All Forum Posts by: Paul B.

I own a 1 BR condo in Boston. The condo association has a master policy for the building. My tenant (hopefully) has renters insurance for his personal property. I have renters insurance because I rent my primary residence in Texas. 

A few years ago, I had a water leak in my unit, and I was responsible for replacing my neighbor's ceiling below me. That's when I realized I had an insurance gap, not only for that situation but for any damage within my own unit, such as a fire. So I called my car insurer (GEICO) and explained the situation. I ended up with a policy through Stillwater that is about $400/year. 

I have no idea whether that is a good rate, and if I am even properly covered. Should I be looking for an investor-friendly insurance broker, who understands the local market (my car and apartment are insured in Texas, while my investment is in Massachusetts)? Or is this a fairly common scenario? I don't want gaps or overlaps in my coverage. 

Can anyone recommend someone in the Boston area who insures rental property?

Can anyone who has owned a property for a long period of time confirm that the money they spend over 27.5 years is approximately the original cost of the structure? 

Is this supposed to be maintenance, or are capital expenses included? Don't we already deduct maintenance costs from our rental income, and depreciate large expenditures separately? So why do we get this additional tax benefit? (I am aware that you have to recapture the depreciation when you sell, but why does it exist in the first place?)

My rental property is a condo, which means technically I don't own any land. In fact, the city assesses $0 for my land value, and the total assessment is all classified as building. So I have been using my entire purchase price as my cost basis. It seems I have a tax advantage over a similar valued single family house, no?

I've been a landlord since 2008, but only about six months ago did I decide I wanted to get more serious about real estate investing. I'm an engineer by day, which is why every time I hear an investor or a guru say they were an engineer in a past life, it catches my attention. I don't intend to quit my job, but I have become curious why so many have. The head of one of the local REIAs in Dallas/Fort Worth, a local multi-family investing expert, and the head of a turnkey investment company based in CA but focusing on Dallas are three examples that come to mind. 

Here are my possible explanations:

1. There is no particular abundance of former engineers and I am just noticing them more because I am biased.

2. Engineers are good with numbers and analysis and these skills transfer well to REI.

3. Engineering offers good entry-level opportunities out of college but in the long term is a lousy career path (many of the successful investors I've met quit their day job after about 15 years working in the corporate world).

Has anyone else noticed the trend or have ideas why?

I live in Texas but own a rental property in Boston. I'd love to acquire another one but the deals are few and far between.

Background: I have been looking into multi-family passive investing. I attended a multi-family seminar in early November, hosted by a guru (he hates the term but I'll call him that here for simplicity) who knows my local market very well. I was convinced that it's the right path for me as a passive investor, but was discouraged by the high cost to join the program, which is exacerbated by the fact that I currently don't quite have enough liquid capital to participate in most deals. I networked with several deal sponsors at the event, in the hopes that I would be able to work with them in the future.

Two months later, two situations have raised my eyebrows:

1. One of the sponsors I met, who has a good track record, was working on a new deal that was mentioned at the seminar. I requested the information, knowing that I would not participate, but wanted to get practice examining the PPM and other documents. After our initial contact and email exchange, he has since followed up with me twice, asking if I am interested. The second time was after the date that he initially expected to have all his passive investors committed, and he still has room for 15-20% of the funds he needs.

2. The "guru" who ran the seminar emailed me recently about a deal one of his contacts (whom I have not met before) is sponsoring, in which he (the "guru") is investing his own money. I assume it was sent to everyone who attended. I also requested the information, for the same reason as the previous example. After reading through it, the dates on the documents indicated that I was not part of the initial distribution, which leads me to believe that they didn't get enough interest the first time and now were casting a wider net to reach more potential investors.

My question is, are these the signs of a weak deal?

I've been under the impression that there is more investor money out there than good deals, which would mean that anyone who has a good opportunity should have no problem finding passive investors. I don't have the expertise to do my own due diligence, which is fine because I am not ready to participate right now anyway, so all I can do is look at the projected performance, and the numbers looked good. Can I assume that more savvy investors have found flaws with the projections, and are passing? Or do all syndications take several weeks (or months) to generate enough interest to raise the money they need?

Obviously I am not asking anyone to evaluate the deals themselves. I am just asking if it's a red flag that an experienced deal sponsor with a wide network can't immediately find 30-50 people to put up 50-100K a pop?

I took a bus tour of the Metroplex with his group today. I've lived here for several years now, but have only considered investing here a few months. It seems like a good group, but I came on to this site to see if anyone else had experience too. Sounds like no one does. If I get more info I will report back.

Thanks Chris. I knew all along there was a certain amount of capital one would need to get into MF, which is a contrast to the "no money down" tricks that many gurus teach. I just wasn't sure what the number was. I thought, with 50-60K I was borderline, but if closer to 100K is better, then my decision is a lot easier. I'm not itching to "retire in 5 years" or even quit my current career at all, so I have no problem taking it slow and doing it right.

Nick B., thanks for the advice.

I certainly did meet several deal sponsors at the event and have contacted them afterwards. One of them even has a deal in the works now, which sounded very promising, and he has a strong track record. But, I would rather have a relationship first, and if he is above-board, he shouldn't be taking on investors with no prior relationship either. Also, I don't quite have the expertise to evaluate a deal on its own merits (beyond the reputation of the sponsor). I still have a lot to learn, and the seminar was a great start, but it was just an introduction. Brad's Foundations program is supposed to teach what you need to become a sophisticated investor (I will not be accredited anytime soon). But $4K is pretty steep when I was only looking to make about a $25-30K investment as a start. If things went well, I would put the same amount in another deal after a year or so. By year three, I'd probably have about that much scraped up again and repeat.

That was my plan anyway, until I realized that while there are deals with a minimum investment that low, the better ones start at $50K or more. I am not comfortable tying up all my investable cash in a single deal, at least not as a beginner. So I have yet to decide what to do, but I have no problem taking my time anyway to decide exactly what path I want to take in the world of real estate investing. I'll continue to attend other RE investing meetings, keep in touch with people I met at the seminar, do my own research on multi-family investing, and increase my cash reserves. The next time Brad has another seminar (I believe they are held three times a year) if I haven't decided to take another approach, and it still sounds appealing, I may sign up for Foundations after all.

I have some of the same sentiments as Zeak. I am impressed with Brad and his members, and do believe that the money spent will pay for itself if you make the effort and do it right. 

But, I only have so much money to invest, and I can't justify spending thousands a year, every year, when I only have enough liquid cash available to participate passively in one or two deals, then wait a few years to get it back (if it goes well). If I thought I was going to be able to invest that much every year, then it's more tolerable. I absolutely did not expect the knowledge to be given away for free, or even cheap. But I was a little disappointed that there isn't some sort of junior level membership available, where I could get a little more experience, then upgrade if it goes well.  

I will say that if someone is considering multi-family, this weekend seminar is a great introduction, for not a lot of money. The only significant cost is your time. I highly recommend it. But I have yet to decide what the next step is for me. I thought multi-family would be good fit for me, since I am interested in passive investing, but the barrier to entry is high.

Interest-only is easy. If the rate is 10% and the loan is $200,000, your monthly payment is [(200,000) * (0.10)]/12 = $1,666.67. Multiply the principal by the rate, then divide by 12.

An amortizing loan is a lot harder to explain, but interest-only is pretty straightforward.