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All Forum Posts by: N/A N/A

N/A N/A has started 10 posts and replied 246 times.

Post: How NOT to do business in Real Estate . . .

N/A N/APosted
  • Posts 251
  • Votes 7

You might also want to make sure you have the proper occupancy/use permits for doing that kind of rental. We had some people get into trouble around here for switching SFH's to renting out rooms without doing the appropriate registering/paperwork, etcl.

Post: iPhone?

N/A N/APosted
  • Posts 251
  • Votes 7

I don't have one, but I got to see one in action yesterday. It's pretty much like a small computer and every bit as cool as it looked on the commercials. We looked at Google Maps -- awesome images on either street view or satellite. I could definitely see it being useful, but at $500 plus $99/month for service, well that's a little steep for me right now.

Originally posted by "REI":
What causes a message to remain in the outbox? I do believe I just requested that the message be sent when I finished composing it originally.

I believe it stays in the outbox until the other party has actually read it.

Post: I did it! (my first deal)

N/A N/APosted
  • Posts 251
  • Votes 7

Congratulations. That sounds like a win-win kind of deal. Here's to continued success.

Post: Buying rental property with existing tenants

N/A N/APosted
  • Posts 251
  • Votes 7

Another thing to watch out for, though it's probably not that common, is tenants paying inflated rent. I've heard of landlords getting their friends in there and officially charging them an above-market rent to make the property sell at a higher price. Once that tenant moves out, though, there's no way to get that same rent. This would happen more with SFR than multiunits, but I've even seen this happen on commercial deals (where a business will be selling its own building to lease-back and agrees to pay rent well above market, duping the buyer into paying well above market price).

Post: In DESPERATE search of advice!

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  • Posts 251
  • Votes 7

Well, FMV means "fair market value." Why not clean it up and try to sell it to someone who wants to live there (i.e., not an investor)? Assuming you know the true FMV (i.e, FMV doesn't mean what you wish it were worth or what it may have been worth at some point in the past), you should be able to get that or just slightly under that by listing it with a real estate agent who will properly market it.

Post: Lease to buy

N/A N/APosted
  • Posts 251
  • Votes 7
Originally posted by "all cash":
I've completed a "fee simple" sale so I'm not going to run afoul of state laws on L/O,

Could you elaborate on exactly what you mean -- specifically what do you mean by "fee simple" sale and what state laws do people run afoul of in these types of deals?

And "S&P" is not a money market account. I'm talking about investing in mutual funds that invest according to the S&P 500 index. These are usually trivially easy to invest in, some will have a minimum investment but will waive it if you set up for automatic monthly investments. Vanguard, Fidelity, etc. I'm sure all have them. Fees are typically charged as a percentage, but with index funds the fees should be trivially low (fraction of a percent).

Rehab's point should be taken well to heart. These funds go up and down (ulike your money market which has probably always gone up). Most investors feel these stock funds pay off a lot better in the long run and thus are worth the risk, but a year from now you could be looking at a negative return and be cursing the day you left your secure 5% return.

Also, many mutual fund investors feel that diversity is important, and while a mutual fund itself is a form of diversity, a typical plan would be to pick several funds that target different types of companies, not just a single fund that only targets the S&P 500 mix.

Try out the "Property Analysis Tool" in the left column under "Interactive" here at Biggerpockets. It will help you play around with numbers so you can get a feel for how different assumptions affect your bottom line.

A couple of things jump right out at me when I look at what you posted.

(1) I would always factor in at least 5% if not 10% for vacancy (here they did a lot less, but sellers always try to convince you that vacancy is lower than it really is, and there's just a physical amount of time it takes to turn over a unit, even in a place that is easy to fill). So I would up that value to about twice what they listed.

(2) The expenses total must assume that you go are getting one of those great places that never needs repairs and requires no maintenance. These are great if you can find them, but unless you are buying in Fantasyland you better factor in about 10% for each. Some people here advocate a 50% rule (that is, assume all expenses total 50% of income). The theory is that you can never predict exactly what many of the expenses will be, and that 50% comes closer than any number you could come up with on your own. If you use the property analysis tool, though, you'll have to put in your own estimates.

(3) Even if you ignore 1 & 2 above and assume the listed values are correct, this deal would be terrible at a 3% cap rate. The cap rate is the return you would get if you made a cash purchase (i.e., it is the return not counting your financing expenses - in this case the net operating income divided by the purchase price). It can be a useful way to compare a real estate investment to a non-real estate investment. Think about what a 3% cap rate means. I'll assume you would need a loan to pay for this place. What interest rate will you be able to get, maybe 7%? That means you'd be borrowing money at 7% for a return of 3%. That's a quick way to go broke. Even if you paid cash, as your friend pointed out, you can do a lot better than 3%. Whenever I think about how to invest money, I don't compare to a money market, I compare to an S&P index fund, which will average 12% return with zero time or effort on my part, and relatively little risk over the long haul. With real estate, where I have to also invest time and effort, and potentially take on more risk (though that's debatable), I want to see a much better return.

But all this talk is nothing compared to how much you learn by playing with the property analysis tool. Try it out, make some assumptions, and see what you get for different types of properties. What you are looking for will partially depend upon your goals (immediate cash flow, long term asset build-up, some balance of the two, high maintenance for better returns vs. less work for less return, etc.).

If I understand your post it sounds like you had a full year lease (at least) and now you've moved to month-to-month, is that correct? If so, I'd check the lease. It probably states the conditions under which the month-to-month part can be terminated, usually it's 30 days notice. If they've given you the proper notice and it really is a month-to-month situation there's probably little you can do (that's the whole point of month-to-month leases, allowing either party to terminate it without cause). If you really want to stay, your best bet would be to find out why they want you out. If it's a situation of them needing more money or security, maybe you could offer to pay higher rent or offer to sign a new full-year lease. But you never know the reason; I'm having tenants move out of a house of mine because I plan to clean it up and sell it -- there's really nothing they could do to convince me to let them stay. I waited until the lease was up, but now I want to sell.