All Forum Posts by: Scott Mac

Hi Raheem,

Be ready to see some "Wear and Tear" that might not have been there when they moved in.

"Wear and Tear" is different than "Tenant Damage".

A family in a house for a few years with worn carpets = wear and tear.

A family in a house for a few years with a gallon of paint spilled on the carpet is tenant damage.

Things wear out from use, expect that, it's a cost of doing business, but actual damage they should pay for.

Just my thoughts.

Good Luck!

Hi Tom,

This place even has a salad bar, and the food looks great ( I looked it up on Google).

This looks like a place I'd hang out at if I were closer.

Austin Texas is a bit far to drive though.

Good Luck!

Hi Rousner,

No permit, what if the place burns to the ground from an electrical fire. Will insurance cover it? Who will the court hold liable if someone is injured or killed in the fire? Permits and inspections exist for a reason.

The old fuse system probably has no ground wires in the walls, even if the outlets are 3 prong, and that might be what he's getting at. Extra cost to rewire the house to (safe) modern electrical standards.

GFI's in the bathroom, grounded receptacles, more circuits, etc...

Place probably needs a rewire to pass code.

I would not have this done without a permit.

Good Luck!

Hi Jesse,

I do not think there is any "Paid Professional" type who can give you advice on how to turn your properties from hungry cash lions to cash flow cows.

There are owners and owner operators (who have a business model they work) who might be able to improve these properties if they owned them, but maybe not.

I say maybe not because part of a successful business model is knowing what to avoid, and making sure the purchase is structured to lower the risk of this happening.

You have 3 properties, and possibly 3 different sets of problems with a lot of possible variable causes.

Possibly others can weigh in on this with some help for you. I hope so.

Good Luck!

@Erik Pfundstein

Hi Erik,

Without doing the math, here is the logic I would start with.

1. Pretend only you (Partner-A) and the other very active (Partner-B) were the only ones invested in the deal.
2. Figure out your split for each, cash flow and taxable income or losses. (if your taxable allocation is different than your cash flow allocation for each partner, you should have all of your CPA's look this allocation before doing it.)
3. Add the lower effort (Partner-C) to the mix and allocate from (A and B) a total percent amount that seems "Fair" for the efforts and fair for the risk/reward of his cash percentage.

If everyone is not on board with the results, at least you have a starting point, and can modify the logic as needed.

Good Luck!

Hi William,

16 years old.... To cut your own aggravation over dealing with a teen,

you might want to think about having a carrot and a road map to increase the likely hood he will follow through and that you won't have to nag him to follow through.

• The carrot, maybe something he likes, or thinks is adult-like, such an afternoon at the driving range and lunch out somewhere he chooses for the two of you.
• The road map, a (short) bulleted list of say 3 books (maybe eBooks he can read on his phone)
• A test to ensure he has read them by pretending you have not read them yet, and have him "Teach You" what was in the books before he can earn the carrots.

And if it were me I'd start with Rich Dad Poor Dad as number 1.

Good Luck!

Hi Terrell,

It always amazes me when someone makes a decision to spray paint on the interior walls of where they live.

I could never imagine myself ever doing that, but it seems to happen often in some areas.

Scott...

Hi John,

The answers to those questions might be neighborhood dependent.

Class, A, B, C and D neighborhoods will have different answers and price points.

Some tenant profiles will expect better and some will expect lower end.

Just my thoughts.

Good Luck!

Hi Derek,

Why not just call the underwriter on the phone and ask them what they want.

It might be as simple as bulleted list signed by you, or they may have a form.

Good Luck!

Hi Cameron,

For this business, no degree is probably better than any degree.

Why, because:

1. They will not teach you how to make money in this business.
2. You will spend a lot of time jumping through their hoops vs spending time on this business.
3. Unless you're free at BYU you will have student debt to pay off.

The positives to a degree you probably already know, possible job, possible social standing with some people, etc...

This business is unique.

Hire a CPA that knows this business, and you personally read the IRS rules on Deprecation, and 1031 exchanges.

Hire an attorney that knows this business to form your LLC, and read an ebook about how to run the LLC.

Make as many business friends as possible in the area you want to do business in by attending Real estate meetups. Have business cards.

Either have cash money to invest, or know friends and relatives that have cash money to invest, or partner up with a business friend who has cash to invest.

Ask a couple of your business friends after you know them for a while if they will mentor you. Not the blind leading the blind, but someone with experience doing what you want to do.

Realize that not every deal will be profitable, you may lose money and time on some, so learn to "feel" which risks are worth taking and which ones are best left alone.

and above all else understand the numbers of this business

No college will teach you this.

Good luck!