All Forum Posts by: James Mc Ree

I had no problem opening my LLC bank account with Wells Fargo. My business didn't exist beyond paperwork then either. Try going into a branch if you can, or call again and hope to get a different associate. You might have gotten someone who didn't know what he was doing.

Screen the applicant just like you would in all other ways.  You can downplay credit history since you will have cash in hand.  I did this in PA in 2013.  They payment side was great: once and done for a year.  The tenant wasn't such a good choice though as I did screen well enough.

Check the property records to understand the expenses.  Did they do unit rehabs recently that significantly increase the value of the property, but also its expense in those years?  A rehab should reduce your operating cost and offer the opportunity at higher rent, but it probably won't show up in the bottom line numbers until year 2-3.

Same goes for replacement of major systems with a long service life.

I don't think it is correct to presume that taxpayers pay more if someone creates a new Section 8 property. HUD has a budget and they operate within it, regardless of the number of properties or tenants in the program. That is why there is a waiting list. Don't feel like you should or shouldn't utilize Section 8 based on taxpayer impact. I think of it as a way to get my own tax dollars back!

You might be able to keep your tenants by gradually increasing their rents, say $100 - $200/month per year.  That means you delay your own gratification, but you also keep your tenants.  This might work well if you can wrap it into a long term lease with them.  You may be able to avoid a vacancy which will be one of your largest costs if you raise rents and displace your tenants.

Your tenants can apply for Section 8.  If they qualify, you and your tenants can apply to turn your lease into a Section 8 subsidized lease.  Your tenants may have to wait a few years in line, but that might be your long term solution.  Also, look for grants for housing assistance to the elderly or other relevant demographics.

Ask for a copy of their tax return.

Bitcoin & other cryptos.  I read Wall Street is now getting in on the game.  We will perfectly recreate 2008 as cryptos proliferate into mainstream Wall Street investment houses.  Wall Street is starting to invest their own money in cryptos.  The next step is to increase those investments with customer accounts, leverage them, use them for collateral, then.... startling profits!  They're geniuses!!!  Pop!  Uh oh....who knew cryptos were never really backed by anything anyway?

It is just a matter of time as more cryptos proliferate to distract buyers.  We will hear the giant flushing sound when sellers overwhelm buyers because Wall Street is unloading or caught in a downdraft, possibly due to a hacker or closure of international exchanges.  I think everyone is thinking, "I will get out just before that..."  We will then discover cryptos crept into many parts of our financial system and who knew?  Lots of people, but they chose to watch the cash go into their pockets rather than do the responsible thing.

Same as with those 120% LTV mortgages with no verifiable income.

This scenario would probably occur in conjunction with the other concerns in this thread, such as stock market plunges, rising rates, etc as buyers unload riskier positions and the "smart money" wants nothing to do with them.

You need to share a lot more information to get any useful feedback.  What are the numbers?

Flood insurance will protect against losses, but hits your cash flow every year.  A 0.2% flood chance is "1 in 500 years.", but those big storms are coming around much more frequently than expected  The risk and expense should be built into your purchase price.  I wouldn't automatically disqualify the property.

Probably, if you are buying to make money.  It's fine as an expensive hobby or if you need a piggy bank that you don't expect much from.

A presumption that vacancy will be 0% is a mistake.  Everyone moves or dies sometime.  Vacancy is likely to be your largest expense.  What does your deal look like if your current tenants refuse your rent increase?  Do you plan to market your property yourself or with a broker.  Using a broker usually means paying the broker another month's rent.

Keep an eye on taxes and model increases every year.  NJ is a high tax state.  Your $150/mo cash flow can disappear by year 2 or 3 if you aren't able to raise rents to match.

You will probably gain appreciation over the long term.  Some say we are approaching a valuation peak, but no one knows the timing.  If we are near peak valuation in your location, you can expect a valuation drop in the coming 10 years, especially as interest rates rise.  Hopefully, a recovery ensues and values continue marching north.  Keep in mind though that incomes have to rise to make those valuations keep going up.  I model 1% appreciation per year to keep expectations modest.

Write a letter to your tenant that specifically cites the damage, cost to repair and section(s) of the lease Tenant violated.  Include copies of the repair receipts and ask Tenant to reimburse you the cost within 30 days.  Tenant pays you or you take the funds from the security deposit.  It is best for Tenant to pay you directly so you don't lose security in the deposit.

FHA loan for 1 year while you fix the place up. Use the year to learn more about real estate and plan your next acquisition. Sell after 1 year and you have a very nice profit from your first project. Ask the landlord if he has another!