connection to a municipal sewer varies, for 3k to 6k.
Sunday, October 12, 2014
Water is the common enemy of all constructions
Water is the common enemy of all constructions... 2009-04-25 22:58:39
by JY
well, besides the landlord business, I been a home builder over 10 years, also own an interest in a concrete/excavating business, so I know a few things about foundations.
usually before the house was build, there are footers, and along them footers, there are underslap drainage systems, which make up of perforated pipes or so call weeping tiles, these tiles are surround by stone or gravel and sand, not soil, they are interconnected, and paralleled run for load balance, just encase one of them is clogged, all the under water collected thru these tiles usually got a sump pump, and pump out to surface ground, but in your case, instead of a sump pump, they connected to the storm water line.
After the concrete walls are form, the outside perimeter tiles are then connected to underslap tiles, also important that the house should only back fill with gravel and sand, not dirt, some builders try to cut corner on that, which can cause flood later, this way there wouldn't be standing water surrounding the house.
now, there is not thing wrong with gravity feed system like you have, sewer lines are all done like that, but the problem is sewer lines are seal and tiles are not, over time, soil can get in the tile system and finally clog the line and eventually flood the basement.
now knowing this much, you now need to determent where is all these water coming out from, is it from where the wall joint the floor? or from concrete saw lines in the floor?
from the picture, these look like they are additional plumbing for future bathroom sewer, should have nothing todo with the tile system, the reason the water do down to it is because it is connect to the sewer system, which technically is illegal to drain surface water to sewer line.
by JY
well, besides the landlord business, I been a home builder over 10 years, also own an interest in a concrete/excavating business, so I know a few things about foundations.
usually before the house was build, there are footers, and along them footers, there are underslap drainage systems, which make up of perforated pipes or so call weeping tiles, these tiles are surround by stone or gravel and sand, not soil, they are interconnected, and paralleled run for load balance, just encase one of them is clogged, all the under water collected thru these tiles usually got a sump pump, and pump out to surface ground, but in your case, instead of a sump pump, they connected to the storm water line.
After the concrete walls are form, the outside perimeter tiles are then connected to underslap tiles, also important that the house should only back fill with gravel and sand, not dirt, some builders try to cut corner on that, which can cause flood later, this way there wouldn't be standing water surrounding the house.
now, there is not thing wrong with gravity feed system like you have, sewer lines are all done like that, but the problem is sewer lines are seal and tiles are not, over time, soil can get in the tile system and finally clog the line and eventually flood the basement.
now knowing this much, you now need to determent where is all these water coming out from, is it from where the wall joint the floor? or from concrete saw lines in the floor?
from the picture, these look like they are additional plumbing for future bathroom sewer, should have nothing todo with the tile system, the reason the water do down to it is because it is connect to the sewer system, which technically is illegal to drain surface water to sewer line.
Mold in basement? What to do?
1. if everything looks dry, it is possible moisture is humidity, because
basement usually cooling and no vent, so maybe all you need is a
dehumidifier.
2. if it is small leak thru the wall, you can fill it with concrete filler inside, and paint it over with oil base sealer.
3. if you notice water lines, the only permanent fix will be dig from outside and seal with rubber sealer.
2. if it is small leak thru the wall, you can fill it with concrete filler inside, and paint it over with oil base sealer.
3. if you notice water lines, the only permanent fix will be dig from outside and seal with rubber sealer.
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REO experience
from my past experience on REO 2008-07-17 19:29:59 - by JY
1. when buy a REO, try go directly to the seller agent, once they know you well, they will let you know any great deal coming along, in my area, REO must list in the MLS 3 days before the agent can take in any offer, but if he is willing to work with you, he can twist that by listing the property on Friday before midnight, and take your offer first thing on Monday to meet the 3 day rule, then you for sure you get the first choice, this works out great back when flipping market were good, there are times I resell the property to the next buyer for 30k or 40k without touching the house (too bad those days are long gone).
2. if the bank list a new REO, bank tend to not discount alot, most will be 10%, then every 30 days, the seller agent will summit a market report and request to reduce price, so after 30 or 60 days, you have a better chance to bargain. and sometimes bank will change agent after 60 days if the house not sell.
3. try not to fall in love in any properties, investment is investment, not your primary home, always have an exit strategy and ready to walk or you may overbid the house that can't get out, there is always another deal.
1. when buy a REO, try go directly to the seller agent, once they know you well, they will let you know any great deal coming along, in my area, REO must list in the MLS 3 days before the agent can take in any offer, but if he is willing to work with you, he can twist that by listing the property on Friday before midnight, and take your offer first thing on Monday to meet the 3 day rule, then you for sure you get the first choice, this works out great back when flipping market were good, there are times I resell the property to the next buyer for 30k or 40k without touching the house (too bad those days are long gone).
2. if the bank list a new REO, bank tend to not discount alot, most will be 10%, then every 30 days, the seller agent will summit a market report and request to reduce price, so after 30 or 60 days, you have a better chance to bargain. and sometimes bank will change agent after 60 days if the house not sell.
3. try not to fall in love in any properties, investment is investment, not your primary home, always have an exit strategy and ready to walk or you may overbid the house that can't get out, there is always another deal.
About Flipping
flipping is only for short term gain, to reach 10m mark 2008-07-17 19:17:09
by JY
like Bro Stone, you must leverage, leverage and more leverage. but again, you can not reach maximum leverage when you have negative cash flow.
as I always said, if you have cash flow, credit crunch and depreciation is not thing to worry about.
I own and manage 90 units, all positive, generating 150k income and 350k appreciation per year for me.
by JY
like Bro Stone, you must leverage, leverage and more leverage. but again, you can not reach maximum leverage when you have negative cash flow.
as I always said, if you have cash flow, credit crunch and depreciation is not thing to worry about.
I own and manage 90 units, all positive, generating 150k income and 350k appreciation per year for me.
Benefits of Eviction
haha, benefits of eviction........ 2010-09-10 07:56:19
By JY
1. you feel good that the law is finally on your side..
2. you feel even better that you can lawfully kick someone's ass.
3. and the high point of the whole process will be when you have the sheriff help thru all the tenant stuff out on street.
4. the side benefit is you will get a judgment.
5. the judgment will show up in their credit report.
6. they can't sell any real estate unless they pay you first, of course that day may never come.
7. and you may get to visit them in jail if you push the case all the way to the end..
haha.
but yes, you will lost couple months of rent, but compare the all the excitements you getter for free, it is well worth it...
My comments:
Eviction is very expensive in MA. Avoid bad tenants in the beginning.
By JY
1. you feel good that the law is finally on your side..
2. you feel even better that you can lawfully kick someone's ass.
3. and the high point of the whole process will be when you have the sheriff help thru all the tenant stuff out on street.
4. the side benefit is you will get a judgment.
5. the judgment will show up in their credit report.
6. they can't sell any real estate unless they pay you first, of course that day may never come.
7. and you may get to visit them in jail if you push the case all the way to the end..
haha.
but yes, you will lost couple months of rent, but compare the all the excitements you getter for free, it is well worth it...
My comments:
Eviction is very expensive in MA. Avoid bad tenants in the beginning.
About The Low Income Housing Tax Credit Program or LIHTC
About The Low Income Housing Tax Credit Program or LIHTC 2008-07-17 19:29:33
by JY
Uncle Sam does not build a complex himself for low income family, it is the investors that using one of the low income housing program to build such project.
you need to find out what program was it build with, section 8? Farm Home Credit? senior housing? or the newer LIHTC?
The Low Income Housing Tax Credit (LIHTC or Tax Credit) program was created by the Tax Reform Act of 1986 for low- and moderate-income household, usually investors use either tax free bond or private loan to build the project and the project will receive a tax credit equal to 90% (Private funded project) or 40% (public funded project - tax free bond) of their hugely inflated cost (one project I saw was 95k per unit in Indiana, and that is crazy) over a 10 year period, most of the time, the owner of the property will not be able to use all of the tax credits, and therefore, many LIHTC properties are owned by limited partnership groups that are put together by syndicators, the sell the tax credit on 75 cents for each dollar to companies and private investors to against their federal tax liability in return.
there for, in 10 years, the project is paid for by the tax payers, and the project owner make millions on selling tax credit and still own the project, then at the end, they sell the project thru a non profit group to a third party buyer and still don't pay a dime in taxes on capital gain.
I did a lot of research on tit year ago, on one project I saw, 132 unit complex cost 12 mil, the developer makes 2mil in the beginning, builder makes 1.5 mil and each year tax credit can sale for almost 1mil, now that is huge money, but this market is dominated by big guys, they knows all the network and channel, they build project one after another, they really do not care about renting the units, because they make their money by selling tax credits.
80% of the apartment complex build today is under this program.
Question:
Hi, JY. Just curious about this: sell the tax credit on 75 cents for each dollar to companies and private investors.
The tax credit should be attached to that low income project. How can the owner sell the credit to another company or investor, while still keep the property?
Answer:
In an LP, there can be one or more general partner, all others “limited partners.” The general partner has full management responsibility runs the day-to-day operations of the business. A limited partner cannot incur obligations on behalf of the partnership and does not participate in the firm's daily operations or management. In fact, a limited partner's role usually involves nothing more than making an initial capital investment in exchange for a share of the firm's profits.
for example, if this project is private funded and qualify credit total is 12mil, IRS is allocated a tax credit equal to 90% of the qualify construction cost, which be 10.8mil over a period of 10 years. this tax credit is essentially an asset to the LP, and any investor wants to buy in, will become a limited partner, in exchange for their hard earn $$, they will receive a allocated tax credit, which they can apply to their own corp or personal tax return.
and remember, the LP can have thousands of limited partners, but only the general partner can operate the business, and the LP still responsible for repaying the 12mil loan.
so lets look at the number again, on this 12mil project, the developer makes 2mil, the builder makes 1.5 mil on the construction phase, then the general partners makes 7.5mil by selling tax credits, the LP repays the loan, mortgage holder makes 10+ mil in interest, 10 years later, they sell the project for 3mil.
usually these type of projects are put together by syndicators, for their investment of 12mil, their return over 10 year, is 24mil..
by JY
Uncle Sam does not build a complex himself for low income family, it is the investors that using one of the low income housing program to build such project.
you need to find out what program was it build with, section 8? Farm Home Credit? senior housing? or the newer LIHTC?
The Low Income Housing Tax Credit (LIHTC or Tax Credit) program was created by the Tax Reform Act of 1986 for low- and moderate-income household, usually investors use either tax free bond or private loan to build the project and the project will receive a tax credit equal to 90% (Private funded project) or 40% (public funded project - tax free bond) of their hugely inflated cost (one project I saw was 95k per unit in Indiana, and that is crazy) over a 10 year period, most of the time, the owner of the property will not be able to use all of the tax credits, and therefore, many LIHTC properties are owned by limited partnership groups that are put together by syndicators, the sell the tax credit on 75 cents for each dollar to companies and private investors to against their federal tax liability in return.
there for, in 10 years, the project is paid for by the tax payers, and the project owner make millions on selling tax credit and still own the project, then at the end, they sell the project thru a non profit group to a third party buyer and still don't pay a dime in taxes on capital gain.
I did a lot of research on tit year ago, on one project I saw, 132 unit complex cost 12 mil, the developer makes 2mil in the beginning, builder makes 1.5 mil and each year tax credit can sale for almost 1mil, now that is huge money, but this market is dominated by big guys, they knows all the network and channel, they build project one after another, they really do not care about renting the units, because they make their money by selling tax credits.
80% of the apartment complex build today is under this program.
Question:
Hi, JY. Just curious about this: sell the tax credit on 75 cents for each dollar to companies and private investors.
The tax credit should be attached to that low income project. How can the owner sell the credit to another company or investor, while still keep the property?
