All Forum Posts by: Scott Pigman

 Don't those charge you a fee for the convenience of having them pay your bills? I don't see the value of spending money to get out of debt.

I also have a rental property with where the rent is <1% of the value. Something that helped me clarify what I should do with the property was learning how to run a projected IRR or MIRR (Internal Rate of Return or Modified IRR) for various holding periods to figure out when my best exit year is likely to be. Frank Gallinelli's What Every Real Estate Investor Needs to Know About Cash Flow explains it well.

In a nutshell, you set up a spreadsheet where row 1 is your initial investment as a negative number, the middle rows are your projected cash flows for the years you hold the property, and the last row is the cash flow for the year you sell it (rent + cash out from sale). Then you apply the IRR or MIRR function to the whole column of numbers; you use IRR if all the cash flows are positive but you have to use MIRR if you anticipate negative cash flows in any year. If you run the calculations for various holding times you might see that there's a peak year to sell to maximize your return, after which your returns start to decline.

This is a great tip; as a newbie to google's cloud based suite of tools it opened my eyes to some possibilities I hadn't realized before.

Something I discovered is that you can add additional columns to the spreadsheet to perform calculations on the values submitted from the form. For example, I created a simple property analysis form where I enter the address, ARV, rehab estimate, estimated rent and asking price. Then in the spreadsheet I added columns to calculate what percent of ARV the all-in price comes to (i.e. the "70% rule" number — that should have a name but I don't recall seeing one), the GRM, the "2% rule" number (which also need a name), cap rate, etc.

Another nice feature is that if you add new fields to your form they are inserted into your spreadsheet between the previously existing form columns and any columns you added. Nothing gets overwritten.

It's definitely a thing that's done in Austin and there are rules in place to cover it. They call them Alley Flats. It used to be the lot had to be at least 7,000 SF but I believe they were considering or did lower that number citywide. I believe some neighborhoods modify that requirement. There's also an impervious cover requirement -- a certain percentage of the lot has to remain uncovered by structure or asphalt so that there's less runoff to contend with; I think it's a 60/40 split but I can't recall which number is impervious and which is for the permeable. the living space itself was capped at 850 SF last time I looked and was usually done in an apartment over a detached garage. Finally you have to have access to the second unit so usually this is done on corner lots or lots with an alleyway behind them -- hence the name, Alley Flat.

Glenn Gurgiolo can tell you all about the rules and correct what I've got wrong. He has an account on BP but it doesn't look like he's too active. His company is Ladybird Ventures.

Oh Ben you are a click bait master and wizard level forum troll and yes your points hit close to home.

I moved from Maryland to Texas a little over a year ago and rented out my home back there and I have a PM. I think he's a good PM but to be honest he makes more off my house than I do -- he makes his 10% regardless; I get stuck paying for the new oven. He certainly doesn't have to spend much time managing the property most months.

On the other hand, given the turmoil of moving twice in one year -- once into a rental and again into a house we bought, learning our way around a new city, and not knowing who to call when there's a problem because usually I would have either fixed it myself or ignored the problem when I lived there, I'm not sure I would self-manage that property if I did have the chance to do it over again. It's not a cash-flow deal, it's a hold-on-until-the-value-improves deal. I'm probably going to sell it next year while I can still get the capital gains exemption and after some development in the area is completed which I believe will bring the value up.

If I buy more property out of state (I'm considering it) I will try to manage it myself. What would be useful would be to find a property manager who's willing to work a la carte, "I'll pay you $50 every three months to inspect the property to make sure nothing's leaking and to replace the air filters"

It's a combination of things. Making more cheddar than the average mouse is part of it. Actually having studied a degree that requires math is another. (But we use math for practical purposes, not navel gazing stuff like the mathematicians or the physicists.) We know our way around excel pretty well too, which ain't a bad skill to have in REI. Engineering is about figuring out how things work and finding solutions to problems. Real estate is just another problem for us to figure out.

On the flip side we tend to be more introverted and small-c conservative than sales and marketing types, so we struggle with those parts of the business.

I think you also get to a point in engineering where you have to decide whether to stay on a technical path or go over to the pointy-haired dark-side of management. The big money is usually along the management track -- for the select few that make it to the CxO level or who strike out to start their own business. Those of its who aren't interested in that rat race might start to look into other pursuits. 

All that said I doubt that many engineers actually end up investing in real estate even if a disproportionate number of investors are engineers. I think more get active in the stock market or take up hobbies like restoring cars.

IMHO, 10% for management might be a *little* high, maybe. It's market rate in Maryland where I own a rental. Last I asked in Austin I was told something like 8 or 8.5% was market here. I don't know about rental.ai but they must make money somewhere unless they're some sort of charitable outfit. However since I can't seem to get any information about them without first giving them my email address I'm not going to be able to figure out what their angle is.

My guess (and it's just a guess) is that there's some overlap between your 10% for maintenance and your cap ex estimate.

FYI, these are a pretty good articles by a Texas attorney on assumptions and wrapping existing mortgages in Texas:

http://www.lonestarlandlaw.com/Assumption.html

http://www.lonestarlandlaw.com/Wraparound.html

My gut reaction would be to take the one closer to downtown. Everything near the airport I've seen is decidedly low-end and I can't see it ever being anything else; people don't like airplanes interrupting their barbeques. Which neighborhood is B in? Is anyone doing tear downs and rebuilds in the area yet?

I recall a case from a few years ago about a HOA prohibiting someone from flying a US flag on their property. As you might expect it got a lot of attention at the time. You might want to see how that resolved.

I suspect that your only option is to ban all flags or all flags except the US flag. Banning a specific flag sounds like grounds for an ACLU lawsuit. Replace "Confederate flag" with "Gay Pride flag" and think through how your policy would be received.