What I learned today...

57 Replies

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

DSCR = Net Operating Income / Total Debt Service

Simple example: NOI 100,000 / TDS 65,000 = 1.5%


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

Updated about 2 years ago

ARV - After Repair Value "is an estimate, based on comparable properties near the subject property, of the value of the home after it has been repaired and remodeled." - BP Glossary

Early on in researching I remember reading...

"I like single level Multi Units... Because water travels down..."  I can't remember the source but it stuck with me

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 :-)

Podcast 190 - Pat Hiban

“On Section 8, I buy where if they find out that I’ll put a Section 8 in there, they’ll be upset.”

Vertical vs Horizontal streams of income 

Benefits to "Real Estate Professional" on taxes (research eligibility)

Podcast 183 - Sarah Pritchett

"Instead of accepting No ...ask How can I do this deal..."

Podcast 125 - Michael Gerber

"Learn from a Master" "Be a Master at what you do..." "Have a Dream..." 




In looking for a farming ground...  not sure total relevance but found it interesting.

States with no income tax...

Alaska

Florida

Nevada

South Dakota

Texas

Washington

Wyoming

Limited Personal income tax states

Tennessee

New Hampshire

@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!

Helps me remember if I put it out into the world.

My wife started laughing hilariously when I ask what the tiny package from amazon was :-)

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.

@Shawn Ackerman

@Shawn Ackermanundefined

Thanks...Maybe it's safari but this always works weird for me

@Greg C. you got it man! You can add this to your "what I learned today" list LOL!  Keep on pushing man!

I'm cracking up about the mini book post!!!!

Podcast 150 With Clayton Morris

"What's your Freedom Number"  Great info here.  Something I will work on later today.

BP Podcast 152 - Ben Leybovich, Brian Burke, and Serge Shukhat

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.

Originally posted by @Greg C. :

Podcast 150 With Clayton Morris

"What's your Freedom Number"  Great info here.  Something I will work on later today.

BP Podcast 152 - Ben Leybovich, Brian Burke, and Serge Shukhat

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.

 Glad to help, Greg :)

Haha 1 hr 9 miles - that is just NUTS!

Which one are you listening to? I did #14 and #61, aside for the one you mentioned already.

@Ben Leybovich Well now I have to listen to both of them.  I'll Probably listen to #61 first as as my mind is focused on Multifamily at the moment.

BP Podcast 061: How to Succeed in Multifamily Investing – A Unique Conversation with Josh, Brandon, and Ben

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)

@Greg Cohan Following this post so do keep it going :)

I needed to laugh hard today!! That was just what I needed........I love being caught off guard with something killer funny.........

Thanks!!!

I can't stop laughing about your mini book post !!
Thank you for sharing such great info !!
Keep it up sir !!!!

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...

Tax Geek Tuesday(?): The IRS Finally Figures Out The Real Estate Professional Rules

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."

earnings-too-high-claim-passive-losses

I'm just going to note here again... I'm just learning and taking notes.  If I'm miss informed or not accurate in my info.  Feel free to let me know.

Wow, tons of info on there. Good stuff to know. Now "following" this post.

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