All Forum Posts by: Rhonda Wilson

@Cheryl Pachella  We have properties in different regions. In one area, we implemented RUBS for a while and then eventually dropped it in favor of just including the extra cost into the rent. I decided that it was additional complexity - such as an addendum to the lease - that just didn't seem to add any value.

On another property, in the Tacoma area, RUBS was already in place. I spoke with the property manager (who has hundreds if not thousands of properties under management). He said that renters in that area are used to seeing a utility charge and just assume that it will be an add-on. So, in comparing rent, we would be at a disadvantage if we dropped the RUBS. That is if we rented for $900 + $50 RUBS that would seem cheaper to the renter than just charging $950 because in the latter case, the potential renter will assume that there will be an additional charge. 

Oh, and we charge $50 + $5 per additional occupant after the first. It is MUCH less than our actual w/s/g. In some states, you cannot charge more than the actual.

@Jeff Glass Okay, I looked up Monetized Installment Sales and understand now. Thanks for the tip. This wasn't something that I was aware of. Small world, I'm watching your Youtube video about it! :D

@Alina Trigub Thanks for your suggestion, Alina. I have thought about seller financing as an exit strategy on assets. As you say, it's doesn't defer taxes "forever" the way 1031s can, but it does spread it out.

I agree 100% with your four points. I've seen a lot of things as a landlord. Mostly due to tenants we inherited on distressed properties. 

The only advice that I can offer is to try to keep cool and objective. Look at the situation in terms of cash flow and asset protection. As much as it may rub you the wrong way, you might consider cash for keys to get rid of the problem tenant. Nobody wants to "reward" bad behavior, but if you can rid yourself of a problem quickly, you might save money in the long run.

In the language of Rich Dad Poor Dad, your home is a liability and it doesn't matter whether you have a mortgage or not. Just because it's a liability doesn't mean that you shouldn't own it!! One could sleep on Mom's or a friend's couch. Or, one could buy an old camper and live in that. Forgive me by going a bit extreme to make a point. 

It's useful to think about what in our lives is an asset and making us money versus that which is not. It helps bring clarity to the financial decisions that we make. At some point, we have to decide on a balance between our devotion to increasing our income and net worth versus pleasure and comfort in our lives. I have a lot more house than I really need and also own a newer car when an older one would do. 

The key is living below your means. That is the formula that creates the extra cash flow needed to build an asset base. If your house is paid off, I expect that you already know this and are living this way. Congratulations!

14 years ago we bought our first multi-family property. About the same time our best friends bought a vacation house in Bend. Is a vacation home not offered for rent an asset? Well, our multi-family provided us monthly income - small at first but it grew over time. Our friend's vacation home cost them in extra utilities, property tax, insurance and upkeep. If one home is an asset then two is double the asset. In fact, they are both liabilities.

@Dave Foster Wow! Thank you for the well written and thoughtful post. I have already read it a couple of times as there is quite a bit of information there. 

I hadn't really given consideration to the leverage aspect until reading your post. I'm quite used to increasing leverage with each 1031 exchange. Moving from a currently owned property to an all-cash investment in a TIC is interesting. True, it minimizes risk. In general, I'm a pretty big believer in having some degree of leverage. After all, if the cap rate is higher than the interest rate, then I'm making profit on the bank's money.

The advantage of having multiple medium sized properties, as we do is that I'm now thinking that I could refinance another property and use the cash to pay off the small mortgage on the property that I'm selling. That would increase the cash available for the all-cash investment and eliminate, I think, any danger of mortgage boot. 

Thanks again for the post! 

@Joshua Wright Thanks for responding. What you've said is definitely in line with what I assumed. There is no such thing as a free lunch after all. Somewhere, somebody is going to need to be paid for a service. And that doesn't bother me. I mean, the next time we sell there simply might not be a property that fits our objectives especially in the 45 day identification period. If that is the case, the choices might be to cash out and pay a lot of tax then buy a bond or something for 5%. Of course, after the 24% fed and local tax, the returns will be 76% x 5% on the gains. Obviously a 1031 exchange has a big advantage in preserving the equity. 

I'll PM you and we can discuss further.

@Matt McElravy Thank you for the welcome! We actually have rentals in your area!

@Account Closed Thanks! We have a 14-unit in Pierce County (Lakewood). That one needed a lot of work!

I'm a fan of 30-year loans because I value the flexibility. With a 15-year loan, you are forced to make a higher payment no matter the circumstances. This can create risk of negative cash flow during vacancy or other events in which income is low or expenses are high. 

If you do want to pay down the debt more quickly - and I have done this - then you can set up periodic auto-payments from your bank. I like making quarterly "extra" payments. I've also made extra principal payments if I've sold a stock or other investment and want to put the money to work for me. Paying off a mortgage is a solid guaranteed investment at an interest rate higher than you can get from any AA investment (like a bond).

One endorsement of 15-year loans is on BP podcast #279 starting at 5:10 and continuing for 

Hello BP community, we have done a couple of 1031 exchanges into apartment buildings. Next year, we would like to sell one of our smaller properties (a 4-plex) and do a 1031 exchange to defer capital gains taxes. As everyone knows, it's been difficult to find good deals on multi-family these days. Also, my husband especially, would like for us to move into more "hands off" investments even if that means somewhat lower returns.

I have seen Delaware Statutory Trusts advertised as a vehicle for investing 1031 funds. Does anyone have any experience with this? What kind of returns can one expect? Does anyone have companies that do this that are good to work with and offer strong investments? If you don't care to share specifics in the open forum, you are welcome to send me a private message. 

I should say that we haven't, by any means, ruled out purchasing a replacement property on our own as we have in the past. However, I'm wanting to explore the alternatives.