All Forum Posts by: Rob Hakes

@Frank Visaggio

We have been renting out our downstairs for a while now.  If you do claim the income on your taxes then a good accountant will help you figure out the depreciation of that portion of the house (ususally as a percentage) and you can also right off a portion of the expenses (insurance, utitlities, etc).

There are some implication if you plan on selling the house in the future as you will have you pay recapture on the portion of property that was depreciated if you sell for higher than you bought it for.

From my experience any good accountant with some real estate knowledge will just treat the income and expenses just like any other unit.

As long as we keep getting free money from the government popping into our bank accounts every few months, then yes things have changed as we know them.  

@Jonathan G.

Yea i have heard of them.  I started looking at lending deals with them a few years ago, so i have been getting emails ever since.  Its been interesting to see how rapidly they evolve and change.  At first they were selling turnkey, then promissory notes on new commercial, then notes on growing equipment (for marijuana probably).  I starting closing in on a deal, then backed out.  It just didn't make sense based on what else is available in the market.  Their notes are a lot less secure.  They do offer a higher yield, but if you look at how long your money sits in escrow before it starts to earn interest that higher yield gets zapped pretty quick.

@Caleb Heimsoth

Thanks for asking.  Yes 2020 was a breath of fresh air for my turnkeys, finally.  Steady rents, without a bunch of big service calls.  I think the pandemic actually helped with this especially for the tenant that is section 8.  As far as the returns, i think this year dug me out of the hole from the previous years.  

Here are the numbers for the Spartan Properties

Original property - Cash on Cash return of 6% and 11% if i don't count principle paydown as an expense

2nd Property - Cash on Cash return of 9% and 14% if i don't count principle paydown as an expense.

These numbers are as accurate as i can get them considering i considered ALL up front expenses as my cash in (not just the down payment, or 'return on equity' number) there was no creative handy work to make returns look better in these calcs.

Analysis - I think these CAN offer a better return than the stock market especially if counting equity as a return.  They are, however low returns considering the risk of having some bad years interspersed.  Still comparing them to 9-10% performing notes that have not missed a payment in 3 years.

The 2nd property shows some hope of appreciation as the Zestimate suggest that area has appreciated about 20% in the last two years.  The 1st property has not shown any signs of appreciation.  I know those are only estimates, but gives an idea of trends.

Overall - These could be good investments if i could raise my rents to match the increase in tax expenses.  Could happen overtime.  I have not approached refinancing to a lower rate, as I don't know if it is worth it.  

Keeping fingers crossed again for 2021!!

@Chris Seveney

Curious on this, would you try and hold the borrower responsible for this? Or do the work and forward him the bill?

Sounds a little messy.  

Is there any way in the land contract agreement to have the borrower be responsible for keeping the property up to code?

@Hunter Fitch

Everybody seems to add about 50 lbs of muscle, and a bit more venom to their bite when they are behind a keyboard rather than face to face.  You're right, it is crazy how quickly people can jump to attack a genuine question or concern.  We can also jump to the defensive pretty quickly if we feel a critique is an attack.

It would do everybody better if we were all a little kinder, but also less sensitive and so easy to offend.

@Martha Daisley

I have not done it a lot, but i did refinance a house in a trust earlier this year.  I did not even tell the bank it was in a trust, so when the title company saw it was in a trust they just transferred title to my name for a day and then right back into the trust after the refi was done.  Pretty seamless, but they did have to review my trust agreement to ensure i was the beneficiary.

They may be being difficult or lazy, or they may not be comfortable with a land trust. 

@Mike Moore

If you have experience in house flipping you already have an great in to note investing.  Have you created any notes after a flip?  I bet there is lots of opportunities to create a note via seller financing or contract for deed on a rehabbed property and see really awesome returns.

I guess its a good sign that haven't really had anything to post lately.  Both of my properties with Spartan have stabilized and have been getting consistent rent (even through pandemic) without any maintenance costs.  I think these buggers will actually be a boon to my portfolio this year rather than the drag.  THat feels good.

Hope i didn't jinx it. 

@Andrew M.

I will need to echo what @Caleb Heimsoth has said as i to am somebody that has been down the turnkey road for a few years.  Cashflow projections are too high.  You will have a few months where you see it cashflow over $200/mo but there are way too many things that can go wrong with a turnkey property that was purchased at top dollar.  

The taxes will increase.  If you are calculating taxes at $62 there is a good chance after a year or two the county will realize that you are not an owner occupant and you will lose that exemption, or they will just realize that they can charge more in taxes to an out of state investor that can't/won't come and protest.  

Also your mortgage rate looks a little low for an investment property, but i haven't looked in a while so i could be wrong.

On one property the taxes started at about $750.00 a year and two years later are at $1150 a year.

I was and am very excited about the turnkey model, but the numbers don't lie.  They are crappy returns thus far.   Really the only hope of having these be a really good investment is if i can see some good appreciation overtime.  That's not a really good model if you are planning on cashflow and the chances of much appreciation in these markets is sketchy.

There are other solid passive investments that have proven to be more stable with higher returns.