In my opinion, the more pertinent question is if it is more rational to build a business plan around what is likely to happen, (assuming you take care in choosing your PM):An honest, competent and imperfect, (Read: Human) Property Manager does their best to maximize your ROI while staying true to an ethical and moral standard that is in alignment with yours.Or should you build your business plan around the worst case scenario:A dishonest, incompetent, and imperfect, (Read: Human), Property Manager, not in alignment with your ethical and moral standard, somehow manages to fool you in the interview process and gets away with overcharging you.Both scenarios are possible.

Here’s my rational to taking the deal: I like the both of them very muchI believe they would be great tenants to have (no headaches)I can lock that unit up for several years for consistent cash flowMy rational for not taking the deal:Substantial rent reduction for the first 6 monthsOverall under market rent paymentMy question to you members is it worth taking the reduced rent reduction for the first 6 months and have overall cheaper rent per square foot in order to lock up cash flow and have, from what I believe, a great tenant? 

There are several reasons people do this: they may not have enough capital to buy the full amount, they have the capital but want to spread it across more then one loan to diversify, It may be a newer note and they want to keep their investment to value ration low (ITV), they may be building a laddered maturity and want a specific duration so they have something closing out each year. they may not be sure they want to invest in notes and want to "test drive" one without buying 10 or 20 years of payments, or they may be a newer investor or busy professional that wants to have someone more seasoned with an interest in the out years who can step in an manage things if the borrowed runs into difficulty.For example we have a note in Indiana with 6 years of payments left on it and had a friend that had money sitting in a checking account earning almost zero.  

It doesn't matter if the market is hot or if there is blood flowing in the streets or what happens next, if you let the numbers be your guide you will tend to make rational investment decisions with profitable exits.People need a place to live, even when the SHTF.

Nonetheless, our NOO/rentals are not in CA - and we don't have these water rationing issues there.Our primary residence (and I would probably also do this if and when we purchased investment properties here) is primarily grass with some native trees, shrubs and plants (near the property).To allow us to have grass without heavy fines for water we use 1) apply summer guard and 2) winterize our laws. 3) we are mandated to water only Wed and Sat (early am or late evening). 

I would hit them a small amount per year also as mentioned above as they are also usually making rational decisions about moving costs and other competing units...

Originally posted by Account ClosedIf you are living in one of the units, you will be able to leverage a high-ration, insured mortgages at 10%; you will probably even qualify for the first-time-homeowner programme and be able to put down only 5%.If you were not to be living in the building, you would most probably need a standard down payment of 20% (to use conventional financing).

It's definitely an interesting market but would be much more appealing with some rational property taxes.

# of Months from Purchase to Sale: 1.5 2.5 4.0 Costs to Buy: loan origination $ 6,700 $ 6,700 $ 6,700 appraisal $ 250 $ 250 $ 250 credit report $ - $ - $ - title insurance $ 750 $ 750 $ 750 escrow fee $ 1,000 $ 1,000 $ 1,000 recording fee $ 100 $ 100 $ 100 other ___________ $ 200 $ 200 $ 200 other ___________ $ 1,000 $ 1,000 $ 1,000 TOTAL Costs to Buy $ 10,000 $ 10,000 $ 10,000 Costs of Repairs: roof repairs, paint, misc repairs $ 8,000 $ 8,500 $ 9,000 Cabinets $ 1,500 $ 1,500 $ 1,200 Landscape $ 1,500 $ 1,500 $ 2,000 Furnanace $ 2,500 $ 3,500 $ 3,500 Air conditioner $ 2,500 $ 2,500 $ 2,500 other ___________ $ - $ - $ - TOTAL Costs of Repairs $ 16,000 $ 17,500 $ 18,200 Holding Costs: pay 'subject to' mortgage payment 1450 $ 2,175 $ 3,625 $ 5,800 taxes 45 $ 68 $ 113 $ 180 monthly pro-ration insurance 40 $ 60 $ 100 $ 160 monthly pro-ration Utilities: gas 15 $ 23 $ 38 $ 60 electricity 50 $ 75 $ 125 $ 200 water/sewer/trash 35 $ 53 $ 88 $ 140 HOA 48 $ 72 $ 120 $ 192 HOA, etc. 0 $ - $ - $ - TOTAL Holding Costs $ 2,525 $ 4,208 $ 6,732 Selling Costs: real estate brokers commission 4.0% $ 9,960 $ 9,600 $ 9,400 title/escrow fees $ 10,000 $ 10,000 $ 10,000 concessions to buyer $ - $ - other ___________ $ - $ - $ - TOTAL Selling Costs $ 19,960 $ 19,600 $ 19,400 u

Key concepts to learn here are CAP rates, Cash on Cash Return, Debt-service-coverage ration, IRR, NOI. 3.