All Forum Posts by: Stephen Masek

We all know that commercial real estate often is valued and sells based on the rent it draws.  How mush do you think that applies to single family houses?  We've got a house in Memphis (rehabbed, no work needed) which is rented for $725 on a lease with 20 months to go before renewal, in a neighborhood where rents run $700 to $750.  Management, property taxes and insurance run $216, for an annual cash flow of $6,108.  If somebody is looking for a 10% return, that would mean they should be willing to pay $61,080 for the property.  However, the prices in the neighborhood include foreclosures, so are all over the board.  We are thinking $52,000 would be a good listing price.  What do you think and why?     

At best, somebody might give you a referral fee. The seller should just put it on the MLS to get the best price. If somebody can go to them before then, and do thorough due diligence (environmental, financial, building condition), they may be able to get a nice below-market price.

Yep, it struck me as crazy the first time, and every time since, that I have heard about it.  Some crooks doing seminars in Orange County claimed that the banks never call the loans, but that is obviously false.     

Many people just do not understand the freedom which comes with being debt-free.  It is also nice not to have to worry about or fiddle with making payments.  Mary, the man you mentioned is an excellent example, and I appreciate your postings on him (and your postings in general).

I discovered Dave Ramsey on the radio in 2006.  In 2007 I turned 50, and decided it was silly to have a mortgage on our residence, so paid it off.  The place is now worth $900,000 to $1,000,000.  We had sold all but two of our rental houses at or before the peak, and paid off those last two in 2010.  Yes, we used leverage to buy in the early 2000s and made some excellent money on appreciation, but we had high income and large reserves.  We have been debt-free ever since.  In 2011, we resumed buying houses, and continue doing so. We are up to 16 rental properties.  Two are for sale, and we will replace them with other rentals.   We need to see a more stable economic and political climate before we decide to use leverage, if we ever decide to do so.     

I happened to be able to hear Dave Ramsey for a while a few days ago, when a caller asked about investing in real estate vs stocks.  Dave told him that he is 70% in real estate, and that those who like real estate should invest in it.  he also pointed out that the market for single family houses is very broad, while that for duplexes, triplexes, and quadplexes is quite limited.  He stated that he owns single family houses and larger apartment buildings.  It was wonderful to hear him not just pushing stocks and ELPs.      

We're debt free. I'm almost 59 and Rima is 53, and we have a $3.3M net worth.

We paid off the house we live in 2007, and the only two rental mortgages we had in 2010.   

I understand that the lever in "leverage" pries in both directions.   Almost everything I hear and read is about the lever prying in one direction.

I have used debt to buy real estate in the past, but now seems an especially dangerous time to be in debt.  We have a government system well and truly out of control, and significant external threats.   

Joe, what happened after 911?  Do we have more or fewer terrorists in the world now? 

As for "systems and risk controls," please provide the details.  Many times I have met or read about people with "systems and risk controls," but never gotten the details.  The "system" I see most often is hoping nothing goes wrong.   Instead, please give some real world examples of things which can and do go wrong  (broken equipment, vacancy, vandalism, etc.) and what happens in each situation with 100% leverage.  Even better, provide what happens at various levels of leverage.  What happens can range from a minor inconvenience to filing Chapter 7, or worse.      

Ben, that sounds like a way to get that Lamborghini Huracan I've been eyeing ;)  However, what if something goes wrong?  Tenant Lawsuit? Major terrorist attack? 

Here is the article on debt I wrote which was published in our local newspaper:

http://www.ocregister.com/letters/debt-448435-stro...

You may also want to read Dave Ramsey's Total Money Makeover and The Millionaire Next Door. 

I also live in Mission Viejo, and run an environmental consulting corporation.  

1) There are no mold laws or regulations in California, but that does not mean owners and managers have no liability.

2)  Calling the insurance company is a terrible first move.  It may be best never to call them.  They tend to move slowly, and raised rates or cancel coverage. 

3) The best first move is calling a company such as the one I run to have a consultant investigate and make recommendations.  A good consultant has far more than a moisture meter.  We have tings such as infrared cameras, temperature and humidity meters, mold air and surface sampling equipment, and many years of experience. 

4) While mold is not regulated, asbestos and lead are very highly regulated, with potential huge fines, even time in federal prison.  Therefore it is important to hire a consultant also certified or licensed (the word they use varies state by state) for asbestos and lead consulting.

5) Quick actions is essential, so identifying consultants and remediation companies before their is a need is best.