Answer:
In an LP, there can be one or more general partner, all others “limited partners.” The general partner has full management responsibility runs the day-to-day operations of the business. A limited partner cannot incur obligations on behalf of the partnership and does not participate in the firm's daily operations or management. In fact, a limited partner's role usually involves nothing more than making an initial capital investment in exchange for a share of the firm's profits.
for example, if this project is private funded and qualify credit total is 12mil, IRS is allocated a tax credit equal to 90% of the qualify construction cost, which be 10.8mil over a period of 10 years. this tax credit is essentially an asset to the LP, and any investor wants to buy in, will become a limited partner, in exchange for their hard earn $$, they will receive a allocated tax credit, which they can apply to their own corp or personal tax return.
and remember, the LP can have thousands of limited partners, but only the general partner can operate the business, and the LP still responsible for repaying the 12mil loan.
so lets look at the number again, on this 12mil project, the developer makes 2mil, the builder makes 1.5 mil on the construction phase, then the general partners makes 7.5mil by selling tax credits, the LP repays the loan, mortgage holder makes 10+ mil in interest, 10 years later, they sell the project for 3mil.
usually these type of projects are put together by syndicators, for their investment of 12mil, their return over 10 year, is 24mil..
An Overview of a Quit Claim Deed
An Overview of a Quit Claim Deed - ZTed 2009-05-22 21:29:30
An Overview of a Quit Claim Deed
Quit claim deeds are a form of deed used in the transfer or sale of property when a grantor, a person who owns an interest in the property, is essentially allowing the transfer of that property to another person. The grantors do not actually own the property but rather simply have responsibility over it. For this reason, grantors have the legal right to sell the property but there is a catch.
The quit claim deed offers little protection for buyers down the road. Although the property will be transferred to the grantee from the grantor, the quit claim deed does not legally protect the grantee from future claims to the property. The grantor does not legally own the property and so that leaves a back door open for potential future problems regarding the property.
Quit claim deeds are often used in a couple situations due to their relative simplicity compared to many of the other forms that have to be filed during property transfer and/or sales. One, the quit claim deed is used to clear up a title. And two, quit claim deeds are effective for those who want to use a simplistic method for giving up their interests in a certain property.
When used in a sale of a property, quit claim deeds can result in significant risk to the buyers of the property. However, quit claim deeds still have other uses that are very beneficial. For instance, in the case where there are multiple people who have claims to a home, such as when a relative passes away, a quit claim deed is an effective way of one of these people to legally transfer their interests in the home to another person. A divorce can create a similar situation, making the quit claim deed very useful.
It is important to be smart about which form of deed you will be using and signing whether you are a seller or a buyer. Know what the potential risks are and the protections that are being offered by the deed so as to better be prepared.
An Overview of a Quit Claim Deed
Quit claim deeds are a form of deed used in the transfer or sale of property when a grantor, a person who owns an interest in the property, is essentially allowing the transfer of that property to another person. The grantors do not actually own the property but rather simply have responsibility over it. For this reason, grantors have the legal right to sell the property but there is a catch.
The quit claim deed offers little protection for buyers down the road. Although the property will be transferred to the grantee from the grantor, the quit claim deed does not legally protect the grantee from future claims to the property. The grantor does not legally own the property and so that leaves a back door open for potential future problems regarding the property.
Quit claim deeds are often used in a couple situations due to their relative simplicity compared to many of the other forms that have to be filed during property transfer and/or sales. One, the quit claim deed is used to clear up a title. And two, quit claim deeds are effective for those who want to use a simplistic method for giving up their interests in a certain property.
When used in a sale of a property, quit claim deeds can result in significant risk to the buyers of the property. However, quit claim deeds still have other uses that are very beneficial. For instance, in the case where there are multiple people who have claims to a home, such as when a relative passes away, a quit claim deed is an effective way of one of these people to legally transfer their interests in the home to another person. A divorce can create a similar situation, making the quit claim deed very useful.
It is important to be smart about which form of deed you will be using and signing whether you are a seller or a buyer. Know what the potential risks are and the protections that are being offered by the deed so as to better be prepared.
I got sued by tenant for personal property left behind - The End
Did you win the case?
yeah, insurance pay for the attorney, judge thru out the case...haha.
If you win, why insurance needs to pay?
each side pays for own defense, so insurance pays my attorney fees...
yeah, insurance pay for the attorney, judge thru out the case...haha.
If you win, why insurance needs to pay?
each side pays for own defense, so insurance pays my attorney fees...
I got sued by tenant for personal property left behind - Pt 3
| I got sued by tenant for personal property left behind - Pt 3 |
After 2 month of waiting, last week, my attorney which he was hire by my insurance company, call and said the tenant wants $1000 and drop the case, the insurance counter at $500 without informing me, but gladly the other side wants more, so we are going to trial.
so, today I sit thru a 2 and half hour trial, recall the all the witness and represent all the pictures as evident, now it is on the judge's hand, but I have the feeling we going to win because all the stuff in the pictures shown are all junks.
I got sued by tenant for personal property left behind - Part 2
| I got sued by tenant for personal property left behind - Pt 2 |
As I filed a motion to dismiss the case, the court granted a hearing on the dismissal on 8/20/08, if the motion is denied, then a contested trial hearing will be held on the same day.
My Landlord liability insurance company contacted me again on Friday after the receive a copy of the court summon, and reassured that their attorney will defend me on this case when that day comes.
This past week, I also came cross this blog on the same matter, from The Indiana Civil and Business Law Newsletter, here is the insert of it:
http://haslerlaw.blogspot.com/2008/07/landlord-tenant-abandoned-property.html
Monday, July 21, 2008
Landlord-Tenant: Abandoned Property
How long must a landlord hold onto a tenant's property? Indiana has a statute on this:
IC 32-31-4-2 Liability; abandoned property; court order allowing removal by landlord
a) A landlord has no liability for loss or damage to a tenant's personal property if the tenant's personal property has been abandoned by the tenant.
(b) For purposes of this section, a tenant's personal property is considered abandoned if a reasonable person would conclude that the tenant has vacated the premises and has surrendered possession of the personal property.
(c) An oral or a written rental agreement may not define abandonment differently than is provided in subsection (b).
(d) If a landlord is awarded possession of a dwelling unit by a court under IC 32-30-2, the landlord may seek an order from the court allowing removal of a tenant's personal property.
(e) If the tenant fails to remove the tenant's personal property before the date specified in the court's order issued under subsection (d), the landlord may remove the tenant's personal property in accordance with the order and deliver the personal property to a warehouseman under section 3 of this chapter or to a storage facility approved by the court.
Notice the statute uses the phrase "reasonable person" without defining that phrase. The statute leaves the phrase undefined because there can be no abstract definition of reasonableness. What is reasonable depends on the situation.
The best practice is to do nothing without a court order.
Can the landlord dispose of the items as the landlord sees fit? I would like to read Paragraph (e) as saying no but I cannot. The General Assembly made the procedure of (e) permissive rather than mandatory: "the landlord may remove...." The General Assembly left an open question about a landlord's ability and liability for disposing of the tenant's property in the following circumstances:
1. When the landlord has an order finding the property abandoned but does not send the property to a storage facility.
2. When the landlord does not seek to get an order finding the property abandoned.
I foresee more problems for a tenant successfully suing a landlord under #1 than #2 but it is still annoying that the General Assembly could not have made this simple statute a bit more certain.
I see landlords having liability in the following:
1. The property has sufficient value to justify a lawsuit;
2. The landlord does not seek a court order finding the property abandoned; and
3. The landlord acts unreasonably in declaring the property abandoned and then disposes of the property.
What is the bottom line? If you are a landlord, get a lawyer before disposing of a tenant's property.
I got sued by a tenant for personal property left behind
| I got sued by a tenant for personal property left behind |
Back in January this year, I filed eviction thru small claims court on a tenant, she was 30 days behind, I got the court order procession, court ordered the tenant move out within 72 hrs.
After I had procession, the tenant move most of their furniture and personal belongings, left bunch of food, clothing and junks behind, so I donated whatever are decent to a charity and thru the rest a way, it took 4 days and 2 guys to finish that and 3 more days for cleaning and repair.
2nd court day come around for judgment on damage and back rent, tenant's parent hire an attorney to represent her, try to argue they did not have enough time to move, whatever left behind was valuable, and by law, I have to kept in storage for up to 90 days, the judge thru this portion of the argument out because the hearing was for back rent and damage.
The initial judgment awarded was $1780, which covers back rent and cleaning, so I appeal the case for additional late fee and others which later I won an additional $640, for total judgment of $2420 plus court cost.
July 1, I started the collection process thru court, file all the paperwork,
and the tenant's attorney file a counter sue for their personal property left behind for $2000 and I got the court summon July 15th.
So, I filed a motion to dismiss the case as followed:
DEFENDANT’S MOTION TO DISMISS CASE
Comes now Defendant, Jy101 in the above captioned case and requests that the case be dismissed, without prejudice, and in support of this motion would show the Court the following:
1. That the defendant, as Landlord, took procession of the property at xxx st, xxx town, Indiana on Feb 8, 2008 after obtain a court ordered possession, Case No. 43D03-0801-SC-1 on Feb 1, 2008.
2. That the plaintiff was never given any forwarding addressing or phone number to landlord for further notices to be send.
3. That the defendant, as Landlord, under INDIANA CODE IC 32-31-4-2 (b) had determined that tenant has abandoned the premise and any personal property left behind, since she had sufficient time to move after appearing the hearing on Feb 1, 2008, and the defendant had left the premise open and unlock for an additional 7 days after possession in order for tenant to take their belongings.
4. That under INDIANA CODE IC 32-31-4-2 (a), A landlord has no liability for loss or damage to a tenant’s personal property if the tenant’s personal property has been abandoned by the tenant.
On the same day I got the court summon, I forwarded it to my insurance and file a claim under landlords liability, today, the insurance adjuster called, I told the insurance that I DO NOT want to settle with the tenant, so the adjuster said they will hire an attorney defend me on this case.
I currently have 24 open case on eviction, judgment, collection or civil warrant, I am in court once or twice a week. and I also got sued or counter sued numerals times, but so far I had not lost any cases.
more to come, as I post any updates.........
Rental Center AC - Use the most common and cheaper brand
Use the most common and cheaper brand. The system is simpler
than the high end units. If the problem could not be easily
fix, just replace the problem parts, i.e. compressor, coils.
tax lien auction
JY:
Its a huge topic...
My past experience on this topic, again, every state maybe different, a tax lien auction can't get you a title, if you win the auction, they will issue a certificate entitle you first position on the property. so yes tax lien is first lien, but you still need to foreclose the bank loan for clear title.
The worst story I know was, the guy bought some ground then found they were contaminated..
1. If there is mortgage, 99% of time, bank will not let it happen, they always pay the taxes so they not jeopardize the mortgage.
2. If there is no loan, owner mostly would redeem, they rather sale the property before let you own it for just few thousands bucks.
3. As investor you can't afford to research on all the properties...
Other:
Its a huge topic...
My past experience on this topic, again, every state maybe different, a tax lien auction can't get you a title, if you win the auction, they will issue a certificate entitle you first position on the property. so yes tax lien is first lien, but you still need to foreclose the bank loan for clear title.
The worst story I know was, the guy bought some ground then found they were contaminated..
1. If there is mortgage, 99% of time, bank will not let it happen, they always pay the taxes so they not jeopardize the mortgage.
2. If there is no loan, owner mostly would redeem, they rather sale the property before let you own it for just few thousands bucks.
3. As investor you can't afford to research on all the properties...
Other:
as mentioned above, the primary lien holder
such as mortgage companies or owners won't let it happen so easily.
however when tax lien or tax deed auction scheduled, very like neither
lien holder or owner really cares about the property. the chances are
that these properties are really junk.
to my experience, the most properties are vacant lands in nowhere. the remaining improved properties are really old, small,with significant damage. the renovation cost will leave no profit margin.
occasionally you may find a few acceptable properties. however these properties could be redeemed by the owner at the last minute or you have to bid up significantly to win the bid.
overall speaking the chance of getting tax deed for good properties is like winning a lotto.
to my experience, the most properties are vacant lands in nowhere. the remaining improved properties are really old, small,with significant damage. the renovation cost will leave no profit margin.
occasionally you may find a few acceptable properties. however these properties could be redeemed by the owner at the last minute or you have to bid up significantly to win the bid.
overall speaking the chance of getting tax deed for good properties is like winning a lotto.
Flea problem - Raid Flea Bomb
* I spent a lot of money with Home Defence, flea killer etc, no use. Raid Bomb is really working.
