All Forum Posts by: Tim Deimer

@Mike Hern

There was a time when I'd never have dreamed that 5.25% 30 year fixed mortgage rate would be called a shock to the upside!

I just hope the rate hikes will be able to stick, with the ridiculous amount of debt this country is taking on.

@Eli Krav

I think people who are waiting for prices to fall are going to be waiting way longer than 3-5 years.

We were in a similar situation a while back. We found a house in a new subdivision and decided to put in a kind of low offer. If we got it, we would live in it for 3-5 years until the subdivision filled up, take our profit and get a place out of town a ways. We got the place and moved in in 1996. I'm typing this in the kitchen of that house.........has it really been more than 5 years??!!!

@Alicia Tingey Geddes

Stay away from Wisconsin, this place is uninhabitable! It's still winter here!

Seriously, if we were starting over, I'd look at places we'd like to live and find a 2-4 unit to owner-occupy. Easy to finance with low down and, in our experience, a forgiving introduction to owning real estate. Even if you eventually decided to move out of town or back home again, you'd be familiar enough with the area to find a manager if you wanted to keep that property or save the cap gains tax on the portion that you lived in if you decided to sell it. Good luck!

@Shannon Glanton

I guess some people are calling us house-hackers now, but my wife and I started with what used to be called an owner-occupied duplex and I'd recommend it. I'd go into it just planning to buy a duplex to live in. It takes a lot of the pressure off, telling yourself you just want to buy a duplex rather than wondering where to start to end up with "200 doors". In my head, I compare it to eating an elephant: I buy something (take a bite) and then I have to "chew" for awhile. I've always thought of getting comfortable owning a property as chewing. When I got comfortable owning one, I swallowed and started looking for another. Our second property was a small commercial that we weren't looking for. I thought it would be good for my Dad, who had recently retired but he has NO interest in real estate. The more I looked at it, I couldn't let it go and we bought it. It helped me early on to just look for one property with the intent to buy one, whatever it was, get used to that and eventually I'd get the itch again.

I was recently searching on Loopnet to find where there might be better cash flow than the two markets we're in right now, and Killeen and Copperas Cove caught my eye. I've been thinking about going down there to try to figure out why we shouldn't buy something there. I know you can at least find cash flow in that area. Best of luck to you!

Quote from @Bill B.:

I charge market when I list for new tenants. I renew great long term tenants (say 4+ years that have never been late once) about $25-$50/mo under market. I only have great tenants. 

You are in effect punishing the tenant that would like to rent your property at market rate. You’re telling them they can’t pay you $1650 because someone else is already paying you $1100.

PLEASE HIRE A PROPERTY MANAGER. At $1650/mo they will charge you about $132/mo (8%). They will keep you legal, screen your tenants, schedule and manage repairs, AND, deposit $1518/mo in to your bank account. You are PAYING. $400/mo to be a property manager. That’s before they raise rent next year when you wouldn’t have. 

Who knows, maybe you’ll find out market rent is only $1500, or it’s $1800, they will know, not guess. 

👍👍 We bought a condo 2000 miles from home for a price that's about what the tenant pays in a year now, so we were forced to get a manager. The only property we have close to home is rented by my brother-in-law, so I take care of that one, but I've told my wife that I'm hiring a manager if we ever buy more here. They take all the emotion out of it and it's all $$. When we discuss raising rent, all I have to consider is how much it's going to cost in lost rent and make-ready expenses if they leave versus what we collect if they stay. I'd hate raising someone's monthly bills by $300, but the manager knows how far we can go , staying below market just enough that the tenant can't afford to go somewhere else, all else being equal. I also have to say it really pisses me off when I look at a place to buy and there's 10 months left on a $600/month under market lease and a 10% over market asking price! It would be better for me to have it empty at that point, rather than a seller telling me how much I can raise the rent in a year after I clean it out and make all the repairs that the seller couldn't afford to do! I won't even waste my time looking at most of those. Not a problem for a seller right now, but that will change eventually.

Quote from @Dave Foster:

@Tim Deimer, Ouch that one stings!  Don't know if you have any other kids in the pipeline.  But a couple of things that can mitigate your situation very easily

1. Have your children house hack and declare the rents of their friends on your return.

2. Go ahead and make your lease with your child market rate and then gift them back whatever you want to up to the annual limits ($16K from each spouse to anyone they want).  That would give your child a break.  And still let you legally treat that property as an investment.

 Thanks for the tips, I'll file them away for next time. This one worked itself out anyway. We bought the condo with the intent to keep it for retirement. (It's in Phoenix) I'm not crazy about the market, as a buyer, anyway. It's not likely that I'll find anything to buy until the "sealed-bid" marketing style goes out of fashion. In the meantime we have another rental down there with management in place, so she leased it out at a rate that takes my breath away. So it's a first-world problem and one reason I wouldn't even pretend to think I know how a tenant thinks!

You've done a lot more than you let on in your first post. My long-winded point was anything is possible, but anything that's easy is only easy because it's something we love to do. My favorite market was 2008 - 2014 and we haven't bought anything since 2016. I can't get interested in the current "sealed-bid sale" environment. At my peak, I was sitting on the couch with my feet up and a computer on my lap so long that I needed knee braces! Many people would have considered it torture but it was a compulsion for me. If you're doing what you like and can afford to live your lifestyle, you're doing better than most. 

BTW, I thought my knee problem was just age related until the market got away from me and I had to get up and do something else! Now they're fine.

@Rick Ortiz

Not really part of your question, but I also recently found out that a condo I wanted to sell wasn't eligible for a 1031 exchange because it hadn't been rented out at market rate while our daughter lived there while going to school.

@Michael Paling

"Several cracks in the drywalling" makes the hair on the back of my neck stand up! I'd get the inspection and make sure you don't have foundation issues, that would more than likely be a deal breaker for me in the UP. If you're planning to live in the place, I'd be more concerned with getting a good handle on the repairs that you know need to be done than on return. My wife and I moved into the ugly unit of our first duplex and made repairs as we had time and money to do so. Just make sure you don't have structural problems and you should be fine.

@Maria G.

This may not be a full 2 cents worth, but not being an accountant or wanting to pretend to be, I take detailed notes so in March I can remember exactly what I did last February, and hand them to an accountant. When it comes to the IRS, the more fingerprints there are on my trainwreck, the better! The accountant asks questions if she needs to, but it never seems like she sweats much over our taxes.