All Forum Posts by: Bill F.

@Desmond Williams

If you think the property has enough potential you could hire a Private Investigator for $100.

@Rick Roberson That doesn't' sound too bad for the plumbing, especially if you plan to keep the property for awhile. Be careful thinking in terms of Cap Rate with a 4plex though; its still valued off of comps. Plus, do you now for a fact that small multis in your area are selling at an 8% Cap?

@Jennifer McElliott I can't comment on the rates for attorneys in securities law specifically, but $400-500 is the range for a partner in a top 100 law firm that I've seen. So I'd say you are in the ball park.

Whenever I get into an area that I've never been in before I look at the cost of an expert (lawyer account ect) like the cost of a tutor and ask them a bunch of questions. It gives me an opportunity to learn things I wouldn't normally get a chance to learn and see how they view these situations. Plus its an insurance policy; if something is wrong with the deal they act as a safety net of sorts. As I get more comfortable in that area sometimes I phase them out and other times I don't.

@Rick Roberson Owner paid expenses ( Waters, Sewer, trash, lawn care) are their own line item under expenses. Does the municipality not pick up trash and are the units on city sewer or septic? Not knowing your area I can't give you a good idea, but I know in my area I pay $25 for trash and around $30 for water each month for two people. So overall your costs for water could be upwards of $125 a month and $50+ for trash. That takes quite a chunk out of your $370 a month overall cash flow.

I'd ask the current owners about these expenses and also price out your own estimates by calling around.

Is there a way to sub meter the building's water to the tenants?

@Jack Taylor It depends on your goals, but it seems like you want to have your cake and eat it too. Are you taking advantage of an increase in the value of your home to do away with PMI?

This may seem obvious, but you can pay down a 30 year loan in 20 years, but you can't pay a 20 yr loan in 30 years!

If you want the cash in your pocket when you need it and have the discipline to make voluntary pre payments, go with the 30 year. If you know yourself and need the forcing function, pick the 20 year.

I've heard of some products that allow to keep the same loan duration while adjusting your rate and the amortization schedule.  

@Christopher V.Lots of folks have pointed out a few things that you overlooked. Using just the numbers you've provided and making a few generous assumptions I think you'd lose about $3700 if you follow the plan as it stands now. 

Price:$300,000

Loan:$270,000

Cash Invested: $30,000

Monthly Rent: $2,050

Vacancy (5%): $102.50

Net Schedule Rents: $1,947.50

I added the expenses you listed together with 5% for Repairs and CapEx, with 10% for Property Management, for a total Monthly Expense of $1,186.

NOI: $761.17

Debt Servicing: $1,138 ( $270,000 30yr fixed @ 3%)

Cash Flow" -$376/ month

Here are your numbers when you go to sell in two years. I've assumed 2% appreciation.

Home Value: $312,120

Loan Balance: $258,062

Proceeds from Sale: $35,330

2 Years of Negative Cash Flow: -$9044 added to the Initial Investment of $30,000= -$3700

It goes without saying that the longer you hold the invest the better you returns are: at five years you would get around $23,000 and after 10 years you'd get in the ballpark of $80,000. This assumes two important things. 1. no major repairs of CapEx 2. that the Property appreciates at 2% per year. If you get 2% a year for the first three years and then 1% until year 10 your cash return drops to around $57,000. None of these numbers are gospel and are based solely off basic assumptions. The thing they do show is how much your returns can swing when you bank on appreciation.

Good luck and hope this helps.

@Gregory J. That's quite the first tenant to screen. 

Speaking from experience, 99.9% of the officers that come to the US for exchange tours are the top officers in their nation's military. I'm talking they will become Generals in the near future. If the country is a NATO country this holds even more true. 

He will have some sort of US military "sponsor" who will help him get acclimated to the unit he joins. I'd get that person's contact info and ask them to help with the questions you have. They will be able to "translate" what you are asking for. 

I'd rent to them for Three reasons.: 

1. They have done something right to get an assignment to the US. His nation and the US military did your screening for you!

2.  If they mess anything up it becomes a big deal very quick. Like Department of State talking to Department of Defense big deal. This incentivizes them to behave. 

3. You get a tenant for three years, with a very low probability of turnover. They can't buy a house and after moving his family from another country, they will have a high aversion to moving again. 

In my humble opinion you've found yourself a super tenant!

@Guyoz Golan Thanks for the compliment! 

I've never thought all that much about a foreign national investing in the US Market and being totally honest I don't have the legal or tax background to make a complete analysis. So take everything from here on out as total speculation!

Off the cuff I think the same general principles hold true with a few differences. The main difference being, no matter if you bought a REIT or multi family, your invest would have to be passive since you would most likely use a third party to purchase or at least manage the property. At the end of the day, a REIT is a equity just like Apple or GM. They will act much more like a stock, in which you get cash flow from dividends and appreciation via a share price market to market, than a RE investment.

As to what is the best way for a foreign investor to buy RE in the US, I have no good ideas. I'm out of my depth there. Syndication, Joint Ventures, turnkey...Those all come to mind. 

Hope this helps!

@Andrew McIntyre Depends on a multitude of factors. The underlying assets of the REIT and their yield playing the largest role. You can find that out from the REITs 10k reports.

Where would you buy the multi? If you have a property picked out its easy to run the numbers and compare them to the performance of the REIT to get a rough answer. Big disclaimer here: just like you don't drive a car looking through the rear view mirror only, neither should you invest your money solely based on a securities past performance.

In general, REITs behave and are valued like equities and have the same advantages and limitations ( you don't get tax advantages and amortization but they are passive).

@Brandon Glasgow

Are you month to month or on a lease? Were you able to live in the property any day during May?

If you are month to month, I'd tell the landlord you want to move and find another place to live. I'd ask for my May rent and security deposit back. The asbestos abatement will do a number on the house so as long as you haven't damaged the rest of the house, I'd feel comfortable calling it a wash. That's just me though.

Try to understand the position that the landlord is in like @Jason Hartley pointed out. Keep things amicable so he can be a reference for you. I will disagree with the assertion that you are lucky to get $63  a day. You paid him for housing and he isn't/can't provide that to you. If you still remain his tenant than he needs to house you and your family. We as landlords hear sob stories about how our tenants can't make rent( flat tire, laid off ect) This is the rare case where the shoe is on the other foot. You've paid for housing and he needs to provide it to you, regardless of the hardships he faces.