* After 5 Raid flea bombs, no flea inside house after a few hours
* After 5 Raid flea bombs, no flea inside house after a few hours
RE investment story: 13 unit asking 550K
by JY
Part I:
New prospect- 13 unit asking 550k, 2008-07-17 19:09:53
13 unit asking 550k, counter at 425k and owner financing.
will entry at $475, 10k closing
Gross Income (Year) $77,400.00
Vacancy
Vacancy Rate @ 10% $7,740.00
Operating Expenses
Fixed
Property taxes $7,800.00
Insurance $4,200.00
Variable
Property management
Maintenance $4,200.00
Legal Fees $200.00
Accounting fees $800.00
Advertising $300.00
Administrative expenses $600.00
Utilities $600.00
Total Expenses $26,440.00
Net Operating Income $50,960.00
Mortgage
- First Mortgage 20yr@7% $44,192.04
- Second Mortgage
Profit or Lost $6,767.96
Ratios
Debt Coverage Ratio 1.15
Cap Rate 11.32%
Cash on Cash Return 67.68%
Break Even Point On Units 10.56
Part II:
Part III:
New prospect- 13 unit asking 550k part3 2008-07-18 09:20:12
5 month after closing on the property, with new round of tenant change and rent increase, monthly rent now at $7030 per month, increase from about $4800 when it was with previous landlord, expected vacancy down to 5% compare to previously expected 10%, positive cash flow expect to be $22,321 this year.
13 unit asking 550k, after a month long counter and counter offer,final accepted price 456k, 56k cash down less tax credit and deposit, 400k owner finance at 7% amortize over 20 years, 5 year balloon.
Gross Income (Year) $84,360.00
Vacancy
Vacancy Rate @ 5% $4,218.00
Operating Expenses
Fixed
Property taxes $7,800.00
Insurance $4,121.00
Variable
Property management
Maintenance $6,000.00
Legal Fees $200.00
Accounting fees $800.00
Advertising $300.00
Administrative expenses $200.00
Utilities $1,200.00
Total Expenses $24,839.00
Net Operating Income $59,521.00
Mortgage
- First Mortgage 20yr@7% $37,200
- Second Mortgage
Profit or Lost $22,321
Part I:
New prospect- 13 unit asking 550k, 2008-07-17 19:09:53
13 unit asking 550k, counter at 425k and owner financing.
will entry at $475, 10k closing
Gross Income (Year) $77,400.00
Vacancy
Vacancy Rate @ 10% $7,740.00
Operating Expenses
Fixed
Property taxes $7,800.00
Insurance $4,200.00
Variable
Property management
Maintenance $4,200.00
Legal Fees $200.00
Accounting fees $800.00
Advertising $300.00
Administrative expenses $600.00
Utilities $600.00
Total Expenses $26,440.00
Net Operating Income $50,960.00
Mortgage
- First Mortgage 20yr@7% $44,192.04
- Second Mortgage
Profit or Lost $6,767.96
Ratios
Debt Coverage Ratio 1.15
Cap Rate 11.32%
Cash on Cash Return 67.68%
Break Even Point On Units 10.56
Part II:
New prospect- 13 unit asking 550k part2 2008-07-17 19:13:10
13 unit asking 550k, after a month long counter and counter offer,final accepted price 456k, 56k cash down less tax credit and deposit, 400k owner finance at 7% amortize over 20 years, 5 year balloon.
Gross Income (Year) $77,400.00
Vacancy
Vacancy Rate @ 10% $7,740.00
Operating Expenses
Fixed
Property taxes $7,800.00
Insurance $4,200.00
Variable
Property management
Maintenance $4,200.00
Legal Fees $200.00
Accounting fees $800.00
Advertising $300.00
Administrative expenses $600.00
Utilities $600.00
Total Expenses $26,440.00
Net Operating Income $50,960.00
Mortgage
- First Mortgage 20yr@7% $37,212
- Second Mortgage
Profit or Lost $13,748
Ratios
Debt Coverage Ratio 1.37
Cap Rate 11.75%
Cash on Cash Return 24.55%
13 unit asking 550k, after a month long counter and counter offer,final accepted price 456k, 56k cash down less tax credit and deposit, 400k owner finance at 7% amortize over 20 years, 5 year balloon.
Gross Income (Year) $77,400.00
Vacancy
Vacancy Rate @ 10% $7,740.00
Operating Expenses
Fixed
Property taxes $7,800.00
Insurance $4,200.00
Variable
Property management
Maintenance $4,200.00
Legal Fees $200.00
Accounting fees $800.00
Advertising $300.00
Administrative expenses $600.00
Utilities $600.00
Total Expenses $26,440.00
Net Operating Income $50,960.00
Mortgage
- First Mortgage 20yr@7% $37,212
- Second Mortgage
Profit or Lost $13,748
Ratios
Debt Coverage Ratio 1.37
Cap Rate 11.75%
Cash on Cash Return 24.55%
Part III:
New prospect- 13 unit asking 550k part3 2008-07-18 09:20:12
5 month after closing on the property, with new round of tenant change and rent increase, monthly rent now at $7030 per month, increase from about $4800 when it was with previous landlord, expected vacancy down to 5% compare to previously expected 10%, positive cash flow expect to be $22,321 this year.
13 unit asking 550k, after a month long counter and counter offer,final accepted price 456k, 56k cash down less tax credit and deposit, 400k owner finance at 7% amortize over 20 years, 5 year balloon.
Gross Income (Year) $84,360.00
Vacancy
Vacancy Rate @ 5% $4,218.00
Operating Expenses
Fixed
Property taxes $7,800.00
Insurance $4,121.00
Variable
Property management
Maintenance $6,000.00
Legal Fees $200.00
Accounting fees $800.00
Advertising $300.00
Administrative expenses $200.00
Utilities $1,200.00
Total Expenses $24,839.00
Net Operating Income $59,521.00
Mortgage
- First Mortgage 20yr@7% $37,200
- Second Mortgage
Profit or Lost $22,321
Mechanical lien on your home
The topic of mechanical lien on your home.. 2010-03-06 19:23:17
by JY
Q: Recommendation needed: how to deal with building contractors.
Q: Recommendation needed: how to deal with building contractors.
A: It is a tough one, he can attach a mechanical lien to your home.
you may try these steps.
1. have a meeting with him, give him a demand letter stating a final time line for him to finish or pack his tool and leave.
2. if he refuse to cooperate or can not finish in a reasonable time line, tell him is fire, it is your property and you have right to prohibit him from entering.
3. he may put a mechanical lien in your property, each state is different on this, the original status was to protect laborer get paid when job is done, but it is been abuse so much over the years, the contractor can basically put a lien on you without any prove, and it is up to you to prove it is not.
4. if you get a notice from county recorder's office about the lien, you have several options,
4a.do nothing, usually you can request it to drop after 1 year if the contractor did not bring the case to court and win a judgment.
4b. send a certify letter with return receipt to him, simply stating SUE OR QUIT within 30 days, if you can prove the letter is delivered and he did not sue you, then present the letter to recorder's office request the lien to be drop.
4c. if he sue, then you need to present to court all your evident that he did not do the job and you already given him a reasonable time line to finish, then it is up to the judge.
or better yet, hire an attorney to take care the problem for you.
I had been there and done that.
good luck to you
you may try these steps.
1. have a meeting with him, give him a demand letter stating a final time line for him to finish or pack his tool and leave.
2. if he refuse to cooperate or can not finish in a reasonable time line, tell him is fire, it is your property and you have right to prohibit him from entering.
3. he may put a mechanical lien in your property, each state is different on this, the original status was to protect laborer get paid when job is done, but it is been abuse so much over the years, the contractor can basically put a lien on you without any prove, and it is up to you to prove it is not.
4. if you get a notice from county recorder's office about the lien, you have several options,
4a.do nothing, usually you can request it to drop after 1 year if the contractor did not bring the case to court and win a judgment.
4b. send a certify letter with return receipt to him, simply stating SUE OR QUIT within 30 days, if you can prove the letter is delivered and he did not sue you, then present the letter to recorder's office request the lien to be drop.
4c. if he sue, then you need to present to court all your evident that he did not do the job and you already given him a reasonable time line to finish, then it is up to the judge.
or better yet, hire an attorney to take care the problem for you.
I had been there and done that.
good luck to you
Septic System - Life span and Replacing the septic tank and leach field
by JY:
the property is on a septic system, really common for residential property outside of city sewer, its life span usually about 25 years, if the property is over 20 years old, it may only have a 500 gal tank.
the new code depends on size of the lot and how many bedroom in the house, local health department usually require a minimum of 1000 gal tank, 100 feet of leach field per qualify bedroom, 50 feet away with any water source. if your lot is too small, you can seek a soil scientist test the soil simple and you may reduce the leach field requirement, or you may end up with a mount system if soil simple turn out bad.
a standard system with 300 feet of leach field, usually cost about $2800 to $3300. plus another $1000 for remove the old tank. a mount system will cost from $6000 to $8000.
if you buying it as-is, then you may end up paying for repair, talk to your lender or closing agent, most likely they can do an escrow account for repair after closing.
==============================
Replacing the septic tank and leach fields 2008-09-06 22:35:15
Septic Tanks and Leach Fields are common in northern states, depends on size of the house, how many bedroom / bath room, each state may have different requirement.
and it also depends on soil sample, your county health inspector need to come out and test the soil, and let you know what type of septic system you allow to install, then they will issue a permit for the work.
a typical gravity fed system on a 3 bedroom /2 bath house needs a 1000 gallon tank and 300 feet of leach fields, cost $3200 to $4000, plus time to dig out the old one.
if the soil test out bad, then you need a mounted system, it will cost $6000 to $8000.
the property is on a septic system, really common for residential property outside of city sewer, its life span usually about 25 years, if the property is over 20 years old, it may only have a 500 gal tank.
the new code depends on size of the lot and how many bedroom in the house, local health department usually require a minimum of 1000 gal tank, 100 feet of leach field per qualify bedroom, 50 feet away with any water source. if your lot is too small, you can seek a soil scientist test the soil simple and you may reduce the leach field requirement, or you may end up with a mount system if soil simple turn out bad.
a standard system with 300 feet of leach field, usually cost about $2800 to $3300. plus another $1000 for remove the old tank. a mount system will cost from $6000 to $8000.
if you buying it as-is, then you may end up paying for repair, talk to your lender or closing agent, most likely they can do an escrow account for repair after closing.
==============================
Replacing the septic tank and leach fields 2008-09-06 22:35:15
Septic Tanks and Leach Fields are common in northern states, depends on size of the house, how many bedroom / bath room, each state may have different requirement.
and it also depends on soil sample, your county health inspector need to come out and test the soil, and let you know what type of septic system you allow to install, then they will issue a permit for the work.
a typical gravity fed system on a 3 bedroom /2 bath house needs a 1000 gallon tank and 300 feet of leach fields, cost $3200 to $4000, plus time to dig out the old one.
if the soil test out bad, then you need a mounted system, it will cost $6000 to $8000.
Life Insurance - Term Life / Whole Life recommedations from a previous insurance agent
By JY:
My short life as an insurance agent
Any one remember a company A.L Williams 2008-07-17 19:11:54
A.L.Williams % Associates was a national agency in the late 80 and early 90's, later merge in Primerica, they was more like a MLM scheme, heavily marketing the BUY TERM AND INVEST THE DIFFERENTS idea, the sell mostly 100k 20year term to lower or middle income class along with a annuity product.
when I was still in college, I got introduced to the idea, went thru their 1 week boot camp, just like RE boot camp ppl promote now except it was free back then, not like RE boot camp wants 5k to go, a lot of hype, and a lot more hype, the one thing they tell you was to be successful, you must willing to get out of your COMFORT ZONE (like brother Miat said), and SELL SELL SELL. so, everyone went thru the boot camp become a free agent, the office I went had over 200 ppl at the one time. (and Yes, I did too, pass the state exam, got my license to kill, ready to make a million)
The head guy in the office was my neighbor, nice guy and nice family, 5 kids ( that is how I got in it) he got promoted to regional director while I was there, basically, anyone sell like 5 policy becomes a VP, and 20 policies is a senior VP, but he was the only director, so we had over 100 VP and 20 Senior VP in that office. so, everyone is selling to their family, their co worker, their neighbor, and promoting their friend to their down link (like MLM, you get a override commission).
