All Forum Posts by: Jerry W.

@Jim K., first off thanks for starting this thread.  It was so good I put off my 2 hour walk that is part of my daily exercise routine.  I appreciate your insights, especially into kids who are a waste of skin.  I have helped form trusts for pretty rich folks, prosecuted lots of kids from wealthy backgrounds and from poor backgrounds.  I have even been a trustee for a fair number of trusts.  Extreme wealth in my experience rarely creates extremely competent kids, but it can.  One of the most pervasive problems I have seen in kids from wealthy families is drug and alcohol addiction.  For some they are just arrogant even when they turn up poor in later years.  I have also seen a lot of poor folks with addictions and just plain obnoxious as well.  Some kids were the opposite of their folks, some were identical to their folks.

I appreciate the mention by @Steve Vaughan about getting my insight, but when my kids were young I was frankly too busy and too ignorant to pass much wisdom on.  I barely had enough for myself.  I am pleased with how my children turned out, despite many sleepless nights of wondering if I was doing things right.  I suppose the quality of my children is a mix of picking a woman who was a great mom and luck.  Here are a few things that I think I did right.

I grew up nearly desperately poor.  I finished my last year of high school on my own living in my car sometimes.  I made my own money bought my own car and groceries.  My kids earned what they spent.  They had an old car to drive.   If they wanted a nicer one they worked and earned it.  They made payments with no help from me.

They learned by watching.  Saying the right thing is not nearly as important as them watching the right thing.  My kids never saw me do any illegal substance, or have more than 2 drinks in the same week.  I understood that everyone can make mistakes.  There was usually a lecture, if you made the same mistake twice it got ugly because you didn't learn your lesson so the penalty got ramped up.

I had standards and enforced them.  If you wanted to go hunting with dad you had to be able to gather materials, and start a fire with one match.  You could not do it, you could not go.  You had to be self sufficient.  My son once got stranded in the mountains and then an unexpected snowstorm hit.  He built a shelter, had a fire, plenty of food, extra clothing, etc.  When the storm broke and search and rescue found him he was leading his companion out in perfect shape, warm, and dry, on the trail home in a fairly bad storm.

I always told them the truth.  Both children often called me mean.  Telling my daughter that just lost a beauty contest that she had done very well in, that being a model or beauty queen was vain and more a freak chance of genetics rather than something to be proud of got me no love, but she ended up being valedictorian, and getting nearly a full ride scholarship.  Telling my son who wanted to be a professional football player that he would never be a pro football player didn't go over well either.  He was a wildland firefighter with the BLM and worked up to being the boss or assistant boss on fires with hundreds of firefighters and engines deployed.  After having his own son he finally transferred into parks and recreation so he could be home and see his son grow up.

I really struggled to get a college degree because of cost.  Several years saw me only going to college for 4 months and working the other 8 months to save up money.   I told both of my kids that they would get a 4 year degree.  It would be in anything they desired, and I would pay for it, but they would finish.  My son was required to pay his own truck payments and buy his own food.  He worked summers as a firefighter to pay for those.  When he wanted to quit I went and spent a few days with him in his dorm room explaining why it was the wrong decision.

There were a lot of fights, I am still not sure if that was smart or not.  Right was right, wrong was wrong.  MY son burnt the clutch out of the truck one night out with friends.  He paid the $800 to have it replaced out of his lawn mowing money.  At $30 per yard it took awhile to pay for.  They had their own bank account even in high school from money they earned, and they balanced it every month.  We gave each child $10K for a down payment on a house.  

My son hated the rental houses, while my daughter helped me work on them.  We never had a new vehicle until I was almost 60 years old, and I nearly had to have counseling to buy that, even though it was in my business and a 100% tax write off.

I try to say things to them and encourage them to be smart about life and money. I feel I fell short in some areas, and great in others. I am proud of how they are raising my grandchildren. Now I have enough wisdom to pass it on, and plan to spend it fully on my grandchildren. My gifts are piggy banks, and money that they earn from me gets put in a Roth IRA for them.

I will leave most of my wealth to my children, but not all.  My goal is to train my grandchildren and create generational wealth.  In the end I can only give them the chance to be amazing, I cannot force it, but I can give them a greater range of choices than I had.  I cannot put them into the dire financial condition I started in, but I can teach them my values.  After that it's up to them.

Thank you everyone who posted I really enjoyed this thread.

@Tom McGee, every mortgage I have seen since the 1970s has a due on sale clause in it.  The question is whether your lender will actually call the loan over it.  Many people say they never do, but if they can increase your interest rate 5 or 6% they might.  You could always do the  transfer, then if there is a problem just deed it back to your personal name.  My last loan was for 9.25%, so if I had my choice I would leave it in my personal name and up my insurance on it.  On a $200k loan you will pay $10K more per year in interest, or $850 more per month.  You can buy a BUNCH of insurance for that.

I personally like having an LLC, but if it would save me $850 per month on each house I own I hold them all in my personal name lol.

@Chad Price, I actually use Farm Bureau.  I use it on my long term rentals and they have a policy for my STRs as well.

