All Forum Posts by: Victor Saumarez

For anyone interested in a deeper dive into what's wrong with the housing market, Housing Hardship: Decoding the Real Estate Crisis, available on Amazon is illuminating. It is based on over 100 research papers, reports, and articles that examine the many causes of the current crisis, and not just the obvious ones. The book is primarily aimed at the retail market and those with an academic interest in real estate, but it would also benefit investors wishing to develop a more disciplined approach to their dealings.

Thanks all for the replies. Theresa makes a a valid point about who is responsible if there was a deficit, and I agree with Erica that this would need to in writing somewhere. I do wonder though how things would play out if large sums were involved.

This is a hypothetical question. Say you sell a condo and the HOA subsequently informed you that there was a budgetary surplus on the account. They email all homeowners that the surplus is to be credited to their accounts. Since the condo was sold and you no longer therefore have an account you can't receive the credit. Would you expect the HOA to send you a check, or is the new owner under an obligation to refund you once they receive the credit? I appreciate this may depend on where the condo is located.

@Drew Sygit Thank you. The Dodd-Frank law prohibits me from lending directly to a borrower, but I can lend indirectly through a licensed broker. So, how does that pan out? Is the broker paid a commission, or a share of monthly mortgage payments? How profitable, hassle-free, successful, and widespread is the practice? Do any licensed brokers specialize in this?

@Drew Sygit No, seller finance to a buyer. I mentioned “tenant’ in error.

@Drew Sygit Not totally sure I understand. The idea for seller finance is not for the owner to occupy the property, but for the tenant to occupy it. 

“The Property Manager should never use funds from the deposit.” Sounds right to me. Thank you.

There’s plenty of info out there that suggests landlords usually pay commission to Realtors who find and process rent applications. Can anyone explain the actual process? For example, does the tenant write two check; one for the rent and security deposit, and one to the Realtors office. I’ve come across the latter, where it seems the tenant is being asked to pay the commission on behalf of the landlord, which is then deducted from the security deposit and rent. Is this normal?

@Chris Seveney That’s interesting. So, if the borrower walks away or defaults presumably the lender forecloses and takes back the property. I guess that would be fairly straight forward if title remains in the lenders name. But what if title is transferred?

Expenses are usually about 50% of gross rental so you'd be netting closer to $4,500 a month. A very crude rule of thumb is to aim for $1,000 a month rent for every $100k invested. That nets down to a healthy +5% cap rate. So you'd be looking to pay about $1m. You could use the current industry standard gross rent multiplier. You simply multiply the number by the gross rent to arrive at a value. The NAR affordability index looks at fundamental value by comparing income to price. Locations that feature low on the index will give you an idea of whether homes are over-valued, or not on a fundamental level. You could experiment with the Gordon growth model of discounted cash flows to arrive at a fair value. Substitute stock price for RE price, and dividends for annual rents for five years. Might be interesting to see what the result is. The best method is really working backwards from the required rate of return. Start with a return % you want based on what you can get from other assets that carry similar risks.