All Forum Posts by: Jim Sokoloff

There's an adverse selection problem in that the average applicant is worse than the average tenant.

The average tenant might get accepted at 50% of they apply. That means they are seen by 1 or 2 landlord as an applicant and then they're out of the applicant pool and have a place to live.

The average applicant is rejected multiple times (and so shows up as an applicant more often). 

If you're getting the inquiry flow and are confident in your rent being average for the type, size, location, and quality of property you have, stick it out a bit longer before re-evaluating.

For income ratios, you should certainly add the husband and wife together (as that gives you the long-term possibility). If those two qualify income-wise, that's great, because they might be willing and able to stay a long while. 

If you're willing to rent for just one year or so, then you could consider all three incomes together. In a case like that, you should probably assume that the daughter will want to move out at some point and that might make the whole family move.

If you can get him to do that (which you can't), you'll profit more from the IRS whistleblower program anyway: http://www.irs.gov/uac/Whistleblower-Informant-Award (up to 30% of the tax owed [and collected])

You deduct DEpreciation (of the building you're renting out, not of the land nor of the building [or portion] that you're using personally).

APpreciation is the change in value of the asset over time. DEpreciation is the credit allowed for the theory that buildings don't last forever and is the financial credit you get for the"wear" on the building while in service creating a rental income stream. If @Dave Wolfe 's tax consultant isn't doing this at all, ask him for an explanation and unless it's amazing (that you have a unique situation that precludes it), fire him and get someone who knows what they're doing.

Look on line 18 of schedule E for a quick check.

Are you going to move to wherever you decide to buy the houses? If so, I'd concentrate on that one area and keep the option to do all the PM myself (you still have the option to contract that out, but if they're in 5 different markets, counting the one you live in, you don't really have that option).

I think you could even consider doing 9 and keep a single $50K contingency fund, or even 10 if you have access to very good line of credit that isn't likely to be pulled. (Take a HELOC on your primary residence as an example.)

If you self-PM, you will be buying yourself a job, but it makes for a better income story for sure.

Also, how are you going to get healthcare? That might be the biggest sticking point in your plan, by far. Make sure you have that sorted out first, IMO.

The $12.32 figure is the annual rent/sqft; the $49 figure is the sales price of the building/sqft.

It's decriminalized in a lot more than 2. I'm not a smoker, so I don't know the laws in and out, but I know that in MA, personal use is close enough to legal that it doesn't seem to be underground anymore...

To the OP, I wouldn't evict on the basis you have and I wouldn't get involved in the domestic situation.

The math is unassailable, provided you can reduce your screening evaluation to a single "fitness score". As an engineer/computer scientist, I love the idea of it, and I've loosely applied this theorem to my own dating, ending up with a spouse that I think is the best fit of anyone I ever dated. Obviously,I chose her, but then back-tested this theorem and it fit nicely.

The cons off the top of my head:

1. In most cases, your fitness function is going to be so non-predictive, and all you need is "good enough to be profitable and low-maintenance" not "the very best in the pool".

2. You're going to turn away a lot of qualified candidates, and if you have multiple properties, may develop a reputation for being arbitrary and capricious.

3. If applicants are paying $25/adult (or more) to apply and you have a-priori decided that they're in the first 37% (and therefore have zero chance of being selected), you might be running afoul of local laws. Even if you're not, you're being a dick, IMO. These are people's lives and they care where they live. It's real life for them, not a math optimization problem. Particularly to the applicant who "sets the bar" (the one in the first 1/e that scores the highest): If they applied later (or were considered later), they'd have gotten the place, but instead get a rejection letter. They are very likely to have a big "WTF?" moment.

4. The system only works if you know the approximate value of N (the number of applicants). You can guess at this, but it also changes over time as more applications trickle in.

5. If you own multiple properties, I doubt you'd be looked upon favorably in a housing discrimination court case where you dropped not only the first 37% a-priori, but also dropped all the marginal applicants until you found a winner.

6. If you want better tenants on average, I think it's easier to just set higher qualifying standards and take the first applicant that meets those standards.

I don't see a legal problem with it, but I think I see a practical problem.

I don't think it's going to help you achieve your goals. If I got such a postcard, I'd probably feel like you were rubbing my nose in my own problem and be less inclined to work with you, not more. If by some chance, I were inclined to work with you, I'd tend to smell "motivated buyer" which would hurt you slightly in negotiations.

You could approach a private/hard money lender, but you're going to pay rates that are a multiple of the conforming mortgage rates for access to the equity. You might be at 10-15% interest and several origination points.