Eventually, ppl just found out they only have 1 parent, 4 neighbors, and a few friend, after that, it is hard to sell an insurance product when you just part time. (and yes, I did sold my parent a policy. 20year level, and make my $500 bucks)
after that, I move on and went with my busy college life, (change out and GF was lot more exciting than selling insurance, ). 5 years later, I come cross my old neighbor, he is still in it, still excite about it, but moved from a 4000 sq ft house to a inner city rental, so, after all the hype, he didn’t adopt the change, lost in the game.
I did learn 2 thing over this, one is always ready to be an entrepreneur, get out of your comfort zone, do something exitng, that is the american way.
2 is all life insurance are underwriting product and guarantee by your state base on the face value even the company when bankrupt, term life is not god nor whole life is evil, they exist for their reasons, that is the insurance company must make money.
I usually now recommend to ppl, for your kid first born, buy a 100k whole life or universal life for $20-30 per month, since that don't change over life time, by the time they goto college, they may have 20k in it, they can cash it out for college is they need.
for ppl like us in 30 to 40, 1mil in term life is must, and supplement with a 100k whole or universal life, because when you in 50 or 60, term life is a lot more expensive then when you are young.
hahaha, life is exciting.............
A.L.Williams % Associates was a national agency in the late 80 and early 90's, later merge in Primerica, they was more like a MLM scheme, heavily marketing the BUY TERM AND INVEST THE DIFFERENTS idea, the sell mostly 100k 20year term to lower or middle income class along with a annuity product.
when I was still in college, I got introduced to the idea, went thru their 1 week boot camp, just like RE boot camp ppl promote now except it was free back then, not like RE boot camp wants 5k to go, a lot of hype, and a lot more hype, the one thing they tell you was to be successful, you must willing to get out of your COMFORT ZONE (like brother Miat said), and SELL SELL SELL. so, everyone went thru the boot camp become a free agent, the office I went had over 200 ppl at the one time. (and Yes, I did too, pass the state exam, got my license to kill, ready to make a million)
The head guy in the office was my neighbor, nice guy and nice family, 5 kids ( that is how I got in it) he got promoted to regional director while I was there, basically, anyone sell like 5 policy becomes a VP, and 20 policies is a senior VP, but he was the only director, so we had over 100 VP and 20 Senior VP in that office. so, everyone is selling to their family, their co worker, their neighbor, and promoting their friend to their down link (like MLM, you get a override commission).
Eventually, ppl just found out they only have 1 parent, 4 neighbors, and a few friend, after that, it is hard to sell an insurance product when you just part time. (and yes, I did sold my parent a policy. 20year level, and make my $500 bucks)
after that, I move on and went with my busy college life, (change out and GF was lot more exciting than selling insurance, ). 5 years later, I come cross my old neighbor, he is still in it, still excite about it, but moved from a 4000 sq ft house to a inner city rental, so, after all the hype, he didn’t adopt the change, lost in the game.
I did learn 2 thing over this, one is always ready to be an entrepreneur, get out of your comfort zone, do something exitng, that is the american way.
2 is all life insurance are underwriting product and guarantee by your state base on the face value even the company when bankrupt, term life is not god nor whole life is evil, they exist for their reasons, that is the insurance company must make money.
I usually now recommend to ppl, for your kid first born, buy a 100k whole life or universal life for $20-30 per month, since that don't change over life time, by the time they goto college, they may have 20k in it, they can cash it out for college is they need.
for ppl like us in 30 to 40, 1mil in term life is must, and supplement with a 100k whole or universal life, because when you in 50 or 60, term life is a lot more expensive then when you are young.
hahaha, life is exciting.............
Mold problem
by JY:
It
will take more work than you think... expect 15 - 20k, mold is
something will always comeback if not treat right in the beginning.
1. take all necessary step to find out what cost the flood, water pipe burst (easy fix) or foundation leak (tough luck), it must done before anything else.
2. gut all drywall 4feet up from the floor, and make sure no damage on anything above that.
3. rib out all insulation.
4. put a few dehumidifiers and fans around, try to suck all moisture out of the air.
4. treat all wood lumber and concrete floor, you can buy a sprayer and spray bleach concentrate to kill mold a few times, make sure they don't come back and seal with a mold killer at the end to save some money.
5. after all that, drywall and paint.
1. take all necessary step to find out what cost the flood, water pipe burst (easy fix) or foundation leak (tough luck), it must done before anything else.
2. gut all drywall 4feet up from the floor, and make sure no damage on anything above that.
3. rib out all insulation.
4. put a few dehumidifiers and fans around, try to suck all moisture out of the air.
4. treat all wood lumber and concrete floor, you can buy a sprayer and spray bleach concentrate to kill mold a few times, make sure they don't come back and seal with a mold killer at the end to save some money.
5. after all that, drywall and paint.
Saturday, October 11, 2014
How to manage 100+ units? appx 30 units per full time handyman..
JY:
appx 30 units per full time handyman..
there is no fix formula, its more correlated to your net cash flow.
base on my past experiences, 20 units can be near hands free, meaning your cash flow can afford to hire out, instead of doing all yourself.
right now, I have 3 handymans on 1099, we can fix 98% of all problems, but if it related to structure, or major mechanical problems, I have to use outside help.
appx 30 units per full time handyman..
there is no fix formula, its more correlated to your net cash flow.
base on my past experiences, 20 units can be near hands free, meaning your cash flow can afford to hire out, instead of doing all yourself.
right now, I have 3 handymans on 1099, we can fix 98% of all problems, but if it related to structure, or major mechanical problems, I have to use outside help.
Get rid of Pet smells in carpet
1. mix bleach 1 to 10, shampoo area few times.
2. diluted bleach 1 to 10 with water; haha, bleach can do wonders....
2. diluted bleach 1 to 10 with water; haha, bleach can do wonders....
How to open Maintenance USA account
JY has recommended this website. but when I called today, they need a electrician or plumer business license. anyone has an idea how to get around it? JY, SunshineCA, and others who know this, please help.
Answer:
Place an order over the phone first. They will call you back for licenses to process your order. you can then provide them your landlord home insurance to prove you have a business. You will have an account after that.
They only do business with business.
I went through the above process.
Flea questions
Hi, all the experts here. Continue with the flea problems, pls give us your suggestion. Thank you so much!
we owned small apt complex (2 buildings, total 12 apts). One apt got serious flea infestation and another apt above this one got minor infected. I finally forced the tenant to move the dogs out so that we can start the treatment. When checking the situation today, I have white socks covered on me. While staying inside for 3 to 5 minutes, I can see about 20 fleas jumped to my white socks and so I have to come out immediately.
To avoid the fleas jumping from one apt to another, we do not think we can bomb the apt. We will definitely get a professional exterminator.
1. Is that ok just to treat the 2 apt that have found fleas, or we have to get all 12 units treated?
2. How much is the average cost for a treatment for an apt (2 bed/2 bath, about 900 sqft)? Do we usually need several treatments? For the 2 infested one, I think we need several treaments. How about others?
3. Do the exterminator company usually have certain kind of waranty?
4. Is that reasonable to ask the tenant who caused the problem to pay for the extermination cost? How should we do that? Is that ok to ask him to pay back in 12 or 24 payments? He has to pay his rent twice each month and do not have much money left for this?Answer by JY:
1. there is no way you can treat it yourself at this point, everyday goes by, more eggs will hatch.
2. usually cost my $140 for 4 units if I do at same time.
3. at least 2 treatments needed.
4. you can ask that tenant pay for all or portion, its your call.
Its the mindset of from 0 to 1 - by JY
Creating your own cash machine--the naked truth.
By JY
most of us ordinary people, we didn't born with freedom that came with a hand down silver or gold or diamond spoon, the main reason we born to this world, is to feed the tube, and power the matrix.
financial freedom is relatively misleading term, more precisely, we should think of it is freedom from hard labor, aka, boss free.
How to break free, and be free. Per Robert's term, we need "a cash machine", it is what need to pay for the basics: food, shelter, and clothing, and it is also the machine can provide you extras, such as car, boat, or luxury designer shoes and clothes.
For many people, they would rather just have a day job, let someone else create this money machine for them,
But for the few, the answer is clear, we want to get away from this Rat Race (in Robert term) and start generating our own income.
There are no such things as life time job anymore, there always be endless supply of young and energized people, willing to take over your position.
The only way to have a lifetime job, is to create one yourself. but how willingly you want to go thru the dark tunnel and to do all the necessary work to establish that cash machine that will take care of you and your family?
Creating a money making cash machine? it is all about how to you use your expertise and skills, you should always investing in yourself, retooling for either a new job or new life style.
You can use your skill, create a money machine for others, and you be feeding the tube again, or you can use your skill, create a money machine yourself, and be free.
it is difficult to quit a job to start on your own. will it succeed or not, its beyond knowledge as well.
but your mindset, the red pill/blue pill question, will you or will you not to risk everything you got, to pull the plug off your back, is the key to success.
By JY
most of us ordinary people, we didn't born with freedom that came with a hand down silver or gold or diamond spoon, the main reason we born to this world, is to feed the tube, and power the matrix.
financial freedom is relatively misleading term, more precisely, we should think of it is freedom from hard labor, aka, boss free.
How to break free, and be free. Per Robert's term, we need "a cash machine", it is what need to pay for the basics: food, shelter, and clothing, and it is also the machine can provide you extras, such as car, boat, or luxury designer shoes and clothes.
For many people, they would rather just have a day job, let someone else create this money machine for them,
But for the few, the answer is clear, we want to get away from this Rat Race (in Robert term) and start generating our own income.
There are no such things as life time job anymore, there always be endless supply of young and energized people, willing to take over your position.
The only way to have a lifetime job, is to create one yourself. but how willingly you want to go thru the dark tunnel and to do all the necessary work to establish that cash machine that will take care of you and your family?
Creating a money making cash machine? it is all about how to you use your expertise and skills, you should always investing in yourself, retooling for either a new job or new life style.
You can use your skill, create a money machine for others, and you be feeding the tube again, or you can use your skill, create a money machine yourself, and be free.
it is difficult to quit a job to start on your own. will it succeed or not, its beyond knowledge as well.
but your mindset, the red pill/blue pill question, will you or will you not to risk everything you got, to pull the plug off your back, is the key to success.
maintenance usa - biggest maintenance supplies company
maintenance usa, biggest maintenance supplies
company in us, carries anything to everything, from bolts to hvac
parts, free delivery over $75, much cheaper then retail.
The other one is HD supply.
For all small or big landlords, when you reach a scale, standardize in everything,, save lots headaches.
[JY] but we usually call in the orders.
https://e-musa.com/
The other one is HD supply.
For all small or big landlords, when you reach a scale, standardize in everything,, save lots headaches.
[JY] but we usually call in the orders.
https://e-musa.com/
What if a tenant moved out and still own you some rents?
Can we ask help from debt collecting company?
Answer: only if you have a judgement.
Answer: only if you have a judgement.
Commercial RE - NNN Lease
What is a “Triple Net Lease” NNN or “Net Lease” and how is it used?
NNN (Triple Net Lease), triple net lease (most commonly used) or net lease requires the tenant to pay some or all of the property expenses which normally would be paid by the property owner who is also known as the "Landlord”. The tenant would also pay fixed rent as well as all or some of the expenses. These expenses can include taxes, insurance, maintenance, repairs, utilities and other items predetermined when lease is signed.
The exact items that are to be paid by the tenant are usually specified in the written lease before the lease is effective. In certain properties (that are leased by more than one tenant) such as a strip mall, the lease expenses that are "passed along" to the tenants are usually prorated to the tenants based on the size or square footage of the area occupied by that individual tenant. The actual term "Net Lease" must not be confused with the term "Gross Lease". In a “Triple net lease” the property owner will receive the rent "totally net" after the expenses passed through to tenants are all paid. In a “Gross lease” arrangement, the tenant pays a “gross” amount of rent, which then the landlord can use to pay the expenses.
Triple net leases are used in many ways and typically “Triple Net Leases” (NNN Properties) are equity investments rather than cash flow investments. A good example of this is when the investor will finance a significant portion of the purchase price (on a property) and make payments on the resulting mortgage with the lessee's monthly due rent. In this case there is usually a small amount left over as a “monthly profit” for the investor or sometimes called “positive cash flow”. The greater the investment payoff comes from the building of equity in the property and you are using the lessee's rent money to do so. After the mortgage obligation is paid off the resulting property can then be sold after this period of “equity building”. Usually this can last 5 to 20 years or the typical commercial mortgage term.
