My Pro's and Con's of real estate investing

[Senator]

Senator, nice work with the RE portfolio. One question I have is related to the bolding above (by me). Please explain how the IRS lien just "went away"? Thanks.

It's easy. It is an IRS lien, on the owners equity in property, not on the property itself. If it was a property tax lien, it would not go away. If she sold the property outright, it would need to be paid off. Hence, she was tied into not selling.

Once I canceled the contract for deed, the owners equity is extinguished, along with the IRS lien on the owners equity in property. Canceling the contract for deed is like a foreclosure.

The previous owner still has a personal IRS obligation, it's just not on the property. Good luck to the IRS on that one, the previous owner has no money...

I have made MANY seconds mortgages go away too. That's even more lucrative. Buying a property for just the amount of the first mortgage, and stiffing the second mortgage, generally takes about 30%+ off the purchase price.

 

[Senator]

we did and it turned out to be a horror .

usually the liens are paid off . in this case it wasn't so we were awarded the property .we had to pay 2 years past due taxes , current year taxes and lots of fees . that was tens of thousands .

but the former owners refused to move out so we had to evict them. they used every stall in the book and it cost more money , both in taxes and legal fees .

when they left they left lots of personal property behind . under the local laws we had to store and pay for the storage for 6 months -more expenses . then at the end of the 6 months we had to pay to have it all removed and dumped.

but wait it gets better . we can't prove it was the former owner but at some point the house was trashed and gutted .

luckily my partner was a builder so we rebuilt the house and sold it but it ended being a costly ,aggravating terrible way to invest

That is almost like an eviction that a landlord has to go through with a bad tenant. Typically you get the property for pennies on the dollar from what I have read.

That is why it is so important to know how to screen tenants. Pass over any tenant with a entitlement mentality. If I have one bad tenant in a bunch of ten, but I do not know which one it is, I would rather reject all 10 of them than take a chance I may get the bad one.

 

[retired1]

since RE income is my sole source of income I've become pretty passionate about it and always get into arguments of how much of a headache they can be, repairs will be costly and that I'm not really truly retired. Just thought I'd throw out the positives and negatives that I've encountered in my 8 years of rental investing, start with the Con's because everyone without RE investments shoots me down with them.

1) had to replace 3 water heaters, $2000
2) installed high wear flooring in 3 units, $7500
3) finishing up an eviction, lost 2 months rent, payed $1600 to eviction company, had 1 other eviction prior
3) replaced 2 A/C units $8000
4) replaced fence in 1 unit, $2400

The Pro's
1) don't work and spend 10 minutes a week tending to them, more now with the eviction
2) rents have kept up with the pace of inflation
3) $3000 pocketed on insurance claim
4) IRS tax benefits are off the charts
5) tenants have literally paid me in full for the homes they are living in
6) equity has tripled up in 7 years
7) net worth has jumped 6 fold in 8 years
8) leaving for Seattle next week, came back from Hawaii 2 months ago and Las Vegas/Los Angeles 3 months ago. did Hong Kong, Thailand, Taiwan, S Korea, Ohio and Denver last year.


So for me the Pro's outweigh my Con's by a wide margin, I have a great property manager and spend very little time tending to them, I've managed to keep my repairs down because I bought the newest units my money would buy, all late 90's early 2000

Thank you for listing Pros & Cons. I've been *wanting* but not able to dare into RE investment. Your post is encouraging.
I've some Questions:
* For RE investment purposes, are SFH better than Condo & Townhomes ?
* How Liabilities covered in case of accidents (Fall on property, Smoke detector not working, CO detector not working, Accidents ) ?
* Who takes care of (and who pays for) Lawn/Garden/Landscaping?
* What are Landlord's legal responsibilities? Do you check if smoke detectors are working? Fire extinguishers (if any) are working? etc. etc.

Thank you !

 

[mathjak107]

That is almost like an eviction that a landlord has to go through with a bad tenant. Typically you get the property for pennies on the dollar from what I have read.

That is why it is so important to know how to screen tenants. Pass over any tenant with a entitlement mentality. If I have one bad tenant in a bunch of ten, but I do not know which one it is, I would rather reject all 10 of them than take a chance I may get the bad one.

it was an eviction . many times with tax lien sales the people are still there until the last minute .

taxes in this case were 10k a year so not cheap plus interest on the past due and fees every where for getting involved with these sales .this was in new jersey . to rebuild and sell the house was a few hundred k . we made a profit but so little.

we really bought these for the interest which always ends up getting paid by the owners. this time was different .

 

[Senator]

Thank you for listing Pros & Cons. I've been *wanting* but not able to dare into RE investment. Your post is encouraging.
I've some Questions:
* For RE investment purposes, are SFH better than Condo & Townhomes ?
* How Liabilities covered in case of accidents (Fall on property, Smoke detector not working, CO detector not working, Accidents ) ?
* Who takes care of (and who pays for) Lawn/Garden/Landscaping?
* What are Landlord's legal responsibilities? Do you check if smoke detectors are working? Fire extinguishers (if any) are working? etc. etc.

Thank you !

I can answer from my perspective...

All RE has it's pros and cons. Generally, it's hard to make money on a SFH in a rental situation. Prices are high, and rents barely cover the expenses. if you get $200 a month, that's great. And you have to mange it for free. Multifamily is much more profitable, the more doors the better. And more expensive.

Condos and Townhomes have Associations. And often rental limits. And penalties to you, if your tenants violate the rules.

I have never need sued, but I have business liabilities policies as part of my insurance package, and umbrella policies.

In my duplex with a lawn, I hire a lawn service. In my condos, the Association takes care of it. In my SFH when it was rented, my low-caliber tenant did it, and I would get a letter from the City once in a while...

I let the tenant check the smoke detector and replace batteries. If they need help, I can do it. Fire extinguishers just stay on the wall and are generally OK.

 

[Amethyst]

Every situation is different, and it can even differ from tenant to tenant. You could write the lease to say whatever you want, if you can find tenants to go along with it.

When we rented out a condo with an HOA that hired its own landscaping, we paid the HOA fees directly (the rent never really covered it).
When we rented out a townhouse, the lease required tenants to cut the grass, which they generally did adequately (the lawn being tiny). One tenant actually hired a kid to do it.
When we rented out our own home while overseas, we paid for a lawn service (tenants would never have done that much work) but got it back in rent. It actually made the property more rentable.

* Who takes care of (and who pays for) Lawn/Garden/Landscaping?

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