One thing sure to get you extra damages is a "known hazard"  Get a few complaints about something like a slippery deck, then don't address it and see how high your damages go.  Remember that  3Million$ judgement for Hot Coffee trial against McDonalds?  That was the 3rd or 4th person severely burned and they did nothing to address it.  That judgement did eventually get reduced by a judge, but ignoring a safety complaint is a great way to go from negligence to gross negligence.

@Charles C Blessing, Welcome to BP.  Congratulations on your first deal.  A couple of questions.  How big is the house.  What improvements if any did you make to raise the nightly rate?  What is the cost for your cleaners and utilities?  My final question is that you said you are turning a profit, but with all cash that is confusing as you have no mortgage payment.  Can you give us idea of gross expenses and income?

@Devon Belt, welcome back to Wyoming.  You must be in the Gillette area.  I am over in Thermopolis WY.  Give me a shout if I can answer some questions for you.

@Randy Cleveland, welcome to BP.  Great job on grabbing this and adding it to the herd.

@Joshua Bailey, Here is my 2 cents. First what you need depends a lot on your financial circumstances. If you start off wealthy you need to start off with strong asset protection. Definitely start off with an LLC and maybe even a double system of a management company over an individual LLC owning a property worth $2ook or much more, maybe even through in a trust or 2 to make a lawsuit have to look to even find you. Most people start off buying their first property while still fairly broke. Eighty percent of their net worth is their car and house. They probably buy their first couple of houses in their own name and use conventional financing in their own name. They use their own savings for things like replacing the water heater or even a roof. They have one checking account or credit card for the business. After buying several cheaper properties they start getting more and bigger properties. They form an LLC, they increase insurance coverage, get loans through the company name, and start having a separate LLC for each $500k to or so value. Eventually the protection gets more complex and you worry as much about how much you pay in taxes as you do about where the money comes from to replace a roof.

When you were a teen you drove a 20 year old car that you had to fix every other week with a shaky battery and not great tires.  You needed a more dependable car when you worked for someone so you could get to work every day.  You needed a safer car when you got married then one with more safety features when you got kids.  It had to be newer and completely reliable.  Eventually you needed a car for you and your wife that had to be very dependable, then eventually you got really nice new cars.

It is all about where you are in the cycle. If you are barely making it you need the cheap option because getting a loan is slightly more expensive in an LLC than in your own name. You are only doing books on one or two cheap properties that are highly leveraged. After you have an established business and several properties with a lot of equity you need an LLC and will probably have reserve accounts for large maintenance issues and for taxes, you may have several LLCs and maybe even an umbrella policy. Do this in steps. Educate yourself on how to make money then about how to run the properties properly and liability protection. Eventually you might have dozens of properties and millions in equity and multiple LLCs.

The biggest problem with this tenant is actually not how they maintain the property, it's when they leave.  They will never be able to move all of this to their new address, and their damage deposit will never cover having to clean the place out.  Heaven forbid she gets a mouse or 2 in there, because suddenly you have 300 mice.  I have a hard time kicking folks out for any reason, but I let a kindly couple who hoarded food and other stuff and it took 3 weeks to haul everything out and get rid of mice.  It is hard to do because there is a mental illness issue here, but clean up or get out.  I hope things are going well for you other than this bud.  Stay warm.  It's 12 below zero here as I am typing this.

@Becca F., its ok to take a few months or even longer to catch your breath and get comfortable where you are at.  In me experience real estate is get rich slow.  I started investing in real estate in the late 70s, but didn't really push it until the late 1980s and early 90s.  Once I decided I would be an investor it would get scary at times.  I had to take awhile to get comfortable.  I am not exactly big time even now as it was a sideline to my regular career.  Initially my investing was buying my own trailer house to live in, then it became a bigger nicer trailer, then land and trailer, then house, then a second house, etc.  I think I am about 60 doors now but I actually don't know as I have not counted them in awhile.  I have an old 12 unit apartment complex that is really a series of 3 large houses.  I have a few duplexes and lots of little houses and now 5 short term rentals.  I will be adding 2 more vacation rentals this year.  I was not able to retire after a few years, instead I just kept working up and now I have a level of financial comfort I never expected.  I lost my government job that paid poorly about 5 years ago and there was virtually no stress because my finances were so strong.  If it keeps you up at night it is not the investment for you.  There were times when I pushed hard to get bigger, and there were times I just consolidated what I had.  Find your own pace.  It doesn't hurt to be a little uncomfortable, I still get that way on every purchase, but I really enjoy the hunt.  My last 2 purchases at 9.5% and 9% interest are at best losing a little money each month, but I am still in the game.  I expect to refinance them in a year or so when rates drop and hopefully they will be cash positive or at least break even.  Many of my best houses were break even but are now cash cows 15 years later.  I did use equity to expand my portfolio, but at the time I knew I could make my monthly payments from my W2 if I had to.  Now of course there is no way I could make all of those payments, but my monthly income in rental income staggers my mind from what it was back then.  I simply reinvest every single penny back into acquiring or improving properties.  I got to where I enjoyed the game.

Anyway, move at your own pace, take your time, smell the flowers, and enjoy the ride.  Best of luck.