There are different types of net leases used in the commercial Real Estate industry. Written below are some of the different types of lease names used in the industry, and how they work.
A single net lease arrangement:
Triple Net Leases
A triple net lease requires the tenant to pay some or all of the property expenses which normally would be paid by the property owner.
A single net lease, or sometimes shortened to net or N is when the lessee or tenant is responsible for paying only the property taxes (in addition to the actual rent). This is not a common form of leasing. Most likely a double or triple net lease would be set up by the commercial Real Estate owner or “Landlord”
A double net lease arrangement:
In a double net lease or sometimes called a Net-Net or NN lease. The lessee or tenant would be responsible for taxes (real estate) & building insurance. In this case the “Lessors” (landlords) are responsible for any expenses incurred in relation to structural repairs and “common area” maintenance. This expense is sometimes calculated as a reserve payment and an example of this would be equal to 15 Cents per square foot. A double net lease is rarely used in the Commercial Real Estate industry.
A “Triple net” NNN lease arrangement:
A triple net lease is sometimes called Net/Net/Net or NNN lease. This is a lease agreement (on a real estate property) where the tenant or lessee agrees to pay all real estate taxes, maintenance, and building insurance or sometimes called “The 3 Nets” NNN. These expenses would need to be paid in addition to any “normal” expenses that are expected under the Triple Net Lease agreement. Also in such a lease, the tenant (lessee) is responsible for all costs associated with replacement of the structural building or repairs of the real estate property. The rents are usually lower in a “Triple net lease” rather than the other form of lease agreements written above. The NNN form of lease agreement is desirable for commercial real estate investors since the overhead expenses incurred by the real estate investor are dramatically decreased due to the transfer of financial responsibility (on the property) to the lessee. This however can have some tax disadvantages for the “Lessor” or “Landlord”. Some other things to consider include what if the lease produces a loss? These losses could be disallowed as a tax benefit due to “passive loss limitations” of the IRS Section # 469 or the at risk rules of IRC Section # 465. Also the significant income usually generated from this type of lease could cause a closely held C corporation to become a Personal Holding Company per IRS Code Section 542 and this could be subject to a “special tax”. Also keep in mind an S corporation could also be affected as well, per IRS Code Section 1362d3. The use of a “Triple net lease” NNN may be a prerequisite for credit tenant lease financing. This may also permit a lender to lend to the landlord on non recourse terms and conditions.
A “bondable lease” arrangement:
A “bondable lease” is sometimes called an “absolute triple net lease” or "hell or high water lease". This is when the most, extreme variation of a “triple net lease” NNN tenant carries every possible real estate related risk (to the property). The most note worthy of these additional risks include:
The obligations to rebuild after a casualty, regardless of the adequacy of insurance proceeds.
To pay rent, even after partial or full condemnation of the property.
These types of leases cannot be terminable by the tenant and rent abatements are not permissible. This lease concept is created to make the rent absolutely “net” under all prevailing circumstances. This would be the equivalent obligations of a bond and hence the name "Bondable Lease”. A good real estate example of this type of lease would be a “leaseback” arrangement. This would be when a retailer leases back a building it formerly owned and then continues to run the shop. The “bondable leases” are also typically used in a "credit tenant lease". This is where the main derivative of value is not “so much” the real estate of the property, but instead it’s the uninterrupted cash flow from the usually investment grade rated tenant.
NNN (Triple Net Lease), triple net lease (most commonly used) or net lease requires the tenant to pay some or all of the property expenses which normally would be paid by the property owner who is also known as the "Landlord”. The tenant would also pay fixed rent as well as all or some of the expenses. These expenses can include taxes, insurance, maintenance, repairs, utilities and other items predetermined when lease is signed.
The exact items that are to be paid by the tenant are usually specified in the written lease before the lease is effective. In certain properties (that are leased by more than one tenant) such as a strip mall, the lease expenses that are "passed along" to the tenants are usually prorated to the tenants based on the size or square footage of the area occupied by that individual tenant. The actual term "Net Lease" must not be confused with the term "Gross Lease". In a “Triple net lease” the property owner will receive the rent "totally net" after the expenses passed through to tenants are all paid. In a “Gross lease” arrangement, the tenant pays a “gross” amount of rent, which then the landlord can use to pay the expenses.
Triple net leases are used in many ways and typically “Triple Net Leases” (NNN Properties) are equity investments rather than cash flow investments. A good example of this is when the investor will finance a significant portion of the purchase price (on a property) and make payments on the resulting mortgage with the lessee's monthly due rent. In this case there is usually a small amount left over as a “monthly profit” for the investor or sometimes called “positive cash flow”. The greater the investment payoff comes from the building of equity in the property and you are using the lessee's rent money to do so. After the mortgage obligation is paid off the resulting property can then be sold after this period of “equity building”. Usually this can last 5 to 20 years or the typical commercial mortgage term.
There are different types of net leases used in the commercial Real Estate industry. Written below are some of the different types of lease names used in the industry, and how they work.
A single net lease arrangement:
Triple Net Leases
A triple net lease requires the tenant to pay some or all of the property expenses which normally would be paid by the property owner.
A single net lease, or sometimes shortened to net or N is when the lessee or tenant is responsible for paying only the property taxes (in addition to the actual rent). This is not a common form of leasing. Most likely a double or triple net lease would be set up by the commercial Real Estate owner or “Landlord”
A double net lease arrangement:
In a double net lease or sometimes called a Net-Net or NN lease. The lessee or tenant would be responsible for taxes (real estate) & building insurance. In this case the “Lessors” (landlords) are responsible for any expenses incurred in relation to structural repairs and “common area” maintenance. This expense is sometimes calculated as a reserve payment and an example of this would be equal to 15 Cents per square foot. A double net lease is rarely used in the Commercial Real Estate industry.
A “Triple net” NNN lease arrangement:
A triple net lease is sometimes called Net/Net/Net or NNN lease. This is a lease agreement (on a real estate property) where the tenant or lessee agrees to pay all real estate taxes, maintenance, and building insurance or sometimes called “The 3 Nets” NNN. These expenses would need to be paid in addition to any “normal” expenses that are expected under the Triple Net Lease agreement. Also in such a lease, the tenant (lessee) is responsible for all costs associated with replacement of the structural building or repairs of the real estate property. The rents are usually lower in a “Triple net lease” rather than the other form of lease agreements written above. The NNN form of lease agreement is desirable for commercial real estate investors since the overhead expenses incurred by the real estate investor are dramatically decreased due to the transfer of financial responsibility (on the property) to the lessee. This however can have some tax disadvantages for the “Lessor” or “Landlord”. Some other things to consider include what if the lease produces a loss? These losses could be disallowed as a tax benefit due to “passive loss limitations” of the IRS Section # 469 or the at risk rules of IRC Section # 465. Also the significant income usually generated from this type of lease could cause a closely held C corporation to become a Personal Holding Company per IRS Code Section 542 and this could be subject to a “special tax”. Also keep in mind an S corporation could also be affected as well, per IRS Code Section 1362d3. The use of a “Triple net lease” NNN may be a prerequisite for credit tenant lease financing. This may also permit a lender to lend to the landlord on non recourse terms and conditions.
A “bondable lease” arrangement:
A “bondable lease” is sometimes called an “absolute triple net lease” or "hell or high water lease". This is when the most, extreme variation of a “triple net lease” NNN tenant carries every possible real estate related risk (to the property). The most note worthy of these additional risks include:
The obligations to rebuild after a casualty, regardless of the adequacy of insurance proceeds.
To pay rent, even after partial or full condemnation of the property.
These types of leases cannot be terminable by the tenant and rent abatements are not permissible. This lease concept is created to make the rent absolutely “net” under all prevailing circumstances. This would be the equivalent obligations of a bond and hence the name "Bondable Lease”. A good real estate example of this type of lease would be a “leaseback” arrangement. This would be when a retailer leases back a building it formerly owned and then continues to run the shop. The “bondable leases” are also typically used in a "credit tenant lease". This is where the main derivative of value is not “so much” the real estate of the property, but instead it’s the uninterrupted cash flow from the usually investment grade rated tenant.
As a value RE investor, I think positive cash flow is the most important key.
[From online RE forum]
as a value RE investor, I think positive cash flow is the most important key.
there really isn't a good or bad time to buy real estate, the only thing it matter is, what is your entry point and what is your exit strategy.
in an up trend market, I only make a move when there is a 30-40% spread, in a down trend market, I need to see at least 50+% discount.
the 3 most frequently used ratio are, debt coverage, CAP rate, and cash on cash.
1. when I look at a property, I always use zero down, NOI/(interest to bank + interest to me)>=1.1
2. CAP, of course, I need to see 10% CAP.
3. CASH on CASH, 15% or more.
NPV, IRR, easy to do on paper, but in reality, hardly can be followed. RE as a small business, has too many unforeseen variables, any unexpected repair can wipe out the whole cash reserve.
as a value RE investor, I think positive cash flow is the most important key.
there really isn't a good or bad time to buy real estate, the only thing it matter is, what is your entry point and what is your exit strategy.
in an up trend market, I only make a move when there is a 30-40% spread, in a down trend market, I need to see at least 50+% discount.
the 3 most frequently used ratio are, debt coverage, CAP rate, and cash on cash.
1. when I look at a property, I always use zero down, NOI/(interest to bank + interest to me)>=1.1
2. CAP, of course, I need to see 10% CAP.
3. CASH on CASH, 15% or more.
NPV, IRR, easy to do on paper, but in reality, hardly can be followed. RE as a small business, has too many unforeseen variables, any unexpected repair can wipe out the whole cash reserve.
Thursday, October 9, 2014
Recommend a good book for RE investor
[From online forum]
only $16.19. It speaks directly to you--if you're an investor with a portfolio worth $100,000 or more. The author addresses the bread-and-butter issues facing that underserved segment of the equities investment community. He will tell you--
How to custom tailor your asset allocation to your personal circumstances
How to capture the recognized outperforming market anomalies in your portfolio
How to keep what you've got and avoid Wall street's wealth extraction machine
Author also passes along some invaluable retirement investing advice learned from Warren Buffett, and he explains the primary asset protection and tax minimization strategies that work for those in the high-net-worth bracket. Here are investment strategies for the affluent, as well as for those who are approaching affluence and are trying to take that big step forward.
http://www.amazon.com/The-Affluent-Investor-Financial-Protect/dp/076416564X
only $16.19. It speaks directly to you--if you're an investor with a portfolio worth $100,000 or more. The author addresses the bread-and-butter issues facing that underserved segment of the equities investment community. He will tell you--
How to custom tailor your asset allocation to your personal circumstances
How to capture the recognized outperforming market anomalies in your portfolio
How to keep what you've got and avoid Wall street's wealth extraction machine
Author also passes along some invaluable retirement investing advice learned from Warren Buffett, and he explains the primary asset protection and tax minimization strategies that work for those in the high-net-worth bracket. Here are investment strategies for the affluent, as well as for those who are approaching affluence and are trying to take that big step forward.
http://www.amazon.com/The-Affluent-Investor-Financial-Protect/dp/076416564X
good discussion on estate planning - by JY
By JY - From online forum
good discussion on estate planning 2009-06-07 21:50:07
good discussion on estate planning, thanks to baysouth...
来源: baysouth
严格说, 美国没有避税天堂.
很多人认为有了Trust就可省税, 这是误导. Trust的主要功能是避免Probate. Trust 本身是一个单独的纳税实体. A/B A/A trust等有上限限制, IRS 不可能让你设立一系列的Trust来逃避遗产税.
利用保险并非说你不缴纳遗产税, IRS 还是照常要收税, 只不过是利用保险创造出的leverage 给你提供了税款, 从而到达了省税的效果.
来源: jy101
Agree that A/B or A/B/C types trusts still have to face death taxes, most of the time, you purchases a life insurances policy in C trust to pay to taxes.
I think the best way to avoid death taxes will be small company like S-corp or LLC/LLP, you gift portion of shares as you grow old.
