Real Estate Investor · Lake Balboa, CA · Member since 2016 · 75 posts · 31 votes
As I'm researching and reading and google searching and listening... I'm learning.
I just wanted to use this space to note things I learn as I learn them. I have absorb so much in the past month. Not looking for a lot of commentary but maybe you learned something useful today also..
(DSCR) - "Typically, most commercial banks require the ratio of 1.15–1.35 times (net operating income or NOI / annual debt service) to ensure cash flow sufficient to cover loan payments is available on an ongoing basis." Wikipedia
Real Estate Investor · Lake Balboa, CA · Member since 2016 · 75 posts · 31 votes
9y
Going to just keep adding notes I have already taken...
CapEx - "Capital Expenditures are those expensive “big ticket” items that need to be replaced every so often, but not every month or year. This could include roofs, appliances, driveways, plumbing systems, or any other large item you should budget for but that do not occur enough to be easily accounted for.” Brandon Turner BP
Cap Rate - The capitalization rate is the ratio of Net Operating Income (NOI) to property asset value. So, for example, if a property was listed for $1,000,000 and generated an NOI of $100,000, then the cap rate would be $100,000/$1,000,000, or 10%.
PITI - "Monthly Payment of Principal, Interest, Taxes and Insurance.” Wikipedia
GRM - Gross Rent Multiplayer - "number of years the property would take to pay for itself in gross received rent. For the investor looking to purchase, a higher GRM (perhaps over 12) is a poorer opportunity, whereas a lower one (perhaps under 8) is better." Wikipedia
Example; $200,000 Sale Price / $20,000 gross annual rental income = 10
Real Estate Investor · Lake Balboa, CA · Member since 2016 · 75 posts · 31 votes
9y
Life lesson learned this weekend... When ordering books on Amazon... read the description... Apparently there are mini versions... Here I am reading my brand spanking new Hard Cover copy of Rich Dad Poor Dad :-)
Real Estate Entrepreneur · Mid West, East Coast · Member since 2015 · 3k+ posts · 1k+ votes
9y
@Greg C. the post about the mini book is hilarious. I'd pay to see you deliver that on stage LOL!!! This is a great idea man. Keep on adding. I learned something new today from your post. Not in to commercial a great deal but was happy to learn about the GRM! Thanks man. Keep it up!
Real Estate Entrepreneur · Mid West, East Coast · Member since 2015 · 3k+ posts · 1k+ votes
9y
That post was funny man! Also @Greg C. always remember to @ someone when responding. When you use the @ symbol it alerts someone to go back and check the post. This keeps you in contact with other BP'ers. Keep it up man and I'll check back periodically to learn and grow with you.
So much great info in this Podcast from 3 very different perspectives. Worth re-listening to.
Notably for me the idea of slapping "Lipstick on a ($30,000 SFH) Pig" really only yields you a $30,000 Pig and that even though you may have meet a 50% rule or 2% standard the long term costs of CapEx may far out way the cashflow. Think Fixed Cost for say... a roof. Also re-enforcing the idea that a "good" deal isn't speculative and relies on the value of the deal and the Value Add play.
So much great info in this Podcast from 3 very different perspectives. Worth re-listening to.
Notably for me the idea of slapping "Lipstick on a ($30,000 SFH) Pig" really only yields you a $30,000 Pig and that even though you may have meet a 50% rule or 2% standard the long term costs of CapEx may far out way the cashflow. Think Fixed Cost for say... a roof. Also re-enforcing the idea that a "good" deal isn't speculative and relies on the value of the deal and the Value Add play.
Real Estate Investor · Lake Balboa, CA · Member since 2016 · 75 posts · 31 votes
9y
@Ben Leybovich Thanks Ben. I appreciated your point of view. I'm going to listen to your other pod cast on the commute home tonight. One good thing about a 1 hour, each way, 9 mile commute in LA is I can get in 2 Pod Casts a day.
Should be noted that when I searched your name #61 doesn't show up in the Podcast section.
Yes Los Angeles traffic. One of the great pleasures of living here. Also the spectacular real estate deals for folks interest in Buy and Hold. (that may be sarcasm)
Real Estate Investor · Lake Balboa, CA · Member since 2016 · 75 posts · 31 votes
9y
Here is a good link explaining the rules to claiming as a "Real Estate Professional" on your taxes. It's dated 2014 by Tony Nitty, but I don't think the info has changed. I of course would recommend a CPA but this is for my personal info...
Some important points made here that are relevant if you are a single property investor vs a multiple property investor and how you need to do "grouping elections".
I'm taking note of the Real Estate Professional because it is a way to get around depreciation caps on personal earnings with passive income. IE if say my wife qualifies as a Real Estate Professional. $150,000 cap would not apply and passive income depreciation / losses would adjust our combined MAGI.
Bank Rate - "Taxpayers whose modified adjusted gross income, or MAGI, is less than $100,000 can claim up to $25,000 in rental losses. The $25,000 cap is reduced $1 for every $2 a taxpayer's MAGI exceeds $100,000. For example, a MAGI of $110,000 exceeds $100,000 by $10,000 so the $25,000 limit is reduced to $20,000. At $150,000, the reduction to the cap is the full $25,000, which is your situation. Any losses you can't claim are carried over to future years and allowed as a deduction against passive income, including gain on the sale of the property. If your income were to go below the thresholds, then you would also be able to claim the losses, including those carried over."