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Originally posted by "lacedup":

The only reason I wanted to make "some" monthly money is so i can buy this car ive been wanting for years (subaru impreza wrx sti $32k).

That would be a terrible investment. Why would you throw away a full 1/3 of the money you are inheriting on an asset that will rapidly depreciate in value (or even worse if you would finance or, ugh, lease it). Get a $4K car and invest the difference.

Originally posted by "lacedup":

btw Do we have any millionaires on the board?

You need to read a book called the "Millionaire Next Door." Get it at the library and be prepared to be surprised. (The Wahsington Post even has the first chapter online:
http://www.washingtonpost.com/wp-srv/style/longterm/books/chap1/millionairenextdoor.htm )

You are at the perfect age to start doing the right thing, but it's easy to get distracted by mistaking "wants" for "needs."

Thanks for the info. It still seems to me that instead of "down payment" it should at least be "down payment + closing costs," because that is really what I am investing, but I do like the tool, and as long as I understand what it's doing, I can interpret the results.

Originally posted by "zenn":

WElcome to the boards TN-Apprentice.
How did your first deal go, care to share some details?
I'm a newbie myself, havent made my 1st yet, still learning.

I bought a single family home for $115K, put about $3K into repairs and am renting for $1000/month. I'm happy with the deal. I got it a little under market value. It was owned by the government and needed a lot of cleaning up, but not too much real work.

My goal is to hold on to it long-term. I had researched rents and thought I hit the mark, but the day I put the sign in the yard I had 8 calls within 4 hours. I guess the demand was pretty high and I probably could have gotten $1100, even though that would have been more than others were asking for comparable places. So far the tenants have been great and the cash has been coming in. I'm also hoping for some good appreciation because of the neighborhood I chose, but we'll see.

For my next deal I'm thinking of a multi-unit, because the cap rates seem better for those in the area in which I'm interested. I'm also thinking about getting more of a fixer-upper, but I'm not as sure about that yet. The down side of the multi-unit would be more tenants to deal with, and I don't always have much time, so I'd probably have to sacrifice some of proceeds to a property management company.

Originally posted by "juzamjedi":

The rate of return pages are very, very important for your analysis ...

But that is the part I am having the most trouble figuring out! How exactly is rate of return defined? Specifically, is the denominator my down payment or my total out-of-pocket expense? Same question for cash-on-cash formulas. I would assume the latter, but I'm not sure. I'm trying to make sure I understand the tool, so I'm trying to re-do all the calculations myself by hand.

I definitely do not understand the "total rate of return." I was thinking it would be:

(total investment results)/(total out-of-pocket expense)

at least for the first year, but that doesn't seem to be right. Also, for the analysis I entered, the total investment result after year 1 was $24K, and after year 2 it was $39K, but both years show a total RoR of 33%. It seems like the "total investment result" after year 2 would have had to have been $48K if the same rate of return continued for both years.

I don't have any formal background in accounting/business/math/etc., so any help anyone can give me in all of this would be great.

Also, how do you use the tool if you buy a property that needs work and its value when you start renting it out is greater than your purchase price + repair costs?

Thanks!

EDIT: OK, on the RoR 33% thing: I think my confusion arises from the "total investment result" calculation. From what I can tell, for years other than year 1, when it calculates "total investment result" by adding the "Unrealized Gains (Equity)" to the "After Tax Cash Flow" it uses the cumulative value for the first, but only the current year for the second. When it calculates the RoR it doesn't do this. Is that correct, and why wouldn't you include cumulative cash in "total investment result?" Thanks again.

Hello,
I'm a relatively novice investor in Tennessee. I've been reading the board for a while and found the advice here helpful before I did my first deal in January. I'm hoping to do my second soon. My main interest is income-producing properties.

Originally posted by "Mikey":

After that I just looked under umbrella policys and if you have enough insurance you shuld be just fine.

I have been wondering about personal umbrella vs. property in an LLC. If I own property in my own name and have a $2M umbrella, the property is safe unless I have a claim greater than $2M against me, while if it is in an LLC all of the equity of the property is at risk for any claim, right? [This is a question, I really don't know.] I understand how the LLC helps to protect my other assest, I'm just wondering about the property itself. Can an LLC like this get an umbrella-like insurance policy?