All Forum Posts by: Ali Boone

I may have totally missed this one, but is this for your personal property or an investment property? If it's your house, pay it off as soon as possible. If it's an investment property and rented out and the tenants' payment is covering the expenses, just let it ride for the 30 years.

Agreed on not needing a business plan. Why would you? You aren't starting a company in the normal sense of the word, you would just have a corporation that holds entities.

If your father wants to keep all the properties in his name, how would you put them in an LLC? They would then be in the LLC's name. Plus, if there are mortgages on them, quit claiming them into the LLC could trigger the due on sale clause meaning you'd owe the full balances on them immediately.

If you are just worried about asset protection, just get an umbrella insurance policy that covers all of them. It's super cheap and gives the same protection.

I'm not an accountant, so you should always double-check with one, but yes you can deduct those. They are general 'business' expenses. I have deducted similar costs from properties I didn't end up purchasing.

Nick, it sounds like you really love this place and are excited about it. Just for that, I'd say it's worth pursuing. And by pursue, I only mean keep researching, running the numbers, getting the inspection, etc.

My only couple cautions are 1. raising rents often make you lose tenants, so you could lose your 3-5 year folks pretty easy, and 2. never bank on raising rents. Calculate the numbers only based off what you are getting today or are going to realistically get. Then if rents do raise later, it's just a bonus.

For this property and general properties, I don't know that I buy the 50% or 1.5x or 2x or whatever theories. There is no set or standard % or flat ratio that works for all properties. For every individual property, calculate your gross income, your expenses, and therefore your net income. If that net isn't positive by a nice margin (less of a margin in your case because you are benefiting by living there), then ditch it.

If you ever want to run actual numbers by me, feel free to send them over! You phrased it all a little vague. I couldn't tell what expenses were included and what weren't, etc.

John, I already like you just because you are truly interested in knowing what investors would like in a PM! Finding a PM is so hard, and I don't blame @SuzieB for not ending up choosing one.

The big things I look for in a PM are:

- EASY communication. You'd be surprised at how many PMs won't even answer their phones, and when/if they do, it's someone who doesn't know the answers and will have to 'get back to me' and never does. Nothing is more frustrating!
- If something goes wrong, give me the heads up. Again, you'd be surprised.
- I hate all the PM software out there. I've yet to have ever had an invoice I could understand from those things. Plus, they often don't accurately reflect any last-minute changes to anything (assuming I got anyone on the phone to make a change in the first place). I prefer old school invoices from Word or Excel.
- I want to be able to call my manager and get him/her directly on the phone. None of this company nonsense.
- I want to know if the toilet floaty ball is out of adjustment that the PM will wiggle it a little before calling a contractor.
- My favorite PM charges a little more for this, but he does monthly inspections on the property, inside and out, and the first 90 minutes of any maintenance is free labor. Also, when he gets parts, he gets them at great prices and never overcharges.
- No nickel and diming.

I think I could go on. I've had horrible property managers! The big thing for me is I want the feel of just an individual guy as my manager. Not a company. Those are hard to find, but they are out there.

A few thoughts for you:

Sell/Rent:
I was in a similar situation a few years ago when I took a job transfer to CA from Atlanta where I owned my house. I had the choice of selling or renting it out (both would be covered by my company, so money was no factor). At the time, housing values had completely crashed so I decided quickly to rent it simply because I would lose my (you know what) on it if I sold it. I currently am just under breakeven on it, so technically I'm negative on the cash flow but it still beats selling.

The big thing is if you aren't going to be positive on the cash flow from it, you want to get rid of it if possible. But, if you won't be able to sell it for a good price, then it is better to keep it until you can.

If it is currently under a 15 year mortgage, you may be able to refi under a 30 year which will decrease your monthly payment so more cash flow in your pocket each month. Might make you positive with the cash flow then?

Company:
You can change the mortgage over to your company's name, but you do risk triggering the due-on-sale clause which would force you to have to pay it off in full. It doesn't usually happen, but it can. I have avoided changing mine over simply for that reason. If you are concerned about asset protection, you can get an umbrella insurance policy. Very cheap, same coverage as an LLC owning the house.

Other than those thoughts, everyone else is right about not having to notify the lender but definitely notify your insurance.

Welcome, welcome!

Hey Ryan, not sure if I can be of help but I work with a lot of turnkey duplexes in Chicago that have huge cash flow. Not sure why the difference between those and the 'more' multi-unit, but I can show you a couple so you can compare if you want.

Hey Dawn, for what it's worth, I have always borrowed against my 401K (or whatever account) so I avoid early withdrawal penalties. The best is if you have a self-directed that you can use to invest in real estate, but if you don't, like I didn't initially, you can take a loan against it. The nice thing is all the interest you pay, you pay directly back to your own account. So like if you bought a rental property with the money, the interest would cut into the amount you pocket each month in cash flow, but that money is just being paid back into your retirement account, so you actually aren't losing any money.

I just watched a webinar about a Nicaraguan development I work with where they had a segment with an IRA/401K expert on it talking about the options for investing with those funds. If you are interested in checking that out, let me know.

Ali

Good plan! Just remember- one step at a time. One by one will get you to your goals. Slowly, but eventually. Stay with medicine to help fund it all!