From: "Paul Thomas, CPA" 
Newsgroups: misc.invest.real-estate misc.legal misc.taxes
Subject: Re: Real Estate Investment Tax Question
Date: Wed, 28 Nov 2007 17:20:46 -0500
Bytes: 3186


 wrote
>I didn't realize at the time but my first post might be misleading; so
> I'll try to clarify...
>
> The original $1M came from an investment pool (as opposed to a loan
> from a bank).  Going to several non-institutional investors, my friend
> raised money for precisely this purpose.  The intention is to take
> this $1M (basically cash), purchase property A outright (whose market
> value is $1M) and use it to secure the $750K loan from a bank.  The
> idea is that the bank sees the $1M property securing the loan and
> provides the $750K (again, essentially cash) which is then used to buy
> another property outright, etc.
>
> I don't know if this makes much difference, but if it does, I'd
> appreciate any added advice.





These "investors" will want an equity position in the building, and possibly 
an equity position in the other properties.  If these "investors" are not in 
an equity position, then the money they put up is a loan and has to be 
disclosed as such to avoid a stay at the Graybar Hotel.

Your implication is that the only expenses you'll incur on the rental 
property is the mortgage payment and property taxes.   I hate to break it to 
you, but you will have many more expenses than those few.  Insurance comes 
to mind, although you may be factoring that into the mortgage payment, but 
if so, why not include property taxes as well?  Repairs, maintenance, 
utilities, advertising, and what do you do if a unit becomes vacant for a 
few months - or longer?  What if it's more than just one unit?

Do you know what the vacancy rates are in that area for that type of 
property?  If you intend on 100% rental 100% of the time, you'll be 
dissatisfied at the outcome.






-- 
Paul A. Thomas, CPA
Athens, Georgia