All Forum Posts by: Nicholas Layton

Here's an exmaple of what I'm talking about... I thought I found a good deal, not for a BRRRR, but at least for a rental property: https://www.zillow.com/homedetails/654-Cambridge-A... Until I got to the property taxes... $5,188! For a 2 bed 1 bath SFR. These property taxes are killing me.

Zillow estimates $1,500 for rent, but I don't think that's correct. I've seen 3 bedrooms in that area going for less than that.

Ok, I get it. You want money that you can use. You can use your cash flow. You don't have immediate access to your equity. And the reason why Cash on cash matters instead of just the flat cash flow is because you usually need money to make money, so if you have X dollars that can be invested, you get the maximum cash flow possible by going for properties with a high cash on cash return.

A property that gets $300 monthly cash flow but requires you to have $12,000 invested may not be as good of a deal as a property that gets $200 monthly cash flow but only requires $6,000 invested because it leaves you with an extra $6,000 that can be used to invest into another property for more cash flow.

Thank you for all the replies and helping me understand this.

 No, you misunderstood. I didn't say the property taxes are normally upper $2,000s. I said the absolute lowest that I've ever seen in the area was upper 2000's on a real dump of a place. A 2 bedroom condo is over $4,000, and a 3 bedroom townhouse I looked at was over $10,000.

About 2 years ago my brother convinced me to stop renting and start owning, so I bought myself a condo. At the time all my debt was a student loan, and a car loan. Once I got my first mortgage my credit score shot up 63 points. Last year I paid off my car loan and that made me lose about 10 points. Life happened. I needed to move into a house. This year I bought a house. My 2nd mortgage dropped my credit score by 63 points. My condo was 100% owner occupied so I couldn't keep it as a rental, I had to get rid of it. When I sold it, paying off that loan, dropping my total debt, lowering my debt to income ratio, moving from 2 mortgages to 1, only increased my credit score by 1 point.

I will NEVER under how credit scores work, but I know they affect chances of getting a mortgage and interest rates you can get. I can only imagine if I buy another property for a rental it's just going to punish my credit score again even more, so how do people do crazy stuff like buying 18 properties in 18 months with completely demolishing their credit scores?

I haven't seen much discussed about property taxes, and maybe it's just a concern to me because of where I live. Cook/Will counties in Illinois of some of the highest property tax rates in the country, the property taxes are usually the biggest thing that make most deals really bad that I've analyzed. I see Brandon doing a live analysis on properties that have like $967 property taxes annually. That's insane to me. I've never seen anything lower than $2000 and everything that is in the $2000's is always the upper 2000's. Close to triple what I'm seeing him find.

I don't know how property taxes are done in the rest of the country, but here, the system is intentionally designed to over assess people's houses to either a) make them pay more, or b) make them higher a tax attorney to get their taxes lowered. "A" obviously means more money for the county so that's why they do that. But why would they do "B"? Because the assessor takes campaign contributions from tax attorneys (google Joseph Berrios, I'm glad he's gone now).

I've seen zero discussion about property taxes so I was wondering, what do people do about this? Do you just accept what the county wants you to pay? Do you fight it? How often do you try to fight it? How much time, energy, and money is spent trying to get your property taxes corrected? Is this only a problem in a few counties around the country or is this a common practice everywhere?

I just sold a 2 bed room, 1.5 bath, 1,100 sqft condo that I lived in for 2 years, I bought it for $85,000 and my property taxes were over $4,200.

What is the IRR? I don't think I've come across this, or if I did, I didn't understand what it meant. I believe it means internal rate of return but I don't know what that is.

But cash flow is cash flow. Cash on cash is not cash flow.

And here's why cash on cash is weird to me. Let's say you have 200 monthly in cashflow, and $20,000 cash invested. that's a cash on cash of 12%. Well, what if I *do* have another source of income. I can live without that cash flow for a year. So i take all that cash flow and just redirect it back into the account that I got the cash from in the first place so now instead of $20,000 invested I only have $17,600. So now going forward my cash on cash is 13.63%.

Why couldn't you just keep chopping it up like that? I've gone this far in my life without that $200 cash flow so why couldn't I just say for the next 8 years I have $0 cashflow, then in the 9th year after i've fully reimbursed myself the $20,000 I invested now i have infinite cash on cash return because i have 0 cash invested.

I clearly just don't understand this stuff quite yet.

I always see people looking for a specific number for their cash on cash return. For example, Brandon likes 12% or higher, and he calculates this by taking the annual cashflow divided by the cash that is invested.

My question is, why ignore the equity that is building in the property? Doesn't that matter? You're not just making cashflow, your renters are also buying you equity that you can later access when you sell the property or do another cash out refinance.

In the 1st year alone with 5% APR on a 30-year mortgage for $100,000 you're not just getting that $2,400-ish cashflow, you're also getting $1,475 in equity, and that only increases every year. Why do I never see anyone taking this into account?

 I do agree that the internet stuff is just a scam to make money, but I don't think landlords can dictate who tenants can and cannot see for their own personal "health" providers.

 Why do you charge so much more for dogs than for cats? In my experience, living with my own dogs and cats and with other people's dogs and cats, the cats cause more damage than dogs. Also dogs are pretty good about only going outside and rarely have an accident indoors, but cat's will pee on anything and cat pee has so much stronger odor. Even cats who do use their litter box 100% of the time and never pee on anything else will still track it around on their paws after walking on it in their litter box.