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All Forum Posts by: Ricky Stafford

Ricky Stafford has started 15 posts and replied 36 times.

Hello friends -

I recently bought a home that I lived in for a bit and am now renting. The house was purchased about 6mo ago. I was unemployed at the time as I had quit my job since my other rental income exceeded what I made by working, so I had my mom sign for the next house because I still don't have enough rental history to qualify for obtaining my own mortgage. Of course, I paid the down payment, have already significantly paid down the principle, and obviously run all the operations for the rental. 

My question is - what are the legal implications to be aware of when deducting expenses related to this property such as mortgage interested, deprecation, etc? It's operated as a vacation rental if that makes a difference.

Any thoughts would be appreciated, thanks.

If an agent sets up a search for you, or you're going through the frontend portal on the realty's website, are there any limitations through this access alone vs. having direct MLS access?

I know obviously Zillow and Trulia are sometimes dated and inaccurate, and shouldn't be relied on, but the searches on a realty's website seem to be 100% up to date. What advantage does the agent have over anyone else?

@Jay Hinrichs

Since you yourself prefer investing in low risk/high quality homes, what is your reasoning in recommending turnkey homes in markets that are generally the opposite of the ones you're a fan of? I know that sounds like an attack, and I don't mean it to be. I'm simply curious.

Originally posted by @Jay Hinrichs:

OF course this is what your going to get when you have super cheap houses with high rent ratios as we all know those are also the most risky.. the most stable markets and the safest markets are in this metric the worse markets..

A neat graph or report would be to see tenant defaults in a given market ... Occupancy rates with the given inventory etc etc.  I think you would see these graphs totally flip flopped.   For instance Portland were we are at did not make the list  we have less than a 1% vacancy and pert near 99% collection rate... what do you think that is in the top market like Detroit.. and I am talking market rents not subsidized rents which skew the reports. Since west coast markets have little to NO section 8 by and large.

Isn't the whole point of investing in real estate vs stocks being able to find inefficiencies? Otherwise why wouldn't you just put your money in some REIT fund and get a pretty guaranteed 4-5% return that increases with inflation. Stable markets are more efficient therefore there's little to no profit to be made. As for Portland, and the general West Coast, the market is out of control and cash flow is non-existent. So it's an appreciation play if anything, at least now. Sure, if you have owned your property for 10-20 years, you're in a good spot. How could could anyone possibly recommend a new investor today invest in Portland if not betting on speculation?

The list itself in the original post kind of shocked me based on what others talk about on here. It just leads you to realize that there is no best market. There are deals to be had everywhere - and everyone has a slightly different strategy. There are plenty of people making money on high rent to property prices and have successfully done it for many years. Sure, it could all implode, as with anything, but unlikely.

Originally posted by @Jassem A.:

@Ricky Stafford

Could be minor--repair the walls, spray paint the house, slap down some new floor covering and repair the siding and it might be good to go if the plumbing and electrical are working.  In any case I don't see more than 3-5k for a diy or about 10-15k to hire it out.  Could be more if it needs all new wire, plumbing, or roof or if labor is expensive there.

If you can restore that house for less than $30k hired out then it would be a miracle.

Originally posted by @Jassem A.:

You may have to travel a bit for 2% and possibly do some work to the property. Looks like you can acquire property within about 50 miles for under 13k which will rent for 600-900 potentially.

"Older 3 br 1.5 ba home in need of updates and minor repairs." LOL

Should clarify: >1%.

It's a lot harder than I though to find an actual deal. I haven't found anything yet that I'm comfortable buying. This would be my first LTR buy & hold purchase.

For the area I want to buy in, I was looking at houses that had a 0.7% rent to purchase price ratio, which was about the best I could find. When accounting for all expenses (including PITI), 20% down, I was calculating anywhere from a 6-10% return. That is definitely not using the 50% rule. With the 50% rule, I'd be negative cash flow in a heartbeat.

In some ways, I have trouble believing the 50% rule because in our own house that my dad has owned for 35 years, he literally hasn't done anything but file a few insurance claims and replace a roof and HVAC system. He replaced a water heater too but found later that it was unnecessary. The HVAC system also wasn't really necessary to be honest. No, it hasn't been updated in 35 years either but unless the place is really thoughtfully designed then most places look pretty much the same in my opinion. I understand that this is with him owning the house, but are tenants really THAT much harder on the house? I would think the higher quality tenant would be about the same. And if they do damage, there is a security deposit for a reason, not to mention most honest people are going to own up to anything they damage. 

Anyway, if we do use the 50% on even a 1% purchase price in this hypothetical situation: $1k/$100k yields a return of about ~7% (probably less) with 20% down. With as much work and headache as it takes to even acquire a property like that in today's market, 7% is pretty discouraging. I'd rather put my money in MLPs and REITs at that point. Do people fear the word "stock" so much that they're seriously willing to settle for a measly 7% return given all the work (at least initially) involved?

So, if the 50% rule is pretty likely over a long period of time, then there is no way I'd accept anything less than a 2% rent/PP. And in this market, good luck, even in the cash-flowing midwest. Find that ratio definitely takes some hard work in today's market.

Am I missing anything?

Post: Becoming frustrated in Charlotte

Ricky StaffordPosted
  • Newland, NC
  • Posts 36
  • Votes 8

Yeah, and I'm looking for ready to go/updated places so I realize that's part of my problem. I also realize another part of my problem is I'm trying to be as passive as possible without resorting to REITs (which I have no problem with owning, it's just the returns aren't usually as good). Guess something will have to give! Marketing to distressed buyers isn't my thing so maybe I'll try to find something on the MLS with some cosmetic issues.

I would be happy with .7% - .8% properties that are ready to go - guess I'll keep looking. I plan on purchasing cash or mostly cash, so cash flow wouldn't be an issue. Just hoping to do that and still earn > than the 7-8% I'd likely get from REITs over the long term. Well that and I just prefer to have a physical asset.

Post: Becoming frustrated in Charlotte

Ricky StaffordPosted
  • Newland, NC
  • Posts 36
  • Votes 8

I'm currently in NC and have decided I'd probably just like to stay here - since there's a little bit of everything. I am looking to buy my next primary home/second rental. I plan on buying it, living in it, renting out a few rooms, and eventually renting the entire thing when I have another home lined up.

But, I'm getting a little discouraged. In Charlotte, I'm seeing a lot of $150k purchase prices for something decent/updated with only $1.1-1.2k rent prices. This would work - but is by no means a deal and wouldn't leave much room for error. The problem is, if you start to go under about $110k, you're limited to just a few, rougher neighborhoods. And the houses still need work usually. It seems even B+ neighborhoods start at around $250k. Raleigh is almost the same story and has definitely become more competitive.

So, how are you finding your deals? I realize I can just start offering what I'd pay on every property I like, but I don't want to waste my time or the agent's. I know my situation is a bit unique, because I want to live there first in a good neighborhood and close to everything (plan on renting STR rooms), but I also don't want to overpay so that I can't rely on profit from a LTR. Are investors just accepting the 0.6-0.8% rent/PP ratio?

Any ideas, insight, or advice would be appreciated.

Post: Rehab for Rental - Be own contractor or hire one?

Ricky StaffordPosted
  • Newland, NC
  • Posts 36
  • Votes 8

 Fair enough, that's understandable, although I do see differing opinions (from searching around online) on this with some contractors being transparent about their markup and costs while others just providing a lump sum number. Guess it depends on the contractor? Will most contractors allow you to buy your own materials or won't even work with you if you want to do that?