来源: baysouth
Small companies need to have buy/sell agreement, which is still an arrangement through life insurance, to raise the cost basis of the company to minimize taxes
As we can see from these threads, Life Insurance is an effective instrument to reduce death taxes, few other methods can as cost-effective
来源: jy101
the main adv of family limited partnership - ability to transfer / gift between partners without gift tax or estate tax.
family Limited Partnership (FLP)
A Family Limited Partnership, or FLP, is a limited partnership in which ownership is restricted to a confined group—family members. This aspect differs from other types of partnerships and corporations where transfers of interest are unrestricted or are publicly traded. The FLP is a valuable tool for centralizing management of a family business and passing limited partnership interests to the next generation.
A Family Limited Partnership is formed with a written Partnership Agreement. Provisions in the partnership agreement can restrict how or if partnership interests are transferred, sold, or encumbered. The FLP consists of general voting partners and limited non-voting partners. Typically, the senior generation acts as the general partners for the FLP and maintains control over partnership activities. The younger generation enters the partnership as limited partners, who hold an ownership interest in the partnership but little or no management authority. Eventually, limited partners transition to general partners.
Advantages of the FLP include:
* limiting ownership interests to family members,
* allowing for an incremental and smooth transfer from one generation to the next,
* having the ability to transfer partnership interests free of gift tax, and
* providing limited financial liability for limited partners.
An FLP must be registered with the state
来源: baysouth
有一利必有一弊 搞不好弄巧成拙
Family Limited Partnerships can be abusive tax-free wealth transfers. How does the family limited partnership work and what are the disadvantages? Two discount estate tax valutions of underlying assets are used as a tax deferral strategy when gifting to the younger generation.
Family limited partnerships, one such traditional limited partnership, have been over marketed as wealth transfer devises. Family limited partnerships are red flags for the Internal Revenue Service as abusive tax-free wealth transfers. Family partnerships have been widely propagated as the devise of choice for transferring the family business and other highly appreciated assets tax-free from parents to their children.
Different programs are available to transfer ownership and the management of a family business. The Family limited partnership is nothing more than the traditional partnership for which "only family members" can be partners as either general partners or limited partners.
Did you know that general partners of family partnerships are exposed to frivolous lawsuits, court judgments, and creditor seizures? The problem is avoided if an irrevocable trust such as the Ultra Trust174; (not a revocable trust) is used as the general partner of your family limited partnership.
How does the Family Limited Partnership Work?
The older generation (i.e. parents) become owners with 2% stake in the business and thereby establish themselves as general partners in a family limited partnership. Over a period of time, by gifting limited partnership interests, the younger generation (i.e. children) end up as limited partners with a 98% stake in the business. This all sounds wonderful and an almost ideal tax deferral strategy. But is there a catch to all of this great tax-free wealth transfer and strategy?
Gifting to the Younger Generation with a Family Limited Partnership
The result is highly appreciated assets are transferred from the estate of the parents to the children presumably tax-free. When carefully and properly implemented the family limited partnership is a useful tool. But there are better ways to achieve a significantly more efficient transfer of wealth.
Did you know the IRS considers these family limited partnership arrangements abusive when overzealous practitioners over claim two commonly used discounts in the valuation of underlying (highly appreciated) assets in estate tax valuations? The IRS comes down significantly hard, when these arrangements are made over a deathbed especially in the hours or days before death. Please note that there's an increasing congressional opposition to the use of family limited partnerships.
Two Discount Estate Tax Valuations of Underlying Assets in Family Partnerships are:
1. Lack of marketability discounting which is typically 15% to 35% reduced estate tax valuation due to a limited market for the business or the assets, if sold.
2. Limited minority interest discounting which is typically an additional 15% to 35% reduced estate tax valuation to the minority position (lack of control) in the business or underlying assets.
Combined, these two discounts can amount up to 70% or more. But how much is too much?
Disadvantages of Family Limited Partnerships:
1. Gifted property does NOT receive the "stepped-up" basis treatment that bequeathed property receives. Therefore the children, who have received "gifted partnership interests" may face unexpected capital gains tax liability. If discounting is reasonably and carefully applied, it's a significant tax saving devise. Keeping in mind that it's great for the parents, not so good for the children because of the unexpected capital gains tax liability that can be imposed on the children.
2. General partners are not insulated from potential lawsuits, judgments, or creditor seizures. This problem can be avoided if the general partner is the Ultra Trust. The parents as general partners are 100% in control of the assets and 100% responsible for a potential lawsuit. General partners will have no asset protection in these cases.
Family Business Succession Estate Planning:
If you have an interest in family business succession planning, there are several financially-engineered devises addressing the following important issues:
* Ownership of family business - Which of the family members will become the future owners of the business? What method or combination of methods is the most effective in consideration of asset protection and wealth preservation, elimination of probate, deferral of capital gains taxes, elimination of estate taxes, and reduction of taxes on earned income or possibly eliminate income taxes.
* Control of your family business - Which of the family members will become the future managers. Not all family members have management skills. Some family members should have voting control, while others must become silent partners.
* Dispute resolution - How will family members deal with potential disputes? What mechanism is fair to controlling and non-controlling family members?
* Employment - Which family members will be employed by the business?
来源: jy101
haha, good discussion, I totally agree the 2 disadvantage.
1. no step up value. this can be good and bad, no step up meaning assets pass on next generation tax free, the problem is when you try to sale, you will pay capital gain taxes, but 45% estate tax vs. 15% capital gain, it still a good deal.
2. partners are liable from law suit arise from assets, this can be solve by liability insurance.
good discussion on estate planning 2009-06-07 21:50:07
good discussion on estate planning, thanks to baysouth...
来源: baysouth
严格说, 美国没有避税天堂.
很多人认为有了Trust就可省税, 这是误导. Trust的主要功能是避免Probate. Trust 本身是一个单独的纳税实体. A/B A/A trust等有上限限制, IRS 不可能让你设立一系列的Trust来逃避遗产税.
利用保险并非说你不缴纳遗产税, IRS 还是照常要收税, 只不过是利用保险创造出的leverage 给你提供了税款, 从而到达了省税的效果.
来源: jy101
Agree that A/B or A/B/C types trusts still have to face death taxes, most of the time, you purchases a life insurances policy in C trust to pay to taxes.
I think the best way to avoid death taxes will be small company like S-corp or LLC/LLP, you gift portion of shares as you grow old.
来源: baysouth
Small companies need to have buy/sell agreement, which is still an arrangement through life insurance, to raise the cost basis of the company to minimize taxes
As we can see from these threads, Life Insurance is an effective instrument to reduce death taxes, few other methods can as cost-effective
来源: jy101
the main adv of family limited partnership - ability to transfer / gift between partners without gift tax or estate tax.
family Limited Partnership (FLP)
A Family Limited Partnership, or FLP, is a limited partnership in which ownership is restricted to a confined group—family members. This aspect differs from other types of partnerships and corporations where transfers of interest are unrestricted or are publicly traded. The FLP is a valuable tool for centralizing management of a family business and passing limited partnership interests to the next generation.
A Family Limited Partnership is formed with a written Partnership Agreement. Provisions in the partnership agreement can restrict how or if partnership interests are transferred, sold, or encumbered. The FLP consists of general voting partners and limited non-voting partners. Typically, the senior generation acts as the general partners for the FLP and maintains control over partnership activities. The younger generation enters the partnership as limited partners, who hold an ownership interest in the partnership but little or no management authority. Eventually, limited partners transition to general partners.
Advantages of the FLP include:
* limiting ownership interests to family members,
* allowing for an incremental and smooth transfer from one generation to the next,
* having the ability to transfer partnership interests free of gift tax, and
* providing limited financial liability for limited partners.
An FLP must be registered with the state
来源: baysouth
有一利必有一弊 搞不好弄巧成拙
Family Limited Partnerships can be abusive tax-free wealth transfers. How does the family limited partnership work and what are the disadvantages? Two discount estate tax valutions of underlying assets are used as a tax deferral strategy when gifting to the younger generation.
Family limited partnerships, one such traditional limited partnership, have been over marketed as wealth transfer devises. Family limited partnerships are red flags for the Internal Revenue Service as abusive tax-free wealth transfers. Family partnerships have been widely propagated as the devise of choice for transferring the family business and other highly appreciated assets tax-free from parents to their children.
Different programs are available to transfer ownership and the management of a family business. The Family limited partnership is nothing more than the traditional partnership for which "only family members" can be partners as either general partners or limited partners.
Did you know that general partners of family partnerships are exposed to frivolous lawsuits, court judgments, and creditor seizures? The problem is avoided if an irrevocable trust such as the Ultra Trust174; (not a revocable trust) is used as the general partner of your family limited partnership.
How does the Family Limited Partnership Work?
The older generation (i.e. parents) become owners with 2% stake in the business and thereby establish themselves as general partners in a family limited partnership. Over a period of time, by gifting limited partnership interests, the younger generation (i.e. children) end up as limited partners with a 98% stake in the business. This all sounds wonderful and an almost ideal tax deferral strategy. But is there a catch to all of this great tax-free wealth transfer and strategy?
Gifting to the Younger Generation with a Family Limited Partnership
The result is highly appreciated assets are transferred from the estate of the parents to the children presumably tax-free. When carefully and properly implemented the family limited partnership is a useful tool. But there are better ways to achieve a significantly more efficient transfer of wealth.
Did you know the IRS considers these family limited partnership arrangements abusive when overzealous practitioners over claim two commonly used discounts in the valuation of underlying (highly appreciated) assets in estate tax valuations? The IRS comes down significantly hard, when these arrangements are made over a deathbed especially in the hours or days before death. Please note that there's an increasing congressional opposition to the use of family limited partnerships.
Two Discount Estate Tax Valuations of Underlying Assets in Family Partnerships are:
1. Lack of marketability discounting which is typically 15% to 35% reduced estate tax valuation due to a limited market for the business or the assets, if sold.
2. Limited minority interest discounting which is typically an additional 15% to 35% reduced estate tax valuation to the minority position (lack of control) in the business or underlying assets.
Combined, these two discounts can amount up to 70% or more. But how much is too much?
Disadvantages of Family Limited Partnerships:
1. Gifted property does NOT receive the "stepped-up" basis treatment that bequeathed property receives. Therefore the children, who have received "gifted partnership interests" may face unexpected capital gains tax liability. If discounting is reasonably and carefully applied, it's a significant tax saving devise. Keeping in mind that it's great for the parents, not so good for the children because of the unexpected capital gains tax liability that can be imposed on the children.
2. General partners are not insulated from potential lawsuits, judgments, or creditor seizures. This problem can be avoided if the general partner is the Ultra Trust. The parents as general partners are 100% in control of the assets and 100% responsible for a potential lawsuit. General partners will have no asset protection in these cases.
Family Business Succession Estate Planning:
If you have an interest in family business succession planning, there are several financially-engineered devises addressing the following important issues:
* Ownership of family business - Which of the family members will become the future owners of the business? What method or combination of methods is the most effective in consideration of asset protection and wealth preservation, elimination of probate, deferral of capital gains taxes, elimination of estate taxes, and reduction of taxes on earned income or possibly eliminate income taxes.
* Control of your family business - Which of the family members will become the future managers. Not all family members have management skills. Some family members should have voting control, while others must become silent partners.
* Dispute resolution - How will family members deal with potential disputes? What mechanism is fair to controlling and non-controlling family members?
* Employment - Which family members will be employed by the business?
来源: jy101
haha, good discussion, I totally agree the 2 disadvantage.
1. no step up value. this can be good and bad, no step up meaning assets pass on next generation tax free, the problem is when you try to sale, you will pay capital gain taxes, but 45% estate tax vs. 15% capital gain, it still a good deal.
2. partners are liable from law suit arise from assets, this can be solve by liability insurance.
The incomplete idiot's guide to Living Trust - by JY
By JY - From online forum
the incomplete idiot's guide to Living Trust 2010-09-17 08:56:55
1. the advantage of living trust is preventing your assets going into court probation, which is a long and costly process.
your estate tax is base on your net worth, has nothing to do with setting up a trust. by setup a trust does not gain tax benefit, what you owe in death tax, you still owe, but you can prolong that tax till the second member die while your heirs can still receive a portion of your hard earn money.
there are many type of trust, each fit a special purpose needed, most frequently used is call A-B trust, where A is survivor, B is family, when one spouse die, assets at that time will divided in 2 parts, you can fund the B trust up to deceased spouse's federal estate tax exemption, and the remaining in A, which mean you don't need pay any estate tax at this time, but still able to pass thru portion of your assets to your heirs.
now, when you die, A trust then must distributed at the time, and pay the estate tax base on the asset in A.
you can direct how the asset is distributed, to whom, when or at what age.
if your net worth is XX mil, you should also consider A_B_C trust, where C can be just a life insurance policy on you, own by the trust and the face value can offsets the estate tax in A.
if your net worth is over XXXXX mil, then you should consider a charitable trust, where assets within goes to charity instead of going to IRS.
haha..
