All Forum Posts by: John K.

I think with a rental portfolio the key is to get a few of the properties paid off 100%, and then get lines of credit against them.  Then when the good deal comes along you exercise your line of credit and the cash goes into a bank account, use the bank account as proof of funds and get write the cash offer.  As soon as you close you can start the process of financing the property to get the cash out to pay off your line of credit and repeat.  

I think it's better to just keep properties together under one LLC if you are a small operation - even though there is always risk the amount you end up spending and time spent on overhead of keeping separate books, checking accounts, etc adds up fast. Not to mention drafting an operating agreement for each LLC, etc.

@Chris Mak - When your acting as the property manager and you are the owner, you just never want to sign anything just as your own name. You should never just put your name on the signature line for landlord. It should always be: "ABC Property Managers LLC, by: Joe Smith - Member" - so you are basically not signing personally but signing as a member of the LLC. It makes it 100 times harder for them to get past the LLC then since the LLC is signing everything not you personally. Obviously like you said there are always ways...

for future reference, I like to use the Excel function to calculate payment amounts even over using a calculator - since you can verify all the values are correct!

Just use the PMT function

-it will ask for rate (put in ".04/12" since it is monthly)
-nper (number of payments, so "360")
-pv ("550000")

the number shows up as a negative - but its a easy way to calculate it.  

What is the key to debt with scaling in buy and hold?  I have heard that if you can get rentals paid about 50% off - banks love to keep lending since there is solid equity in the portfolio.  What key factors makes buy and hold rental property owners perfect in the eyes on the bank?  What is the perfect balance of debt to equity?

I didn't have any, had no clue what I was doing and had no problem borrowing $170k by putting $42k down (20%).  Banks love the 2 year rule when you try to scale, so it's key to get your first property as soon as possible just to get the clock ticking on your 2 years.

With flips I believe it's not capital gains tax… But just regular tax since it's more active than passive - read up on 1041 exchanges relating to deferring taxes

I just had a toilet run for about 6 hours (tenant was gone) that happened to clog, came home to water dripping in the garage which is directly under the bathroom.  We started drying out the area right away.  

I'm not sure the damage is more than the $1000 deductible on insurance policy would be, so I'm hesitant to call since from what I've read even talking about a claim can raise your insurance rates at renewal.  

Do folks typically just fix small things like this and save insurance for the bigger ticket items - or just file claims on any damage repairs?  Any insight would be helpful!  Thanks.

Don't talk to her! Just do everything in writing and let a lawyer handle getting her out!

You probably want to find an accountant, especially if your not familiar. For taxes take your federal tax rate (so say 25%) + 12% self employment and then state tax rate ( say 6%), so about 43% is rough idea for a average person. Plus a penalty if you didn't pay estimated taxes by Jan 15th.

Taxes are one of the best parts of rental property, your book "net income" has minimal relation to your true cash flow due to depreciation. It's a twisted 3-d puzzle of numbers, you can lose money on paper but have a always growing pile of cash in the bank.