All Forum Posts by: Bill B.

@Guy Primo

1) Somethings up with your device, you’re posting constantly. 

2) The 1% rule isn’t a rule and it rarely make sense. People with lower end housing ($50-$60k) would never make any money with the 1% rule, they use a 2% rule. people with $300k - $500k houses will never get 1% and they can still make money. 

3) I was the one that said property taxes go up when the property isn’t owner occupied. Because that’s been true everywhere I live but I don’t know it’s a fact in every state. Houses that the owner lives in are usually “homesteaded”. That means limitations on taxes and usually losing it  during a lawsuit. (Like oj’s Florida mansion). But the property I bought in MN had the property taxes go up 50% when it became my rental from $3300 - $5,000. Look at the property listing  see if in the taxes area it says “homesteaded” or something similar  

It’s just like the $100/door “rule” I make $700-$1,000/door per month but my properties are 5 x more expensive than the ones Brandon was buying when he made that rule. 

Edit: here’s google’s take on it. 

The exemptions discount property tax by "exempting" a certain amount of a home's assessed value from taxation. ... The City of Providence no longer has a homesteadexemption, but Providence has a lower property tax rate for owner-occupied dwellings, and a higher rate for non-owner-occupied homes.May 31, 2017

The exemption is up to 20 percent of assessed value in East Greenwich, Johnston and North Providence. The exemption is limited at 15 percent in East Providence, 40 percent in West Greenwich, and 10 percent in Narragansett.

@Marisa R.

Yes Marisa he should still expect some maintenance but in the condo it would mostly be water heater/ac and kitchen appliances divided by remaining useful life. But, depending on the age of the building he could also be hit with an Hoa assessment for a new roof, painting the outside or parking lot maintenance. That’s why you’re usually give 7-10 days to look over their cc&rs. To see how much money they have in reserve and what limitations you face with the property. (Rentals might not even be allowed.)

@Thomas S.

Thomas, I hope you aren’t doing any business In the United States. I GUARANTEE the IRS considers loan pay down as income and US citizens darn well better be paying income tax on it. 

If you were right it wouldn’t matter if the payment was 100% interest only and zero towards principle or 100% principle and zero interest because the principle pay-down isn’t income  

It’s pretty simple to understand really.  imagine that you could buy a million dollar property with a 5 year loan and the rent would make the payments. So in 5 years you own the property outright with zero of your own money  added. Obviously you’ve made a million dollars in 5 years. Change the price of the property or the length of the loan, it doesn’t matter, you’ve obviously made that money weather you sell or not. Heck, after 5 years take out a new million dollar loan and let the property pay it again  

Better yet  imagine you’re right  in the above example the rent it $5/mo less than the payment and I try to tell the IRS I lost $300 over the last 5 years because loan pay down doesn’t count, but now I just happen to own a million dollar property free and clear.

Lastly, if you were right. A person with a 15 year loan would have less “income” than a person with a 30 year loan.  But thats’s Obviously wrong  they have less cash flow but more income  

If you own any rental properties pull out your tax form and you’ll see you were wrong this time  but thanks for asking instead of being a jerk about it  

In regards to my business, I’ve never sold a home, or any property more valuable than a car for that matter, in my life. I’ve been a buy and holder since the 90’s. 

@Guy Primo

I try to use actual numbers, usually you can find them in the for sale listing, or zillow, or county assessor.

They are all very location dependent. Compared to las vegas your hoa expense listed is probably half, or maybe 1/4th of a vegas hoa. But the property taxes you have listed are 3 x higher and the insurance is probably double our costs.

Dont forget, if the current condo owner is living there, your property taxes could sky rocket as a non-owner occupied. Make sure you are getting a quote on a landlord insurance policy. It should be cheap as it doesnt cover any personal items inside the building. The hoa should be insuring the building from the studs out and you insure from the studs in.

@Guy Primo

The last 2 lines of your original post says $390 cash flow and a net income of $959. (The $390 cash flow plus the $569 mortgage payment being made for you.)

BUT, of that $569, you only get to keep $120, the bank gets the other $450.

So your income is $390 cash flow plus $120 loan pay down. You've overstated the income by almost 100%.

Put it this way, add another expense line that says mortgage interest: $450/mo and it should become clear.

I don’t think it’s possible for the seller to sell without paying the taxes. Otherwise what’s the point of a lien? It shouldn’t be an issue. 

@Kyle Has

Kyle, because you occupied first you get 100%. Flip it around and rent first then occupy, and you get the percent of the gain tax free. 

Too many of my elders reoccupied their rentals for 2 years at a time and then sold tax free so the irs cracked down on the rest of us. 

@Guy Primo

Guy, you’ve finally made the “not including mortgage pay down as income mistake” in reverse though people “looking over your numbers” don’t seem to have caught it. 

Usually people count the entire mortgage payment as an expense and that’s wrong, it under reports the actual income. You did the opposite, you included the entire mortgage payment as part of your income.

Your actual income would be your cashflow plus the principle portion of your mortgage payment, usually about 22% or $120/mo in your case assuming a 30% mortgage  

So your true income monthly is $510 and $6100 a year  

If you’re putting less than $50k in to the deal and the rest of your numbers are pessimistic instead of optimistic, and you haven’t missed any expenses, you’re making 12%, not great but not end fo the world  you’re going to have about $6,000/yr in depreciation so at least the income will be tax free and it shouldn’t kill you if it goes wrong  

Sounds like you are personally benefitting from the loan. Doesn’t sound good  

Ps. How much do you lose if they never make a payment and have to be evicted if they have zero in to the deal?

Tell him to take it out of your wholesaling fee. Then he can make payments on the fee. 

That and all the talk about leases not locking in tennants. I’ll give you I’m small, (13 properties), but in 20 years I’ve had zero tenants evicted and zero tenants break leases. Maybe people who want two year leases are better tenants? 

Finding tennants, especially good ones, is just a hassle and time consuming. So find decent ones and get them to stay. These are also houses instead of apartments.