All Forum Posts by: Joe Splitrock

@Bruce Woodruff we got expensive sheets from Costco that were high thread count and labeled as "commercial hotel". They take forever to dry and they started pilling almost immediately. As a spare set we bought cheap ones from Walmart. They dry in a third the time and hold up great. The difference is high cotton content versus synthetics in the cheap ones. My guess is the Costco sheets are more comfortable, but we haven't had complaints about the cheap Walmart ones either. 

I do replacement cost. I am not super worried about a single property, but there is some risk of a catastrophic event in the area. We had a tornado rip through town a couple years ago. It went right through the part of town where all my rentals are located. It went right between my properties which is a miracle. Had it gone a different way, I could have been dealing with multiple destroyed properties. 

Keep in mind that for a rental property you have a landlord policy, which is different than home owners because there is much lower personal property coverage. Another option on rental properties is coverage for loss of rents. I don't have this, but my friend does. He just had a fire in his duplex and they are covering all the rent loss for 6 months. The other thing that affects rate is liability coverage limits. We have a blanket liabity policy that rides on top of all our individual policies. 

For years I have just been claiming the standard mileage deduction. We drove about 2500 miles last year and we are considering buying a vehicle this year. The vehicle is a CUV that will be under 6000 pounds and the vehicle is over $50K. What type of tax benefit can I expect? I believe there is a reduced section 179 and or bonus depreciation. We will probably use the vehicle either 75% or 100% for business. 

Another question, should I get commercial plates? 

Is this enough miles to show legitimate need? 

We are adding a car because we have a teenage driver. Using it for rentals will conflict with her needs, so we really need a vehicle.

@Ryan Cleary why do you need to provide proof you are working remote? FHA requires proof of employment, but they don't care how close to work you live. The only time this would come into play is if you were relocating for a job. You are relocating by choice.

Quote from @Account Closed:

I'm 20 years old and playing a sport in college, I currently do not have any credit history. Would I be able to get a hard money loan if I used a guarantor with a high credit score? Of course my deal would have to be solid. I know different lenders have different requirements. 

 Maybe. Lenders will look at the deal and experience/ credentials of the borrower. It sound like you have no credit history and no experience, which is a risk. I would start building credit immediately. You can get a credit card with a cosigner. I would do that ASAP and use the card (responsibly) for purchases. If you need to purchase a car, get a loan on the car (even if you have cash). You can get a short term like 36 months. A co-signer will help with any loan and may be enough by itself to secure funding. Just think about building credit. Small steps now are important, because one factor in your credit score is "Length of credit history". 

@Marquest Page depreciation is based on purchase price. That would be cash plus remaining loan balance. I assume your purchase contract and title work would have the total dollar amount on it. I doubt you actually assumed the mortgage, because that would mean it transferred to your name. You are probably just paying the mortgage and it remains in the sellers name. You will have to be careful on the interest. Normally you would get an interest paid statement at tax time, called Form 1098. I am assuming you want to claim interest expense, so make sure you have mortgage statements and checking account or cancelled check. You will want to keep both the statement and proof showing funds were paid by you. 

Was the property rented in 2021, because if it was not in service as a rental, you will not state claiming expenses until 2022. You can't claim expenses without rental income.

Quote from @Christina Hall:

Thanks! @Joe Splitrock and @Ken BooneAgree with all 

Interest rates on both properties are under 3% but the issue is most definitely cash sitting making no return vs finding a comparable return investment. I like stocks but I like real estate better. We want to keep investing in the same markets if possible, and finding a good return has been a bit of a challenge- been looking for a while. Will definitely give it more time and see what the Spring holds and hopefully we can find somewhere to park the cash and if not than paying off the 1 mortgage I think becomes more appealing :)   

You would be absolutely insane to pay off those loans. I am not trying to be rude, just trying to save you from making a big mistake. Read my last post to understand. You will have no trouble getting better than 3% return. There are stocks that pay 5% dividend or just park your money in an S&P 500 index fund. You would even be better off just saving up and paying cash for your next property. Keep those amazing loans.

Quote from @Ken Boone:

Well while money is still cheap, I would keep going if that fits within your debt/risk tolerance. That is what I am doing.   Money is going to get a lot more expensive as we move forward.

 Agree and it already has. Someone told me they were quoted 4.5% for a 30 year investment loan this week. I did two cash out refinances on investment properties last year, 30 year fixed at 2.875. The payment impact is huge:

$100,000 at 4.5% is a $507 payment

$122,300 at 2.875% is a $507 payment

That is 22.3% more purchase power at 2.875% compared to 4.5%! Anyone with loans under 4% would be crazy to pay them off right now. Rates are likely to move up even further this year. The question is what effect will this have on property values and rent rates? If demand stays strong, they could keep going up. If demand weakens, we could see days on market increase and rents slow down.

@Christina Hall given the highly inflationary environment, I would not pay off any debt. As strange as it sounds, low interest debt is an asset during times of high inflation. (You don't mention the interest rates, so I am assuming under 5%). Inflation came in at over 7% in the last year. The value of the dollar is degrading faster than interest you are paying.

Paying off the mortgage will increase cash flow, but you are buying cash flow. That means you are reducing your cash on cash return. You are better off taking that cash and investing it someplace else. That could be more short term rentals or even in the stock market. You could easily get 8% to well into double digit returns. So is it better to pay off a 4% loan and avoid 4% interest payment or invest that cash and get 8%+ return?

If the cash is just sitting in your bank account not earning interest, then maybe it is better to pay off the loan. Money needs to be working for it to multiply.

Congratulations on your success, but it looks to me you could amplify this and be doing even better. Good luck.

Quote from @Andrew Michaud:

I am comparing what I am making here in Maine to the difference in other states. I feel I am doing pretty well, but may be wrong. The difference with Maine is our properties are much less expensive which helps our mortgage. I have been averaging $275-300/door after debt services.

What are you making in your area?

Is that gross, meaning Rent-Mortgage or does that include allocations for vacancy, management, CAPEX, repairs, utilities, etc?