All Forum Posts by: Greg Scott

I would recommend any FDIC insured account. I heard about a small management company that invested funds in Bitcoin. When Bitcoin hit a dip, they didn't have enough cash and it took down the business.

In a dispute, a judge may want to see you have properly managed the security deposit.  Some people like to have a separate bank account for holding security deposits.  If you have several properties, it becomes a lot of work if you one bank account for each tenant, so most people just switch to tracking the amounts through an accounting package but still holding all the security deposits in one separate account.

On our apartments, we have all those funds in the operating accounts and keep careful track of each resident's deposit in our accounting package.

There are lots of options.  Some are better than others, and some depend on your personal situation.

You can always roll your old 401(k) into an IRA without penalty in what is called a trust to trust transfer. If you choose, you could roll it into a Self-Directed IRA and could use that to invest in real estate with it. That said, investing through a Self-Directed IRA opens you up to UBIT tax. CPA Tom Wheelwright in his book Tax Free Wealth shows why it can be a really bad idea to invest in real estate through a Self-Directed IRA.

In many states, if you are married, you can have a lawyer draw up a QDRO and transfer any portion your 401(k) to your spouse, after which it can be withdrawn and avoid the 10% penalty.  You don't even need to quit your job.  You will, however, still pay ordinary income.

If your next job qualifies you as real estate professional status (REPS), the depreciation benefits are amazing. It may be worth simply withdrawing the money.  If you are smart and strategic on the timing, your depreciation may offset some of all of the ordinary income tax.

While there are special requirements to do this, and many people won't qualify, you can also set up a solo 401(k) funded by rolling over your existing 401(k) and avoid the UBIT taxes.

As you can see, there are a lot of options.  Ironically, avoiding the 10% penalty and ordinary income taxes may not be the best strategy depending on your personal situation.

I've done very well being a contrarian investor.  I"m also from Metro Detroit.  

Real estate in the city of Detroit started to go down in the 60s.  Was that a good time to buy?  How about the 70s?  80s? 90s?  Arguably, you did OK if you bought in the 2000s after 4 decades of things going the wrong way.

Being down is not buy signal.  Ask all those buggy whip manufacturers from 150 years ago.

On the other hand, if population is growing and jobs are growing, eventually things have to turn.  You did not mention those metrics in your post.  If the fundamentals of NOLA are strong but the sentiment is bad, THAT is a buy signal.

If you re interested in buying, just get another appraisal.

The owner may have asked the appraiser to make some assumptions that drove value higher, and if a bank had ordered the appraisal, they would have gotten a different answer.

If a non-biased appraisal is truly 5-10% lower, you can counter at that price.  If he puts it on the market, you can buy it at the 5-10% lower price and he gets to eat the cost of the broker.  It would be worth his while to negotiate with you.

Yes, you need to change policies.  A landlord policy does not cover personal content.  Ask your broker about a DP3 policy which usually has all the right stuff.  Be sure you have your tenants buy renters insurance.  Not only does this protect their property, it also provides you some protection if they caused a loss.

Be careful when renting your personal residence. If you sold it instead of renting it you could avoid all or much of the capital gains tax.  If you rent it out for a few years, you lose that tax benefit.

Be careful with your leases.  You will want a rent-by-the-room lease so you can evict any non-payers without destroying your daughter's credit.

There are lots of ways to attract potential tenants.  Given your daughter is living there, you may want to find someone you know.

You are buying a turn-key rental which is why the returns look terrible. The house is nicely rehabbed and you are paying full-price because you are competing with owner-occupants.

In contrast, look at a house like this one.  It is ugly, and priced low at $150K.  Similar sized homes in that area sell in the 250K to $300K range after they are fixed up.  That is a gap of $100K to $150K from ugly to beautiful house.  If you can rehab the house for less than that, say $50K, you will capture equity doing the rehab and almost certainly have great cashflow.

Yes.  It happens.

Have them fill out an application.  With luck, you can capture their real name and contact information so your debt collectors will have an easier time finding them and collecting the money they owe you.

I disagree with the advice you were given.  The fact that the person who said this was trying to build up cash, shows they are either a rookie or a risk-taker.  You should never go into a deal so thinly capitalized that the timing of the closing is important.  If you are appropriately capitalized, this reasoning is meaningless.  Also, when I've bought or refinanced, typically the first payment doesn't kick in until the following month, which again, brings this advice into question.

Here is the main reasons I would not want to close on the first.  Who is actually collecting the rent?  Many of our residents are on auto-pay.  About 30% pay their rent early.  Sometimes closing dates shift, so the seller is going to be prepared to collect rent.  I would suspect that over half of the rent is going to be collected by the previous owner and you'll have to pro-rate it out later.  Often times the prorations are not completed until 60 or 90 days after closing, so once again, that shoots down the advice you were given.

I actually prefer to close near the end of the month, with a few days to spare before the 1st, something like the 25th.  If the closing looks like a high probability, we will ask the seller to shut off their autopay system on about the 20th of the month.  After closing, we communicate to all the residents of the change and give them new payment instructions.  This is much cleaner.

I have received three colleague requests in the past week, which is a little more than normal. All have been asking for advice, but they did not have a program they were selling.  They simply seemed to be newbies looking for help. 

Part of the problem out there may be that the databases suck. Just today I got two phone calls for an LLC that we closed in 2017. That LLC owned exactly one SF property in Garland, TX.

What crappy database out there is suggesting that a defunct LLC still owns a property sold 8 years ago!