All Forum Posts by: James Galla

@Meir Greenblatt

I have a home warranty that I received as part of a sale - the seller provided it in the deal. My experience is that warranties aren't really that good due to the vast amount of exclusions.

Additionally, the math may just not add up. I would take some time and calculate whether the warranty is cheaper than your separate "savings" from your rental income allocated to cover capital expenditures. My take is that capital expenditures come down the road and that means you have the benefit of cash on hand and the associated buying power with that. Whereas, with warranties, you're looking at immediate cash out of your pocket.

If you're looking for some kind of coverage with respect to rentals, you may as well look to see whether you like the idea of landlord insurance. While it's not geared to take care of your capital expenditures, it's geared to assist in tenant repairs.

@Adam G. Cameron, judgment-proof as in not having the assets to sufficiently and expeditiously cover the costs of an adverse judgment.

Let's say you've got this multimillion-dollar estate that you decide to rent to me, a high school drop out working $7.25/hr on a 40/hr work week, and I've got no prospects of advancement. Let's say I keep at my lease payments, which were tailored to be affordable at my income ability and potential. However, when my lease term nears expiration, I cause $750,000 worth of damage to your property. Assuming you don't have landlord insurance, you're sitting on a $750k claim against my $7.25/hr wage. You aren't going to be made whole given the vast amount of the claim against so little assets/worth.

More realistically, you may own a property worth $40k with a need for $10k to address tenant damages while the tenant doesn't have $10k laying around or stashed in his/her pillow. That $10k doesn't materialize out of thin air, so you'd experience difficulty in collecting.

Hope that helps!

@Adam G. Cameron

A potential downfall is your tenant destroying the place and causing you a years worth of rental income to put it back in it's original condition all while being judgment proof.

Tenants will also constantly lie to your face about pretty much anything that advances their position, so you have to do extraordinary due diligence.

I'd also prepare to be taken advantage of, assuming you allow for it. For example, if you provide free laundry, prepare for your tenant to do some laundry parties or start a laundry business out of the house.

Property managers may also not have the best treatment of the property since they understand the property would be in a lower value area, so I'd prepare for some excuses such as damage/poor screening not being their fault because the tenant pool is not good enough.

That being said, you can still make a lot of money in lower value areas.

@Kris Tidwell

Yes, there is a difference. Asking price is just a number people throw out there in the hopes that someone on the market will take. They are often generated by agents doing CMAs, comparative market analysis, which is a method to compare properties to guestimate what the fair market value is.

Fair market value is the value at which someone will buy the property within a reasonable time. Taxable value is something a bit different in that it is generally developed by what is called an AVM, or automated valuation model. That's a computer program designed to review comparable properties in the location by a variety of factors in order to determine what the value is. It isn't necessarily fair market value since the figure isn't something that is tested on the open market. Instead, it's just a measure to get close to what your fair market value is since the idea behind taxing is that you want to assess taxes against a property in proportion to it's value.

AVMs are also used in a variety of other circumstances. Most commonly, you can see the publicly available AVMs on Zillow, redfin and the other real estate sites. Lending institutions, however, pay for their own AVMs that are typically more accurate. They do that to get a value figure without paying an appraiser because it's cheaper.

Be careful when reading auditor websites. Often times they will distinguish between taxable value versus assessed value. One may be a portion of the other - in other words, you may only be taxed by a certain percent of the overall value.

In the end, they aren't totally unreliable. You ought to use them in conjunction with other publicly available metrics, including other AVMs and real estate agent CMAs.

Good luck.

@Jason Y.

Depends on the tenant. I rewrote my lease for a tenant that is a Ph.D. candidate so he/she would have a right to cure a default by non-payment by a couple days.

Normally, though, I would immediately go through the process. If you're dealing with a higher class of tenant, maybe you'd give them more time.

@Ola Dantis

Sure, I agree with that, but the original poster is a chef. He's not jumping straight into higher level deals. If you're serious in real estate, I'd expect traditional institutions to place a premium on higher education and the sophistication of the person trying to facilitate the deal.

Had the original poster said something like, 'I work for a developer and want to take my career to the next level,' then I'd suggest completion of higher education. Have a bachelor's? Go get your master's or law degree.

Regular landlording doesn't require anything special. See the James Wise post above for the regular person's dilemma in higher education.

If you present a deal to someone, the last question they will ask is what your degree is.

@Mitchell Frisby welcome aboard. Always great to see more folks from Akron on here.

@Irina Belkofer: Sorry, you're wrong. ;-) Mortgage fraud is mortgage fraud. When you take over a mortgage Subject To, you are agreeing to pay that mortgage. If you fail to pay it for any reason, that is mortgage fraud, bank fraud and possibly mail fraud. Along with deceptive schemes and practices, false enrichment and in violation of the Consumer Practices Act. Call your local Attorney General and ask if that isn't so. Do not be so quick to think you understand the law. ;-)

Any reason? What? Can you explain that a bit more? So if I miss payment for a reason that isn't fraudulent, you're saying that's mortgage fraud?

so, like, here's a scenario: I am hit by a car and put into a coma.

You: mortgage fraud!

That's a hard sell. Good luck with that idea. Also, there's no reason to be condescending with your "do not be so quick to think you understand the law" comment.

Welcome aboard. Remember to consult an attorney before you jump into the mobile home park arena so you become familiar with licensure requirements and other rules. Good luck!