All Forum Posts by: Jim Cummings

@Jonathan Boustania. I'm in College Station about an hour from The Woodlands. Almost all the major markets in Texas are HOT - HOT - HOT. And yes this will include The Woodlands, Conroe & Spring. 

The key dynamic to success in  rental investments is CASH FLOW unless you are willing to Speculate on just Appreciation (Betting on Appreciation read another way is Gambling). That's OK - if you are financially equipped to carry the mortgage.

Obviously, you know your relatives better than I do - but I would caution you to be judicious with renting to relatives. Screen them just as you would another Tenant. I know from personal experience the adage about how do you spell loan to a relative. It's spelled G-I-F-T!  

I can recommend an excellent agent in The Woodlands area - if that would be useful!

Good luck!

@Elijah Householder. What's the spread between what the 23 Year Tenant is paying and what is "Market Rate" for the unit? 

If you only really plan to live there one year and then rent it to someone else, I would investigate if I could raise the rent over time while doing minimal upgrades from time to time, and keep the current tenant. 

Run the numbers on what the difference between current rent and "Market Rent". Factor in 2-3 months Vacancy if you plan to rehab and then rent. If current rent is $900, and you want to raise the rent $100 to $1000 per month, for example, it will take you 9+ Months to recover the one month vacancy PLUS additional time to recover the cost of rehab. The point is Vacancy eats up lots of money and it takes a while to recoup and get back on the positive side. 

@Nathan Gesner. Thanks for the CDC Form. 

@Sakib J. If you are working with an Attorney, they will know how to file for a Lien against the tenant. Pretty simple process and not expensive to do, but As I said earlier DO NOT have any expectations of collecting on the Judgement. 

Probably the only way to collect anything on the Judgement is if tenant wants to establish credit on something and lender will require them to satisfy the judgement as a condition of getting the credit.

@Nathan Gesner. Would you post a link to the CDC form you referenced? 

I have a sticky post in the landlord forum that includes the CDC form. Look at it and you'll see that even the CDC states Tenants must meet certain requirements to be considered exempt from eviction. If they are not communicating, they clearly are not in compliance.

Thanks.

JIM

@Sakib J. Good luck on this one. After tenants are out, you can get a judgement lien against the tenants for unpaid rent. But expect to have little or NO success collecting on it!

@Tim V.. Perseverance pays off in the long term. 

Good On Ya!

Dave

Appreciate your input. I thought it would be just a "Pro-Rata" Share of the original 1031 proceeds, just needed confirmation from a 1031 Practioner.  

@David Schmiediche. My simple math brain says if the rent is $650 / Month and I raise the rent by $100 per month and I have one month of Vacancy, it will take me 6.5 Months to get back to even. Then when I add the cost of fixup and turnover ($2,000 - $3,000). That is another 20-30 months to recoup and recover.  So, I could be looking at 36 Months to get back on the positive side of a $100 Month rent Increase. 

Also, from tenant standpoint a $100 Month from $650 to $750 / Month is a 15% increase. If I'm a $650 month Tenant, I may not be able to afford a $15% Increase.  

My personal philosophy is to evaluate the market and tenants and decide what I think they could / would pay without creating a vacancy. You can survey the market to determine IF there are any places your $650 / Month Tenant could find that would rent for less than $700. If not you could probably feel safe raising to $700 or raising to $675 now with an announced intention (included in lease) to go to $700 in 6-8 Months. 

Good luck!  

A Question On 1031 Exchanges for the 1031 Experts on the Forum.

BACKGROUND:

Sold Investment property in 2016 netting around $225,000. Money deposited with 1031 Exchanger. Bought 2 properties with 1031 proceeds. Paid minimum DP 25% plus Closing Costs (approximately $65,000) for property 1., and used the balance (approximately $160,000) for property 2.  

CURRENT SITUATION:

Have an opportunity to sell property 1 to current tenants. Would GROSS about $90,000 from Sale. Net of about $25,000 over and above the $65,000 of 1031 Money invested.

Intentions are to roll the money over into another 1031 Investment. However, in today's superheated market don't want to HAVE to buy something that doesn't work very well just to avoid taxes. 

QUESTIONS: 

What are the ramifications if I don't reinvest the proceeds into another 1031 Investment?

1. Am I subject to Capital Gains Taxes on the approximately $90,000 of gross profit from the sale of property 1?

OR 

2. Am I subject to paying Capital gains Taxes on all the proceeds from the original 1031 (approx $225,000) PLUS the additional $25,000 gain on property 1, for a total of about $250,000?

3. Any other insights / action I should take in lieu of the above?

Appreciate your insight.