All Forum Posts by: Stephen Masek

When was it built?

What is nearby (especially filling stations and dry cleaners)?

How does the Phase I Environmental Site Assessment look?

When was it built? Does the Rehab. estimate include dealing with lead and asbestos? If not, watch out for big change orders, or problems with regulatory and tenant lawsuit liability. You may be able to get a lower price by having agood local consultant perform an asbestos & lead survey, then use the findings in your negotiations.

Yes, that could be fun and useful. We should probably all tell where we are located to try to find a spot which works best. I'm in Mission Viejo, but all over the area for business.

With loans, you have all of the regulatory and lawsuit liabilities, and the lender makes money with almost no risk, especially if they have a big enough down payment. If you have the cash or near cash to pay off the loans at any time, that is one thing, but if not, you also have all of the worry over making payments. A vacancy(ies) in a house(s) owned outright is at most an inconvenience. It could be a tragedy for someone highly leveraged. Remember, that lever pries both ways.

That is good to hear.

I dropped off of Linked-In when I concluded that all I was doing was helping competitors and people in the same business elsewhere learn more about the business.

"my property" is the problem. How much equity do you have? If not 100%, you are a co-owner. If less than 50%, a minority co-owner. If very little, what is the point? An "owner" with little equity is stuck with all kinds of liability, but no benefit. As a renter, you'll not have any of the liability.

Just move out, leaving the property nice and clean.

Jon, Good job. I once decided to put a few quarters in a slot machine, and it paid off. I could tell they casino personnel were irritated, and saw that they quickly put an "out of order" tag on the machine.

How did you get 12 years? We bought both of those two examples in 2011. We got others we've owned much longer, although we sold most of what we had just before or right at the peak.

Please don't forget that the older houses in those worse neighborhoods are far more likely to contain lead-based paint and/or asbestos.

Lead-based paint usage fell way off in the 1950s as water-based paint became good. We (my environmental consulting company) have never found a resdiential building built 1960s to 1978 with more than 1% of the painted surface area covered with lead-based paint. About half have none.

Asbestos usage peaked in the 1970s, then tapered to almost nil by the end of the 1980s.

That means there is a sort of "sweet spot" in the middle 1950s to middle 1960s where you can find buildings with little asbestos and little lead (the topic of one of my magazine articles).

Highly leveraged "owners" of rental properties are functioning as rent collectors for the lender. However, unlike employee rent collectors, they are stuck with most all of the liability arising from lawsuits, laws, regulations, and natural disasters.

We've used loans in the past, but we always had the cash to pay them off anytime we wanted or needed to. We no longer want to even bother with the lenders. Yes, we could buy about three times as many properties with loans (I doubt four, when all is dsaid and done), but would then have three times the liability, three times the maintenance, and the nuisance and worry of dealing with the lender (they almost never paid the taxes & insurance on time when we were using them, etc.). When you factor in the greater maintenance, it seems that the cash flow is about the same. Therefore, it would really just be a gamble on appreciation. I live 3.5 hours from the center of the Las Vegas "strip," so if I want to gamble (I don't), I'd go there.

Jon:

Here are the actual numbers for one of two of our houses.

The first was built in 2006. It has a concrete tile roof and is finished with stucco , so the first significant maintenance item will probably be a water heater. Purchase $90,000. Replace carpet, paint, minor repairs $5,000. Total invested $95,000. Rent $995, property management $79, insurance $32.17, property tax $97.15, HOA $42. That give a 9.4% annual return before maintenance. It should need very very little maintenance for quite a few years. We prefer a better return, but this one is especially likely to appreciate.

The second one: Total invested $86,800.74. Rent $1,100, property management $88, insurance $69.33, property tax $100.75, no HOA. That give an annual return of 11.6% before maintenance. It was built in 1995 and is finished with stucco, and in wonderful condition when we bought it, so the next major expense will be a roof, and it may need a water heater somewhere during the next few years. It still generates above 10%.