All Forum Posts by: Jeff Takle

Jared,

This is a great thread--I'm hoping to hear more stories from others. It's very refreshing to hear the details, even the specific details, of how deals went wrong. That's very helpful in clearly understanding the risks involved in the business, something most people avoid talking about...when they are selling you their latest "system"...

I haven't (yet) had any unsuccessful flips, but I definitely have had tenant problems. Guy called with sob story about why rent would be late and I said that I appreciated his being upfront and trying to solve the situation so I would work with him. Worked fine for month #1 but he never got back to paying on time and EVERY subsequent payment was late. Abou $3,700 in rents and damages later, I've been chasing him around Maryland for the money. Bad call. As much as I hate to do it personnaly, taking an all business hard line as a landlord seems to be the clearly correct path.

Obviously, the best properties are going to be ones that generate positive cash flow from day one, that cost you no money down, were grossly undervalued in the market, and which you found while nobody else was looking...But, while you quickly reach limits if you're experiencing negative cash flows in property, it may still be a very good idea to buy a property even if it's got negative cash flow.

I may be in the minority here, but...I've got other sources of cash which are positive cash flows and here's only so much you can do to reduce that taxable basis. But, I own property that has negative cash flows and posts as passive losses each year. If you can handle the negatives from a cash flow perspective, and it helps you to reduce your taxable basis from other incomes ($$$ benefit), and you are counting on long-term appreciation, I feel this is still a strong strategy. It certainly beats the crap out of working an additionl 40 hrs/week to gain overtime salary.

Maybe it's more like this-- it's better ROI to put your cash in a money market account than keep it under your mattress; but it's better to put it into an index fund than a money market; better still to select a prize-winning stock; better still to correctly pick hedge funds/explosive growth companies, etc., etc. My way might not be the very best investment but still a heck of a lot better than sitting in a money market, and the IRR, ROI, cash on cash, GRM look solid.

Am I missing something or isn't this more a matter of your tastes and personal preferences? I see a lot of chatter that claim only the no money down, positive cash flow from day one, 70% LTV etc. are worth pursuing. I tend to think there is still a LOT of money to be made in the grey area between here and there. It's certainly worked out well for me, but then that might have more to do with an overall very strong market and the fact that a monkey could have picked properties that made money over the past five years???

I might be wrong here (I'm also a Realtor so I get the exception already) but if you are actively involved in the management of your properties, defined by some level of effort maybe 500 hours a year, then you too are exempt from the passive losses limit--essentially because they are not passive, they are from something in which you are actively engaged.

If you do your own property management, fix-it stuff, and finances, you are probably exempt from the $25,000 / yr limit.

The IRS website has a good page that walks you through your specific situation: http://www.irs.gov/businesses/small/industries/article/0,,id=98881,00.html

:rock:

Maybe there is an angle here, setting up a non-profit that rehabs properties and provides some portion of the proceeds to a good cause. Or, provides 2 years' housing in the rehab for low-income families. Or, provides flexible, seller-based financing to low-income first time homebuyers or something...

:woohoo:

You can find a lot of Real Estate RSS feeds (yes, I know they're not radio) at: http://www.syndic8.com/feedlist.php?ShowMatch=real+estate&ShowStatus=all

And, you can grab real-estate related podcasts, download them, and listen to them from here: http://www.podcast.net/search

It's not radio exactly, but they're options!
:beer:

Actually, I went to the Ron Rice state senator website to look for the text of the bill but couldn't find any sign of it. Also, I did a Google search on the topic and only found a handful of articles, all of them referencing each other. Next, I took a look at the NJ State Senate committee home page and didn't see anything on their either. I'd guess that either this bill is still over at the House and hasn't been decided, or, perhaps something else. Could be a staffer provided the information on a pending bill, or a bill in draft form, or that I missed it entirely. Or, could be misinformation.

Can anybody find the exact bill being referenced?

Call me a stickler for details...

Setting aside for the moment any criminal or landlord registry checks, I'm curious to see what type of credit checks y'all use and how well they work for you. To the best of my knowledge, there are more or less three general kinds of checks you can get:

-Raw credit report, no scores, cheapest
-Credit report with FICO or other scores, moderate
-Credit + Risk report with rental recommendations, expensive

I don't know the setup fees for many of the places that offer these. I've seen raw credit reports for as low as $4 each. Equifax has an ePort service now where you can get their report with a score for around $4 each. In addition, some companies will not only look at credit but add in other factors like # of moves, type of credit owned, incomes, locations, etc. and come up with a composite risk score based on some algorithm that shows real likelihood to pay their rent on time.

Some companies will also provide a layman's terms recommendation like, "Charge maximum security deposit" or "Renting to this person presents a VERY HIGH RISK they will not pay rent on time" etc. Though I find this last category the most helpful, the reports I've found ranged from $7-$25+ each depending on the company, whether you buy in bulk, etc. Wondering if anyone else has had good/bad experiences and is willing to talk about prices/quality without just advertising their own company?

Are the credit + risk reports worth the extra money?

:chicken:

That's a frustrating article.

:protest:

good find.

Neat. Thanks. Ironically, randomly typed in "RateYourRealtor.com" and it redirected me to agentratings.com. It would be a great site but I'm a little skeptical of the ratings b/c I see NAR's name all over the place as an advertiser and they're not into anything that makes realtors sound less than godlike. Hmm, maybe I'll poke around a bit.

Haven't used Cashflow 101 but I only hear great things about it. We've got several local groups up here in Boston and you can go play the game with others for free once a month. Great way to play the game with other folks and learn from them too.

If you are already motivated to get into real estate investment and have the gusto to leap in, then you probably already have 85% of what the seminars offer. Hard financial tools, though, are priceless. Community colleges, realtor's associations, and universities all have finance classes and many will have real estate investing versions. They are great and worth every penny.

Even if a class isn't real estate specific, you can always approach the instructor afterwards and tell them you're having trouble applying the techniques learned in class to your real estate investment analysis. Ask for help. I have to imagine that most professors/instructors would love to help people apply what they have been teaching. Bingo, free extra help.