All Forum Posts by: Bill B.

1) are you paying down more than $400, if so you are making money, but if you put down a large downpayment you’re not getting a good return m

2) do an amortization table at 30 years. If that covers the $400 I think you’r ahead. It’s like you bought the properties with a 30 year loan and are putting the rest in to a savings account. I assume you got a better interest rate, and I know you are saving a boatload of interest. 

3) imagine year 11-30 where you are cash flowing thousands with paid off properties instead of hundreds because of these lean 10 years. 

4) hopefully you can raise rents at least $100 each every year and in 2 years your cash flow neutral even with preferred short term mortgage. 

Don’t forget. You’d also make all future capital gains at least partially taxable instead of tax exempt by converting your primary to a rental. Even if it is for just 2 years. This could easily cost you $10’s of thousands if you plan to stay in the home 5+ years when you return. 

What are you hoping to get out of the extra time, work and costs of having the LLC? I don't know when an LLC starts to pay off if you don't have any partners. But with only a dozen properties in only 2 states I've definitely not found a use for one yet. This is literally asked monthly if not weekly. You can click on the magnifying glass in the upper corner I will repeat as I do every time. With thousands of members owning 10's of this quads of properties. Not one member has ever said an LLC saved them when a standard insurance policy. Maybe with an umbrella policy, if they are well off, wouldn't have.

You’ll pay more for tax prep, more for record keeping, more for financing but what will you get? It won’t be privacy, it won’t be asset protection. I understand if you’re going in with a partner and you don’t trust them enough to use TICs and insurance, but as a solo investor why?

Are you going to pay the corporate tax in California? Are you going to keep the separate bank account, keep corporate minutes? Pay for an out of state entity representative? Pay for insurance as a corporation? Great. You’re still going to be personally sued when something goes wrong. 

You have no more at risk than you do in your own home (where you probably have more equity.) or your own car (where you probably have more risk.) and we won’t talk about if you have a pool or a dog. 

Just get started, don’t let this stop you. 

Your best/safest bet would be a regular lease combined with an option to purchase. You’re not going to find a safe way to do what you want unless you or the “buyer” has enough cash to pay off the note. 

Ps. I would never do it for any “buyer” putting down less than 25%. Don't forget, you’re going to be out 10%+ in closing costs so you’ll walk with zero cash and pin your hopes on them paying you 20-30 years from now if that’s all they put down. You have to be ready to make 3-6 months of payments on the mortgage yourself after they stop while you try to foreclose/evict them. Don’t forget to include the cost of the loan servicer. 

Why give up a couple percent? Have them pay a week or two before they arrive when they are past your cancellation period. And then monthly by check or if you don’t trust them certified funds or EFT. 

I love being on the other side charging everything possible on a credit card but there’s no reason to accept them. Heck, you process debit cards if you insist for 1/10th the cost and non-reversible. 

You could try filing a case/judgement against them but I’m guessing they ar leaving the area to screw over the next MTR landlord. Did you you furnished finder or someone like them? Do they offer to help you collect or file a claim against them? I guess be happy it’s only a couple months and a cheap lesson learned?

It’s kind of like asking what’s the worst part about not being a real estate investor?

Having to go to work when you don’t want to?’

Worrying everyday about getting fired for something out of your control?

Honestly 350 days a year I don’t even think about it. 12 days a year I wonder if everyone paid and if not will they pay, for about 30 minutes. And 3 days a year I spend about 30 minutes pondering a repair, rent increase or turnover choice. 

OTH. At least weekly I think about the the fact that someone else is going to work to give me 1/3rd of their money. Or paying off my debt, while I provide them with a nice house to live in instead of an apartment. 

Then there’s this glorious tax season where you realize how many things you get to deduct that others can’t, while sheltering your income with depreciation, and earning tax free income with appreciation. I truly feel bad for people who have to work instead of investing in real estate, especially those with kids. That’s why I try so hard to explain to people I meet every day the benefits. Along with the benefits of time with family and helping others. 

There’s almost always a rate at which it just doesn’t make sense. You’re paying too much for each 1/4 point discount. Plus. Imagine interest rates drop 2% or more in 2 years. Pretty much all the points you paid were wasted. 

Find the rate the lenders want to lend. It will be the “best deal”. Consider a 15 year loan. You might save a full percent just doing that and you have tons of money you didn’t pay in points. Or sometimes a bigger downpayment gives you a better rate. Rather than just spending the money on a rate buy down. 

Reach out to a loan broker with your exact info and the exact or at least type of property you want to buy and they should have options and opinions. 

So the property owner can never sell? At least never to the highest payer. (An owner occupant.) And probably not to an investor. Would you buy a property where you have to give half the profits away for life? it seems like a bad deal for the rights buyer but maybe it’s even worse for the seller? Do all the work to keep half the profits and crush the resale value?

I’m not saying someone won’t get tricked in to either side of the bad deal. I’m just saying it looks like a really bad deal. You’re going to make the deal based on today’s interest rates and today’s returns. If interest rates go down the seller gets hosed for life. If they go up the buyer get hosed. Basically an annuity with 1mor both parties being amateurs. I assume you’re going to have to target just accredited investors as the judge would make you give anyone else their money back. You’re probably selling securities so I’d check the SEC, etc etc. 

You say you “came across this idea” but it sure sounds more like you want to sell people on the idea. I’m just saying get your lawyers lined up and signed off first. I assume there’s zero chance you want to be the buyer of thsi deal. Or are you thinking you’ll be the middle man taking a piece of every deal and making it worse? Again. Go ahead and run with it. Especially if you have good lawyers on retainer or you’re starting with nothing and really don’t have anything to lose in the case of a judgement. 

It sounds horrible. If I sell off 100% of the income rights what’s my incentive to keep it profitable? Heck, maybe I’ll give the property manager (me) a 100% raise and an all expenses paid vacation 6 times a year. Maybe the manager should have a company Tesla. If the income goes negative do I  ask you to send me money?

It sounds a lot like timeshares or partial ownership plans room the 1990’s and 2000’s. Great for the seller, really bad for the buyer. 

As long as it stays optional to the tenant I don’t have a problem with it. They’ll only get it if they see value in it.