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All Forum Posts by: Sylvia B.

Sylvia B. has started 74 posts and replied 1314 times.

Post: Help with Squatters!

Sylvia B.Posted
  • Rental Property Investor
  • Douglas County, MO
  • Posts 1,344
  • Votes 1,419

Didn't you change the locks as part of your rehab??

Post: Multiple bank accounts on LLCs ? holding structure question

Sylvia B.Posted
  • Rental Property Investor
  • Douglas County, MO
  • Posts 1,344
  • Votes 1,419
Quote from @Nona Brewing:

Thanks Sylvia! Regarding the property management single-member LLC, is it a disregarded entity and did you have to use an EIN to open the bank accounts?


Yes, and yes. Each LLC has its own EIN. It can neither open a bank account nor buy real estate without one.

Post: Questions about buying RE with all cash

Sylvia B.Posted
  • Rental Property Investor
  • Douglas County, MO
  • Posts 1,344
  • Votes 1,419
Quote from @Joe Villeneuve:
Quote from @Sylvia B.:
Quote from @Joe Villeneuve:
The source of the funds to pay the mortgage comes from the tenant's rent.  It's not that hard to understand.
Hmmm . . . . yeah. So if I say, "My boss pays for my health insurance" you would naturally conclude that the premiums come out of my pocket, and I'm only indicating that the source of funds is my job. Right.
You really don't get it do you.  Your job is your source of money to pay bills.  You are the one working for it.  The tenant pays the mortgage, insurance, etc...because the business that is your rental property makes the money to pay for it.  When you have negative CF, the part that is negative comes from your pocket because the source of the funds to pay for it comes from your job, which means you are doing the work to earn that money.
The reason why you have a rental, and positive CF, is so your income from your work/job doesn't have to make those payments.  That CF coming from your rental reduces/substitutes, or maybe if you have enough CF, can even eliminate the need for your job.
Your rental property is like any other business.  The income from a business covers all the expenses, which means in the case of a business, the customers are the ones providing the money to pay for all the business expenses.  What's left is profit to you.  Applying the same economics to a rental property (which operates just like any other business), the tenant is the customer, the mortgage/insurance/taxes/etc...are the expenses, and the CF after expenses is the profit.  Which means, just like the customers in a business are the ones paying the business expenses, the tenant in a rental are the ones that are paying the property expenses.

 You are the one who doesn't get it.

The customer pays what the market will bear regardless of your expenses. He will not pay more for your product/service simply because your expenses are higher. 

Increased expenses decrease your profit, costing you money. As the owner, you may decide that an expense is necessary to increase your profit in the long term, but it still costs you money, because if you could get the same results without the expense you would make more.

Post: Questions about buying RE with all cash

Sylvia B.Posted
  • Rental Property Investor
  • Douglas County, MO
  • Posts 1,344
  • Votes 1,419
Quote from @Joe Villeneuve:
The source of the funds to pay the mortgage comes from the tenant's rent.  It's not that hard to understand.
Hmmm . . . . yeah. So if I say, "My boss pays for my health insurance" you would naturally conclude that the premiums come out of my pocket, and I'm only indicating that the source of funds is my job. Right.

Post: Questions about buying RE with all cash

Sylvia B.Posted
  • Rental Property Investor
  • Douglas County, MO
  • Posts 1,344
  • Votes 1,419
Quote from @Joe Villeneuve:
Paying all cash means you are paying full price.  The tenant is paying the interest out of the rent, so the total cost to the REI is only the DP...and any other cash they put in.

 Aw, come on Joe, "The tenant pays my mortgage" is a big fat lie and you know it! 

Whose credit is affected by the payment history of that mortgage? Who signed the paperwork agreeing to repay the mortgage holder? Certainly not the tenant!

So imagine this: A pretty little mortgage fairy waves her wand over your rentals and poof! your mortgages are all paid. What do you do with that money you no longer pay the bank? Do you refund the tenants since they were the ones paying your mortgage? No, you put it back in your pocket, the pocket those mortgage payments have been coming from all along.

There are valid reasons to use leverage in the real estate business. Stick with those, and leave the lies to the ignorant.

