re: TOS: Being a landlord

#1- Get a 1007 Rent Schedule. This is done by a 3rd party so you arne't going off the good word of someone trying to sell you something. If the 1007 seems lower than what the seller has as his rent roll, go with the lower one. You'll need the 1007 for financing anyway. If you want to sound smart, ask for the "ten oh seven" not the "one zero zero seven" form. The appraiser will do this.

#2- You won't be able to get a traditional mortgage on this one. Too many units. You'll need to put alot more money down than you think, and may be required to offer other assets besides the subject property as collateral. The rate won't be as low, it will probably be adjustable. It may even have a balloon. The finance rep will tell you no problem, we refi before the balloon and you'll have more equity and we'll slide you into something sweet... it is a lie.

#3- The mortgage interest won't necessarily be a write off on your personal taxes like a normal mortgage would. It's still an expense that you can write off in your LLC, but LLC's have higher tax rates than personal taxes, generally speaking, so whatever benefit you might have thought you'd get from the mortgage interest deduction may not actually exist for you.

#4- As already suggested, set up a fund, start with $5000 up front, in a bank account, and that is your maintenance fund. Take 10% of your gross rent and put it in that fund, on top of the $5000 you start with. Don't get excited when that fund starts to approach $10k, I assure it's about to get cleaned out on something.


#5- A person offering to sell a property that is renting 2x what the mortgage would be on the selling price is hiding something. As a prospective buyer, you have to find out what it is. Just making up some ratio-accurate numbers, why would a guy making $2000/m in rent, right now, sell the property for $100,000? He's making $24,000 a year. He knows he's about to get eminent-domained or he knows he's coming up on another $100k he'll have to put in the place, because the roof/septic/pipes/hvac/water heater/appliances/security/fire alarm/fire suppression are all end-of-life.

Edit to Add- He could have some little $10k thing that needs to be done, but will require a permit to do. When you have to get a permit, and the inspector comes through, you will be required to bring everything up to code, even it it is 50 years old. There is no "grandfather" clause on most of that shite. That could be another reason they seller is practically walking away from it. He knows a $10k fix on something is going to cost him $100k in other upgrades to get his renewed certificate of occupancy.

There may also be liens on the property. Sellers don't have to disclose liens they don't know about, if you know what I mean.

First thing I would do is find a good friend who does real estate / title law and get an abstraction done. Second thing I would do is find a good friend who does appraisals in the area and get a 1007 done.

I wouldn't even schedule a full appraisal or property inspection until I walked the property myself. Take note of how old/shitty the appliances are. Find the breaker panels, open them, are the individual breakers labeled? How old do the hvac units look? Go on a hot day in the afternoon and see if they sound like bb's rattling around inside. Is the landscaping going to be a bitch? Is the place surrounded by kudzu? You may not give a shite about the landscaping, but the city/county does...

Thats all I got at the moment.