Tag: Risk

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Recommended Reading

Most professional books that are on my bookshelf are not what I would call recreational reading. It seems to me that a better idea would be two different categories of reading, professional and recreational book lists.

PROFESSIONAL READING LIST

  • The Wall Street Journal
  • John Mauldin’s weekly investment & economic newsletter, “Thoughts from the Frontline”

RECREATIONAL BOOK LIST

  • The Choose Yourself Guide to Wealth by James Altucher
  • The Miracle Morning, the Not-So-Obvious Secret Guaranteed to Transform Your Life Before 8AM by Hal Elrod
  • Transitions, Making Sense Out of Life’s Changes by William Bridges

This post will be updated periodically.

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HOAs & Unlicensed Practice of Law

The Florida Bar Association has a proposal to require Homeowners’ Associations to hire a lawyer for such tasks as sending demand letters for unpaid dues, violations of CCRs, collecting debts, and drafting liens. It is under review by the Florida Supreme Court. The Florida Legislature passed a law last session that would allow the HOA’s managers to continue those administrative duties. It’s unclear whether the Florida Supreme Court’s opinion (requested by the Florida Bar Association) will be affected or how their opinion might be influenced by this new law. There is no set time by which we can expect an opinion from the Florida Supreme Court. Just another budget item to delve into on your HOA financials. Might there be legal risk lurking in how your HOA’s management handles its legal risks? Also verify what is covered for Board members and HOA members within your association’s insurance policies.

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GRM (Gross Rent Multiplier) and Cash on Cash Return

Investors like to use the GRM as a fast method for identifying  a potential  cash-flowing investment property.

To figure your GRM, use your purchase price divided by the potential gross rents on an annual basis.

Many investors like to see a net of 8-20% cash on cash return on their investment. If you consider your initial investment (downpayment) then divide by your net cash flow (not gross – you want to use your cash flow after all your expenses.) This allows you  to decide if your investment will meet your cash on cash return requirement. It’s also where you decide if the risk is worthwhile for the return based on other factors.

Right now investors are not being compensated for the risks they are taking by keeping funds in banks or in the stock market. Historically, the real rate of return has been a lot higher on real terms. Don’t hold your breath waiting for the rates they pay you to rise. This is why you need to consider real estate that offers cash flow to build your portfolio and wealth.

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