2. there is not much you can do to reduce the power of a trustee, when you name the trustee, you naming someone act for you, what you can do is to can name someone to audit the trustee's activities, if the trustee fail to perform or lie or steal, your heirs can file suit to release him from the trustee post, which is a painful process.
that is why I said the hardest part is to find someone you trust, I named my brother to oversee my kids, just because I am more close to my brother than the rest of my family..
3. you set of trust papers should include more than just the trust itself, you need an assignment agreement to assign all your personal affects, you should also appoint a durable general power of attorney before you lay in the hospitable, a medical power of attorney to decide you live or die, and you still need a living will for your own wish if you a vegetable, and lastly, your last will, tells your heirs what you want to with anything you left outside of your trust..
haha, now send me $500 for my time....
the incomplete idiot's guide to Living Trust 2010-09-17 08:56:55
1. the advantage of living trust is preventing your assets going into court probation, which is a long and costly process.
your estate tax is base on your net worth, has nothing to do with setting up a trust. by setup a trust does not gain tax benefit, what you owe in death tax, you still owe, but you can prolong that tax till the second member die while your heirs can still receive a portion of your hard earn money.
there are many type of trust, each fit a special purpose needed, most frequently used is call A-B trust, where A is survivor, B is family, when one spouse die, assets at that time will divided in 2 parts, you can fund the B trust up to deceased spouse's federal estate tax exemption, and the remaining in A, which mean you don't need pay any estate tax at this time, but still able to pass thru portion of your assets to your heirs.
now, when you die, A trust then must distributed at the time, and pay the estate tax base on the asset in A.
you can direct how the asset is distributed, to whom, when or at what age.
if your net worth is XX mil, you should also consider A_B_C trust, where C can be just a life insurance policy on you, own by the trust and the face value can offsets the estate tax in A.
if your net worth is over XXXXX mil, then you should consider a charitable trust, where assets within goes to charity instead of going to IRS.
haha..
2. there is not much you can do to reduce the power of a trustee, when you name the trustee, you naming someone act for you, what you can do is to can name someone to audit the trustee's activities, if the trustee fail to perform or lie or steal, your heirs can file suit to release him from the trustee post, which is a painful process.
that is why I said the hardest part is to find someone you trust, I named my brother to oversee my kids, just because I am more close to my brother than the rest of my family..
3. you set of trust papers should include more than just the trust itself, you need an assignment agreement to assign all your personal affects, you should also appoint a durable general power of attorney before you lay in the hospitable, a medical power of attorney to decide you live or die, and you still need a living will for your own wish if you a vegetable, and lastly, your last will, tells your heirs what you want to with anything you left outside of your trust..
haha, now send me $500 for my time....
RE Success story - I can tell you what I know about me..
by JY - From online Forum
would not show me his bank account, but I can tell you what I know about me..
1. I hold a 7.4mil rental portfolio, total of 91 units, in the middle of nowhere in the state of Indiana, we Hoosiers got really excited lately since we never had any presidential candidates campaigning in our state, thanks to Hillary and Obama, but I am not voting for either one of them.
2. I grossed about 600k in rental income with positive cash flow a bit under 100k.
3. I paid over 250k in interest payment in varies kind, some bank notes, some contracts.
4. I paid over 120k in property taxes each year.
5. I wrote off over 150k in depreciation last year, of which 29k of it went against other business income from other things.
6. I file every year but had not pay federal a dime for last 5 years, actually uncle sam pays me each year for having 2 wonderful kids, but too bad I still have to pay in for state tax maybe about 4k or so.
7. I did not use a big accounting firm but I been with my CPA for 19 years, I bet I pay more than most people pay an accountant in 10 years, my bill for this year just for yearend was $9800, now if anyone questioning this bill, I will glad to show you but you have to chip in to help pay for it.
now you can call me a liar....
would not show me his bank account, but I can tell you what I know about me..
1. I hold a 7.4mil rental portfolio, total of 91 units, in the middle of nowhere in the state of Indiana, we Hoosiers got really excited lately since we never had any presidential candidates campaigning in our state, thanks to Hillary and Obama, but I am not voting for either one of them.
2. I grossed about 600k in rental income with positive cash flow a bit under 100k.
3. I paid over 250k in interest payment in varies kind, some bank notes, some contracts.
4. I paid over 120k in property taxes each year.
5. I wrote off over 150k in depreciation last year, of which 29k of it went against other business income from other things.
6. I file every year but had not pay federal a dime for last 5 years, actually uncle sam pays me each year for having 2 wonderful kids, but too bad I still have to pay in for state tax maybe about 4k or so.
7. I did not use a big accounting firm but I been with my CPA for 19 years, I bet I pay more than most people pay an accountant in 10 years, my bill for this year just for yearend was $9800, now if anyone questioning this bill, I will glad to show you but you have to chip in to help pay for it.
now you can call me a liar....
JY - I am involve with most phases of RE
By JY - From online RE Forum
I am involve with most phases of RE, from land development to 2008-07-17 19:36:45
I am involve with most phases of RE, I have a LLC or partnership setup for each phase, land development, concrete/excavating, new construction, rehab/remodel.
rentals are actually just a side products in the beginning, something we accumulated over 16 years, but it is began to show its cash flow power last few years, in 07, rentals counts about 100k of my income.
is land lording hard work? yes it is, but lucky I don't have to do any physical work, in the beginning, my construction crew help maintains them, but last 3 years, I have 2 full time handyman assigned just for rentals.
08 is a tough year for real estate, construction side, I did not start any new construction project this year, first time ever. land development side, we only sold half the lots as we did last year, concrete side, only a few jobs, rehab side, so far 1 remodel.
I am involve with most phases of RE, I have a LLC or partnership setup for each phase, land development, concrete/excavating, new construction, rehab/remodel.
rentals are actually just a side products in the beginning, something we accumulated over 16 years, but it is began to show its cash flow power last few years, in 07, rentals counts about 100k of my income.
is land lording hard work? yes it is, but lucky I don't have to do any physical work, in the beginning, my construction crew help maintains them, but last 3 years, I have 2 full time handyman assigned just for rentals.
08 is a tough year for real estate, construction side, I did not start any new construction project this year, first time ever. land development side, we only sold half the lots as we did last year, concrete side, only a few jobs, rehab side, so far 1 remodel.
Eviction Bible
By JY - From online
JY's bible to eviction............. 2008-07-17 19:09:01
different state has different eviction rules...in Indiana, you can not evict an tenant yourself unless they move out voluntary, by state law, landlord can not just kick them out, or change the lock, or cut off utilities if landlord pays utilities.
here are steps I do.
1. oral notice on due day.
2. written notice after 5days later, demand tenant to move out in 10days, you must give them 10 days under state law.
3. if they refuse to move, file small claims court ASAP, request court order eviction. when you file, request notice to be deliver by sheriff, not certify mail, because tenant can reject certify mail and that will count as no delivery, only when the sheriff can hand them the notice counts.
4. soon as you obtain a court eviction notice, then you have the rigth to thru all your tenant's stuff out on the street( which I love to do, haha), if they refuse to leave, call the sheriff, have the cops come help put their stuff out on the street.
5. drag their ass back to count for damage and back rent, make sure you keep detail record of repair and damage. pictures tells everything, add up all the late charges and early termination penalties, plus the time you spend on it, charge the tenant $50 per hour for the time you make up( the judge may deny this fee, but would not hurt to try).
6. after the damage award, motion for a court ordered garnishment on their wage if they have a job.
7. if they don't have a job, then take their ass to court once a month. unfortunately, you can not put them in jail for owe you money, but if they miss any court date, then motion to cited for Contempt of Court, if they miss the second time, then motion the court issue a body attachment for failure to appear, which is a civil warrant they will spend up to 6 month in jail, and the cash bond goes to pay for the judgment.
8. on December of each year, request the court to garnish their tax return check before the file on January, if they cash their tax check, then you can again request the court for contempt, send their ass to jail for a couple day.
good luck
JY's bible to eviction............. 2008-07-17 19:09:01
different state has different eviction rules...in Indiana, you can not evict an tenant yourself unless they move out voluntary, by state law, landlord can not just kick them out, or change the lock, or cut off utilities if landlord pays utilities.
here are steps I do.
1. oral notice on due day.
2. written notice after 5days later, demand tenant to move out in 10days, you must give them 10 days under state law.
3. if they refuse to move, file small claims court ASAP, request court order eviction. when you file, request notice to be deliver by sheriff, not certify mail, because tenant can reject certify mail and that will count as no delivery, only when the sheriff can hand them the notice counts.
4. soon as you obtain a court eviction notice, then you have the rigth to thru all your tenant's stuff out on the street( which I love to do, haha), if they refuse to leave, call the sheriff, have the cops come help put their stuff out on the street.
5. drag their ass back to count for damage and back rent, make sure you keep detail record of repair and damage. pictures tells everything, add up all the late charges and early termination penalties, plus the time you spend on it, charge the tenant $50 per hour for the time you make up( the judge may deny this fee, but would not hurt to try).
6. after the damage award, motion for a court ordered garnishment on their wage if they have a job.
7. if they don't have a job, then take their ass to court once a month. unfortunately, you can not put them in jail for owe you money, but if they miss any court date, then motion to cited for Contempt of Court, if they miss the second time, then motion the court issue a body attachment for failure to appear, which is a civil warrant they will spend up to 6 month in jail, and the cash bond goes to pay for the judgment.
8. on December of each year, request the court to garnish their tax return check before the file on January, if they cash their tax check, then you can again request the court for contempt, send their ass to jail for a couple day.
good luck
JY - Invest in RE is more of buying yourself a job
By JY (From online forum)
Invest in RE is more of buying yourself a job... 2009-01-31 07:35:52
anyone that is in RE longer than 10 years should already know the growth pain, when you first started, only few units on hand, you do everything yourself, 90% of RE investor quit at this stage, but as you grow to 30 or more units, you can afford to have full time helps, bank will look at you in a better way, then your job become a bit easier, but compare to putting money in CD or I-bond, it still is a hard job, and requires patient and consistency over long period of time.
I never encourage people invest in RE blindly, I always tell them to think not only twice but three times before they do, I had post here many times to discourage people to chase high appreciation on RE investing, but RE's magic is definitely there, it just take a long long time for you to know it, 8% return on CD or I-bond maybe great but will never make you financially free.
I believe all the people comes to this forum are highly educated, and I bed most of you are MS or PHD or even higher, but how many are you working at a dead end job that you hate and worry about lay off tomorrow? I am glad I never have to worry about it.
anyone that is in RE longer than 10 years should already know the growth pain, when you first started, only few units on hand, you do everything yourself, 90% of RE investor quit at this stage, but as you grow to 30 or more units, you can afford to have full time helps, bank will look at you in a better way, then your job become a bit easier, but compare to putting money in CD or I-bond, it still is a hard job, and requires patient and consistency over long period of time.
I never encourage people invest in RE blindly, I always tell them to think not only twice but three times before they do, I had post here many times to discourage people to chase high appreciation on RE investing, but RE's magic is definitely there, it just take a long long time for you to know it, 8% return on CD or I-bond maybe great but will never make you financially free.
I believe all the people comes to this forum are highly educated, and I bed most of you are MS or PHD or even higher, but how many are you working at a dead end job that you hate and worry about lay off tomorrow? I am glad I never have to worry about it.
[From online] RE Success Story - My life in RE (Part 3)
By JY
I had been involve with RE for 16 years since I got out of college, it is by far the best tool to acculmulate wealth that I know.
My profession by trade is ex-daytrader(10 years, did make some and did lose a lot, thanks to Amzon, Lu, Exds and some others), now Fulltime Super DAD( don't pay alot but the fun is priceless ), small business owner(pays good but getting up at 9 is hardest part), part time bill collector(goto court once a week minimum go after deadbeat tenants), and the rest of my spare time, RE.