Post: Inherited tenant wants to pay cash

Sylvia B.Posted
  • Rental Property Investor
  • Douglas County, MO
  • Posts 1,344
  • Votes 1,419
Quote from @Maria M.:
Quote from @John Morgan:

I’ve got 10 tenants like this that pay in cash. Sometimes I feel more like a drug dealer. Especially when I’m dropping off like 10k at the bank making a deposit. It looks a little sus. Lol

Yes, I was reading that in Miami 1 in 10 households is unbanked, many more are underbanked. I wonder how many don’t even show up in these statistics…

 Underbanked? What in the world is that?

Post: Questions about buying RE with all cash

Sylvia B.Posted
  • Rental Property Investor
  • Douglas County, MO
  • Posts 1,344
  • Votes 1,419
Quote from @Jack Martin:

Hi Sylvia, I may have over emphasised the importance of interest deductions, of course, my purchase was based on cap rate, not write off's; write off's are a nice bonus as there aren't many write offs left. Depreciation and every cost and expense also lowers my taxable income., what criterion do you use to evaluate investments?


 Well, Jack, I shouldn't have jumped on you. People talking about spending money primarily to get a deduction is one of my pet peeves.

My primary criterion is, will it make me money. I also evaluate how much work is involved in ownership, and is it an asset I want to own.

Hubby and I are in our early 60s, so we aren't building an empire. Our real estate investments are all in the small town that we call home. We buy distressed properties and make them into nice rental houses. Upfront that is a lot of work, but once it's done and a very well-screened tenant is in place, there is very little to do.

Do I want to own it? In regards to real estate, there are a few questions we ask ourselves. Location, of course, is first. Is it where we want to own? Will it make a good rental? Is it too big/small? Is there too much/little land with it? Is it too old? Will we be happy or ashamed to say we own this?

And will it make us money? How much will we have in it once rehab is done? How much rent can we charge? What is the outlook for appreciation?

All that is, of course, evaluation of potential new investments. There is a very different way we evaluate investments that we already own. But this post is already over-long.

Post: Questions about buying RE with all cash

Sylvia B.Posted
  • Rental Property Investor
  • Douglas County, MO
  • Posts 1,344
  • Votes 1,419
Quote from @Jack Martin:
All cash is interesting, but, and this is a true story; I own a commercial building and when I had my tax advisor send my returns for my review, I went to my wife and started laughing; "I can't believe the write off's I get from this property". Depreciation is a fun one but the biggest are the interest deductions. Leverage is key on investment properties; I also like the idea of self directed IRA's; who manages your money better than you?  

 Yes, it's nice to deduct interest on your tax return, but it is also one of the stupidest reasons to get a mortgage. 

Now I don't know what income bracket you are in, so let's just pretend you are a very high earner in the 37% bracket. That means that for every $100 in interest that you pay your mortgage holder, your favorite uncle lets you pay $37 less in tax.

I will make you a better offer. Send me $100, and I'll give you $50. That's $13 more per hundred than your uncle, and if you are actually in a lower tax bracket, it's an even better deal! There is no limit to the number of times you can take advantage of this offer!

Post: Questions about buying RE with all cash

Sylvia B.Posted
  • Rental Property Investor
  • Douglas County, MO
  • Posts 1,344
  • Votes 1,419
Quote from @William Grantham:

I feel like more people were interested in debating if cash or financing was the better option instead of answering his questions. I’d go as far to even say some of the comments were even bordering on rude and arrogant. 


 This happens every time the subject comes up. There are those who are absolutely sure that their way is the only right way, and they often attempt to shout down those who disagree.

Post: Questions about buying RE with all cash

Sylvia B.Posted
  • Rental Property Investor
  • Douglas County, MO
  • Posts 1,344
  • Votes 1,419
Quote from @Jay Hinrichs:
Quote from @Eliott Elias:

Why are you looking for an investor buying all cash? That is likely the least sophisticated investor you will meet. 


REALLY !!!  least sophisticated,  I guess you can move me over to the unsophisticated Investor category then.  Most folks I know that are VERY wealthy have little to no debt on anything.

Depends on the asset class and if you are starting out with little money then of course you need debt but if you have funds owning props free and clear is not unsophisticated.. Most folks that do have significant banking relationships and sophisticated bankers like to see paid for assets and not all maxed out liabilities.. there is more to it then the math.

We all can do simply math and simple math says leverage increase returns no arguing that point. But there is more to it than just that one part of the equation. 


 Sure wish I could vote 5 times for this post!

"But there is more to it than just that one part of the equation."

It is the unsophisticated who cannot see past the simple math.