Are we crazy?!

[3Diamonds]

from the following list I took off the internet:
                   Accounting Expenses            License Fees                         Snow Removal
                  Advertising                            Office Expenses                    Supplies
                  Attorney Fees                        Pest Control                          Telephone
                  Insurance                               Property Management         Trash Removal
                  Janitorial Service                   Property Taxes                      Travel Expenses
                  Lawn Care                            Repair Costs                         Vehicle Expense
                 Leasing Commissions           Resident Manager                Utilities
                 Legal Fees                            Salary and Wages                 Etc.

The only operating expenses we are incurring are:

Our insurance policy will change
We have $0 advertising expense (yay craigslist!)
and we are paying his utilities, which is considered in above figures.
Everything else is covered in our Common Charges.

I would say that most of these items my tenants pay for our property #1.....

[propertymanager]

We're making a little progress.  At least you do now understand that you have at least a few operating expenses.  For example, you've already said that you have taxes $3,200 per year ($265 per month) and insurance (probably at least $100 per month for NOO Landlord Insurance).  I'm sure that you realize that homeowner's insurance won't cover losses if you're renting it out.  Then, you have utilities of about $250 per month.  Additionally, you have HOA of $440 per month, which only covers things on the outside of the unit.  So, even if we pretend that you are somehow exempt from all other normal expenses, you've already got operating expenses of $1,055.  Not quite the zero ($0.00) that you were claiming yesterday.

Now, let's talk about your negative amortization loan.  You claim that the $1,280 payment includes the taxes.  If so, that means you're only paying interest in the amount of $1,015.  The interest on a $300,000, 30 yr, NOO loan is $2,000 per month.  Therefore, even though this isn't an operating expense, you're really LOSING another $1,000 per month in negative amortization.  That is money that is being tacked onto your principle.  You can only ignore that loss if you're in fantasy land!!!

Back to operating expenses.  How about management?  Somebody is managing it and that is costing you something.  Are you driving to the property to show it to potential tenants?  Are you screening them?   Do you  have a lease?  Did you print that off your computer?  Does your printer use ink?  So even if your time is worth zero ($0.00), it is costing you something.

How about maintenance?  What happens if you get a really bad tenant that trashed the place?  That happens!  So far, you've been lucky.  What happens if your luck doesn't hold out?  One of my friends had a tenant do more than $10,000 worth of damage to her house.  I've had many instances where tenants have done damage.  Are you exempt?

What happens if your tenant slips and falls?  Chances are that they will see one of those scumbag contingency lawyers on TV and sue you!  Are you exempt from that?

Vacancies?  Do those ever happen in NYC?  What if the tenant stops paying and you must evict them?  Is that free in your area or do the liberal laws in your area mean months of vacancy and expensive court costs and legal fees?

What you're basically doing is pretending that everything will go perfectly.  You could get very lucky and maybe that will happen.  However, you could also be unlucky and have a nightmare tenant that destroys the place; doesn't pay rent; and works the legal system to stay in your property for months without paying.

Finally, let's look at what happens if everything goes PERFECTLY.

Gross rents:  $2,775
Mortgage:  Gimmick Loan  $1,015 paying part of the interest
Interest tacked on your principle:  $1,000
Partial operating expenses: $1,055 (only taxes, insurance, HOA fees, utilities)

Monthly Loss:  $295  (OUCH!)  And that is using YOUR NUMBERS and pretending that the normal operating expenses don't exist!  The real loss is much greater!

Mike

[3Diamonds]

Thanks Mike for pointing those issues out.

When i said we have no NOE, i had already mentioned HOA etc- so while my terminology was off on what exactly our NOE were, now i most certainly know- so thank you. But, it wasnt a number being neglected- so however we classified it, it was included.

In re: to the Neg Am loan, our mortg, pmt is $1029 Min due, we are not paying $800 towards the interest (deferred interest).

Re the remainder NOE- management- my husband, We live at the ppty so the only inconvenience is cleaning it up and dealing w/ no shows (its a condo in the woods, not exactly NYC-lol although we are 1 hour or so driving distance), Lease- NO! Month to month only, per our attnys advice. Or, short term lease if possible, so we can evict right away.

We require all tenants to have renters insurance, and we have renters policy, and umbrella policy.

I may seem to be pretending it will all go perfectly, but I pride myself in taking massive precautions to ensure that it does.

We screen all tenants w/ Credit checks, detailed application, etc.

Long story short- We did have a potential tenant come in willing to pay the price, but the following day we decided after all  Not to rent. Thats the kicker.

We are either going to stay here ourselves, or sell it. If you read my initial post, this is our residence, and not a flip or inv. ppty- we are simply trying to see if and what makes the most sense.

Sooo- thank you! I appreciate all the time you spent on this. Actually, my DH and I are really seriously considering getting further into the flip market, if after we do allot of research, it proves the right choice. I will certainly be back. So, thanks!