I involve with many phase of RE, from land development to construction to we all know what - LandLord, Landlording is not the easiest task, most Landlord give up after a few units, because the time and money they had to spend on it, what they don't know is there is light at the end of the tunnel, the more unit you have, less headache you have because you can then hire out, basically yes, economic of scales.
Leverage is the a important tool, but it is also the biggest barrier, Fanny Mae used to limited 10 mortgage per SS#, and now I think they lower that to 4 mortgage, so we have to do some creative financing, there got to be 100s of book on this subject, you just have to learn it and convince people and make it work for you. I am not talking about unlimited leverage, I am talking about controlled leverage, a leverage you must comfortable with, off my 7.4 mil portfolio, I personally invested less than 100k in it, the rest of money are from refi, rehab, land sale and flipping.
1. my avg per unit value at apartments 50k, duplex to 4plex at 75k, SFH range from 80k to 200k. My cost are much less than that, because more than half of them are once bankown REO, I buy them less than 50% on market value, rehab then refi at 75% and I pocket the cash. (I know, this is sub-sub-prime, and this is how the banks lose all the money)
2. my avg mortgage is less than 40k per unit, but I carry a highter interest rate ( mostly at 6.75 but some are as high as 7.875 ), to me, even 10% is cheap money if there is money to be make.
3. Property tax rate is 1.6% (120/7400), yes
4. Monthly rent avg $550 - close, some 1 bedroom unit low as $375, some SFH is high is $950.
5. my area has a few world class orthopedic company around, so the avg appreciation is better than other area in Indiana, house under $150k still appreciated 10% last year, while overall market here is 3% to 5%. so cheaper houses has its own advantages.
6. my avg net profit per unit is about $100 per month.
thanks everyone for reading
I had been involve with RE for 16 years since I got out of college, it is by far the best tool to acculmulate wealth that I know.
My profession by trade is ex-daytrader(10 years, did make some and did lose a lot, thanks to Amzon, Lu, Exds and some others), now Fulltime Super DAD( don't pay alot but the fun is priceless ), small business owner(pays good but getting up at 9 is hardest part), part time bill collector(goto court once a week minimum go after deadbeat tenants), and the rest of my spare time, RE.
I involve with many phase of RE, from land development to construction to we all know what - LandLord, Landlording is not the easiest task, most Landlord give up after a few units, because the time and money they had to spend on it, what they don't know is there is light at the end of the tunnel, the more unit you have, less headache you have because you can then hire out, basically yes, economic of scales.
Leverage is the a important tool, but it is also the biggest barrier, Fanny Mae used to limited 10 mortgage per SS#, and now I think they lower that to 4 mortgage, so we have to do some creative financing, there got to be 100s of book on this subject, you just have to learn it and convince people and make it work for you. I am not talking about unlimited leverage, I am talking about controlled leverage, a leverage you must comfortable with, off my 7.4 mil portfolio, I personally invested less than 100k in it, the rest of money are from refi, rehab, land sale and flipping.
1. my avg per unit value at apartments 50k, duplex to 4plex at 75k, SFH range from 80k to 200k. My cost are much less than that, because more than half of them are once bankown REO, I buy them less than 50% on market value, rehab then refi at 75% and I pocket the cash. (I know, this is sub-sub-prime, and this is how the banks lose all the money)
2. my avg mortgage is less than 40k per unit, but I carry a highter interest rate ( mostly at 6.75 but some are as high as 7.875 ), to me, even 10% is cheap money if there is money to be make.
3. Property tax rate is 1.6% (120/7400), yes
4. Monthly rent avg $550 - close, some 1 bedroom unit low as $375, some SFH is high is $950.
5. my area has a few world class orthopedic company around, so the avg appreciation is better than other area in Indiana, house under $150k still appreciated 10% last year, while overall market here is 3% to 5%. so cheaper houses has its own advantages.
6. my avg net profit per unit is about $100 per month.
thanks everyone for reading
[From online] RE Success Story - My life in RE (Part 2)
By JY
My life in RE, Part 2 2008-07-17 19:01:21
1. indiana is secondary market, rate of return are much lower than prime area like chicago, rents are from 500 a one bedroom to 850 a four bedroom, turning property over to PM can save a lot headache, but the 10% is about all you make on the cash flow. I act as the PM and have a crew to do the physical works.
2. house price on the local market have already go up 50% to 80% for the low end houses over the last 10 years, but most of the entry level housing are still in 70 to 115k range. many of my SFH unit are double now since I bought, they were in the 50k to 90k range. and all my multi-unit properties were bought under 50k per unit.
3. and I am not that old, still almost 30 year before I reach retire age.
thanks for all, I had never wrote anything in my life, I just happen to brouse thru the site, and saw everyone sharing their stories, so I decide to put my 2 cents in.
My life in RE, Part 2 2008-07-17 19:01:21
1. indiana is secondary market, rate of return are much lower than prime area like chicago, rents are from 500 a one bedroom to 850 a four bedroom, turning property over to PM can save a lot headache, but the 10% is about all you make on the cash flow. I act as the PM and have a crew to do the physical works.
2. house price on the local market have already go up 50% to 80% for the low end houses over the last 10 years, but most of the entry level housing are still in 70 to 115k range. many of my SFH unit are double now since I bought, they were in the 50k to 90k range. and all my multi-unit properties were bought under 50k per unit.
3. and I am not that old, still almost 30 year before I reach retire age.
thanks for all, I had never wrote anything in my life, I just happen to brouse thru the site, and saw everyone sharing their stories, so I decide to put my 2 cents in.
[From online] RE Success Story - My life in RE (Part 1)
By JY
My life in RE. 2008-07-17 19:00:33
Story of my RE life...
I came back to indiana in 1993 after college, that is when I first start to investin RE, The area I am in is about 2 hours drive from chicago, also consider the orthopedic capital of the world, all the major orthopedic company are headquater here, this county has over 100 lakes, including the biggest natural lake in Indiana, growth in over all RE is about 4-5 percent per year while lake front property is 10-15 percent depending on the size of the lake. Indiana is secondary market in RE, property appreciation growth are slower than other prime markets.
The first RE investment I did was a 4-plex, with a borrowed 20% down, paid retail price and it did cash flow itself.
I am then begin to invest in SFH since SFH are lot easier to rent out. the first two SFH, I paid retail price for them, in 1995 I can buy a property in the 45k to 60k range, rents are from $450 to $600 range, about 1 percent of the purchases price, the rule of thumb was 1% of the purchase price it will flow itself. now entry level home are in the range of 70k to 110k, while new constructions are in 230k and on up.
As time goes, I began to rehab, I go to auctions, forecloser, sheriff sale, buying property under stress sale, establish a good relationship with local agents, buying property 50-60% of
market value. then spend 10 to 15k to rebab, then refinance out at 70% Loan to value and holding.
Over the years, I had established a good relationship with local agents, they know what I need, I can get the listing before it goes on to MLS system, I can buy them before anyone else knows. Also, maintain a good relationship with Hardmoney lenders, and local bank, I can easily access to $500k hardmoney without any paperwork but at 12% interest rate for short term finance.
I started with renting, then rehab, then flipping, because I can buy cheap and rehab cheap, I can turn around make 25k to 50k in a month with all OPM.
I also started to build in 2002, I am build 3 to 5 spec house a year, maintain a crew that half in construction half in repair rentals.
In 2004, I begin to invest in land and land development, now partner in a 132 lot subdividtion land development.
The latest adventure is I just purchased a 9700 sf commerical condo complex, 6 unit at all, at about 55% of the market value, been rehabing for 3 month, had 40% space leased, if all leased
out, I will have a $2700 positive cash flow just from it.
Last year, I sold my house (5000 sq ft) on the hill facing the lake, and downsized to a lake front house (only 2900 sq ft), it is also purchased in a stressed sale, tear down the back half, and rebuild it. now is worth 745k, only had 560k in it.
So are these hard work have a good return? Well, I had have accumulated 67 residential units for rent, a commerical complex that is going subdivided in 9 units, a partnership in a subdividsion that is 30% sold, 3 spec house now are under construction or near complete. ovall all a profolio of $7.6 million in properties (also owe a lot), and a positive cash flow to provide for our families for many years to come. believe it or not, I had never got a paycheck from any body.
This was done step-by-step, one project at a time, over a fifteen-year period. my goals are simple and extremely well thought out. I want to accumulate a portfolio of about 200 units, which I feel I can continue to manage on my own.
Don't get me wrong, Landlording is hard, you have to ask yourself that do you want to get up in the middle of the night to make a repair call? do you have the time to go after tenanat if they don't pay? do you willing to kick the tenant out as soon as they behind even it is -10% outsize? do you want to go to court 2 or 3 times a month for either eviction or collection? are you willing to take them back to court every month to collect your backrent? do you feel sorry if you have to send them to jail if they don't show up in court?
landlord is more than a full time job. but I am still enjoying it.
My life in RE. 2008-07-17 19:00:33
Story of my RE life...
I came back to indiana in 1993 after college, that is when I first start to investin RE, The area I am in is about 2 hours drive from chicago, also consider the orthopedic capital of the world, all the major orthopedic company are headquater here, this county has over 100 lakes, including the biggest natural lake in Indiana, growth in over all RE is about 4-5 percent per year while lake front property is 10-15 percent depending on the size of the lake. Indiana is secondary market in RE, property appreciation growth are slower than other prime markets.
The first RE investment I did was a 4-plex, with a borrowed 20% down, paid retail price and it did cash flow itself.
I am then begin to invest in SFH since SFH are lot easier to rent out. the first two SFH, I paid retail price for them, in 1995 I can buy a property in the 45k to 60k range, rents are from $450 to $600 range, about 1 percent of the purchases price, the rule of thumb was 1% of the purchase price it will flow itself. now entry level home are in the range of 70k to 110k, while new constructions are in 230k and on up.
As time goes, I began to rehab, I go to auctions, forecloser, sheriff sale, buying property under stress sale, establish a good relationship with local agents, buying property 50-60% of
market value. then spend 10 to 15k to rebab, then refinance out at 70% Loan to value and holding.
Over the years, I had established a good relationship with local agents, they know what I need, I can get the listing before it goes on to MLS system, I can buy them before anyone else knows. Also, maintain a good relationship with Hardmoney lenders, and local bank, I can easily access to $500k hardmoney without any paperwork but at 12% interest rate for short term finance.
I started with renting, then rehab, then flipping, because I can buy cheap and rehab cheap, I can turn around make 25k to 50k in a month with all OPM.
I also started to build in 2002, I am build 3 to 5 spec house a year, maintain a crew that half in construction half in repair rentals.
In 2004, I begin to invest in land and land development, now partner in a 132 lot subdividtion land development.
The latest adventure is I just purchased a 9700 sf commerical condo complex, 6 unit at all, at about 55% of the market value, been rehabing for 3 month, had 40% space leased, if all leased
out, I will have a $2700 positive cash flow just from it.
Last year, I sold my house (5000 sq ft) on the hill facing the lake, and downsized to a lake front house (only 2900 sq ft), it is also purchased in a stressed sale, tear down the back half, and rebuild it. now is worth 745k, only had 560k in it.
So are these hard work have a good return? Well, I had have accumulated 67 residential units for rent, a commerical complex that is going subdivided in 9 units, a partnership in a subdividsion that is 30% sold, 3 spec house now are under construction or near complete. ovall all a profolio of $7.6 million in properties (also owe a lot), and a positive cash flow to provide for our families for many years to come. believe it or not, I had never got a paycheck from any body.
This was done step-by-step, one project at a time, over a fifteen-year period. my goals are simple and extremely well thought out. I want to accumulate a portfolio of about 200 units, which I feel I can continue to manage on my own.
Don't get me wrong, Landlording is hard, you have to ask yourself that do you want to get up in the middle of the night to make a repair call? do you have the time to go after tenanat if they don't pay? do you willing to kick the tenant out as soon as they behind even it is -10% outsize? do you want to go to court 2 or 3 times a month for either eviction or collection? are you willing to take them back to court every month to collect your backrent? do you feel sorry if you have to send them to jail if they don't show up in court?
landlord is more than a full time job. but I am still enjoying it.
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