All Forum Posts by: Tom Hertel

Originally posted by @Tim Swierczek:

@Tom Hertel  The landlord is not required to keep any in unit utilities. Colored is required to pay all common area utilities unless the usage is below the de minimus levels. 

Thanks as always Tim. So, assuming we are talking multifamily with individual meters, sewer and garbage are paid by the landlord while electricity, heat, and water are paid by the tenants?

I’ve been trying to figure out which utilities landlords are required to pay in Minnesota, but the legalese of the MN State statues has me confused. Which utilities are landlords required to pay in Minnesota, and which utilities do you specifically have your tenants pay (if your answers are different)?

@Bryan Tasumi

As many have said, it's an apples and oranges comparison, but I'll do my best to give you an accurate answer. So let's break down the numbers.

Let's say you make a W2 income of $300k/year. Assuming you are single, your federal taxes would be $77,043 plus $13,100 in FICA taxes. Additionally, I see you are in California, so your Cali tax bill would be $25,097. That totals $115,240.

Additionally, I hope you would be saving 20% of your gross income and putting it into a low-cost index mutual fund for retirement if you weren't into real state. That's another $60k/year. Obviously, with a long-term buy and rent strategy, you don't need to "save" that money for retirement because your passive rental income is your retirement.

Because real estate is so tax efficient, I think it's a better idea to compare the $300k/year physician salary to $125k/year in passive income from real estate ($300k - $115k - $60k = $125k).

$125k/year is roughly $11,000/month, and assuming $150/door, that's 70 doors. Obviously the math is a bit more complicated when you take hypothetical 401k/IRA contributions as well as the fact that it's unlikely you pay zero taxes for your real state empire. I'd be on the safe side and agree with what many are saying here: somewhere from 90-125 doors.

I came across a house in my neighborhood that would be an excellent B&B or wedding venue, but I was not sure if it would be legal to operate such an entity based given it's current zoning (R4). Frankly, I'm a bit confused how residential/commercial zoning works within the city limits of St. Paul. 

According to their website, R1-R4 lots are "one-family residential districts provide for an environment of predominantly low-density, one-family dwellings along with civic and institutional uses, public services and utilities that serve the residents in the districts. Because of their residential nature, these districts are not intended for more intensive uses such as small conference centers, private retreat centers and reception houses." This seems pretty straight forward, but what's the difference between R1 and R4?

Next I took a look at the University Club and the fact that it is designated RT2, or a "townhouse residential district (that) provides for two-, three-, and four-family and townhouse structures, along with civic and institutional uses, public services and utilities that serve residents in the district."

Based on this, it seems that a wedding venue doesn't actually need to be zoned as a business, but rather a townhouse that falls under the "public services and utilities that serve residents in the district" clause within the RT2 designation. Is that correct?

So, here are my questions:

- Does anyone have any experience with zoning variance within St. Paul? 

- Is it tough to change the zoning on a property? 

- Is the process drawn out? 

- Are there people within the city government that are instrumental in the process?

- What kind of zoning is needed to run a B&B/small hotel (if you aren't living in the property)?

Thanks

Paging @John Woodrich!

Originally posted by @Wil Reichard:

There are many hidden fees to a 401k plan. And yes it is pre taxed when you pull it out. But guess who sticks their hands back into your pockets when you're 59 1/2? Yep, uncle Sam. It is taxed when you pull it out. Either way when people say one if its "pros" is its not taxed, it actually is. Just later when you need it... Here's how I look at it. If you are not good with managing your money/have no other plan to save for retirement... Then this is a great way to built massive wealth in the future. If you are even fairly comfortable with managing the money yourself, there are 10 other ways to invest your money with a return greater than 3-4%. Any investor out there is better off without it. That is my opinion. You all make some sound points though.

Be careful there... Yes, there are plan fees, but those have nothing to do with taxes. First, 401k contributions is not both pre-taxed and taxed when it's taken out (tax-deferred): it's one or the other. Some employers offer retirement accounts where contributions are after-tax dollars (pre-taxed), at which point it is a Roth-401k and any earnings are tax free after that. Second, the tax benefits of tax-deferred 401k contributions increase for those in higher tax brackets (35% or 39.5% federal) because in retirement they will be in lower tax brackets and paying capital gains taxes (0-15%). It's hard to make the argument that paying taxes later is not advantageous since this is exactly how depreciation works in real estate. Finally, the S&P 500 has averaged about a 10% annual return since it's inception in 1928 (very similar to what hard money lenders make in today's market), providing a realistic passive investment for those not willing to put in the time that real estate requires. 

@Todd Dexheimer

Thanks Todd. I recently went to a couple of the seminars from Ryan O'Neil's group. Who specifically within his team do you think is the best for REI investors, specifically SFR in the east metro?

@John Woodrich

Thanks for the response. I'll add both you and Nelson Berg to my list. 

Regarding finding leads on your own, are you direct mail marketing? Driving for dollars? Finding deals through industry contacts/REIAs? I'm not trying to steal your techniques, I'm just curious what works in the Twin Cities.

As for contractors and "homeowner" pricing, in your experience, how much volume is needed in order to get "industry" rates? Two houses/year? 10/year? 100/year?

@Todd Dexheimer

I'm looking for 3B/2Ba SFRs that need moderate rehab (and value-add opportunity) in the east metro, B-class neighborhoods with good schools, as part of a BRRRR strategy.

@Tim Swierczek

Thanks for the detailed response! I'll be PM'ing you for the details.

Out of curiosity, what kind of lending do you do? I can't really tell based on your personal website.