, so please feel free to just let loose.

Thanks,

Michael

@Brian Adams , I'm grateful for the work you do, and I can see you've already taken a beating here so I don't want to gang up. But there's one thing I HAVE to call out:

[quote]But I am not throwing money away in rent. That is my investment logic.[/quote]

Wrong logic. Paying rent for a house is not throwing money away. Paying rent is paying for a valuable service, and is often far more economically and financially sound than buying. In fact - I would say - your line of work is probably one of the clearest cases for renting, not buying.

All the best, and I hope things work out.

Michael

@Phil Novack , looks like we've got some things in common. My wife and I also live and have tech careers in the SF Bay area. I don't know much about NJ or Detroit, but I'm quite active in Pittsburgh and I just closed on units 11 and 12 there. I think it's a great, great market, with plenty of properties meeting the 50% and 2% rules easily.

Let me know if you want to grab a coffee one of these days.

Michael

Thanks everybody for the non-legal advice.

Yes, I've already consulted a lawyer on the legal issues, but that's not what I'm most concerned about in this post. Lawyers are coming at things from (obviously) a legal perspective and what's best for us when we die. Clearly, that means setting up a family trust.

The problem is that lawyers aren't experts at real estate investing, capital growth, passive income, lending, personal finance or any of the other things that need to be considered.

As an anecdotal example, I was listening to Dave Ramsey and he said that he didn't advocate a trust for most people because they're a lot of extra trouble for what you're really getting that wouldn't be solved with an ordinary will. Then again, he's not an estate attorney.

So I'm just trying to gather a breadth of opinions, especially from the people on this forum that ARE experts at all of those other non-legal things. I want to think of the things I haven't thought of yet.

As an additional data point, our net worth is relatively low, maybe around 5-600k.

Thanks again,

Michael

My wife and I are considering creating a personal trust for ourselves that would hold all our assets, thus making it simpler to die. We're only about 30 years old, so hopefully that won't happen for a while, but you never know.

If we have real estate in the trust, would we be able to get the same kind of financing as if we owned the property personally?

Would their be any more paperwork involved when doing transactions with the property such a buying, selling or financing?

Anything else we should consider?

@Shawn S. , one thing I'd recommend is that you also have a savings account with the same bank. This way you can keep a minimal amount in the checking account, just in case. Keep the bulk of funds in the savings account and transfer as needed. Using this method allows me to feel comfortable sending blank checks to Realtors and such to pay for minor things without needing to worry about losing more than a couple of thousand bucks.

@Matthew Hicks , I've got two managers in Pittsburgh that I'm pretty satisfied with. One has recently gone well beyond the call of duty to help me get two houses ready for initial occupancy.

That said, I'm very willing to pay for good service. Both managers I use are in the price range that you mention.

Let me know if you'd like a referral.

Regarding the car, I think it's reasonable for the manager to spend a little effort there, at the very least to put a notice on the window letting the owner know that the car will be towed. On the other hand, they aren't being paid to manage that lot so it would really be a favor. You could take care of it yourself without too much effort.

@Yong Yoo , at first glance it seems that you may have a good deal here. You missed the last important calculations:

$15,730 NOI / $110,000 purchase price is a 14.3% cap rate.

$10,416 cash flow / 32500 cash-in = 32% cash-on-cash return.

Great numbers, if you ask me. But better check those expenses closely!

@Nick Frankus , I don't know why you're getting so much negativity on this. I think it's uncalled for. The financing terms proposed are wonderful, and anybody should be happy to take them. Think about it this way: If you had $24k right now, would you rather put it down on the house and have a 6% mortgage, or keep all that money in your pocket and pay no interest for two years. I think the answer is obvious.

The REAL question here is whether the house is worth the price - and that's what you need to figure out. These JUICY financing terms might be offered to mask an inflated price. This is the real danger here - that the easy money cons you into taking a deal that's no good.

As @Rob K pointed out, $100k for a house that rents for $950 probably isn't the best deal in the world. I think I'd disagree on the magnitude of that error though. Suppose expenses are on the lower side - maybe $400/mo. That would leave $6600 per year in income, which makes a 6.6% cap rate. Too low for my blood, and I'd pass - but not too low for everybody.

I'm just saying - the deal is probably priced on the high side, but the terms are clearly AWESOME - the opposite of what some people seem to think.

Keep in mind the relationship between interest rates and cap rates. Both are essentially measuring the same thing: return on capital invested.

As such, they track together. All that really means to you in the long run is that higher interest rates means higher cap rates means lower prices means [perhaps roughly] neutral impact on monthly debt service.

Michael