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  • #16
    Originally posted by GeorgeG. View Post
    The problem I couldn't overcome was establishing a "company" so that I didn't have to use my own SSN to buy invenstment property. I had 3 mortgages at one time several years ago and it was a PITA if I wanted to buy a vehicle or anything requiring credit.
    You need a bank that keeps it in house and doesn't report. The two I use do not.

    . I've got a duplex that nets maybe $100 a side. I was negative on it last year due to a fridge, leaking coil, tenant who got me for a month, and a few hundred sq/ft of flooring.

    I would've spent around $8k last summer on A/C related issues if it wasn't for my ability to diagnose them and my FIL owning a HVAC business for me to get parts at cost. That is only on 3 units I had issues with. Shit happens, especially in rentals.

    I have to put 20% down at one bank, 25% at another. One bank is 3yr balloon, the other is 5yr. The rates on a 15 yr term right now are between 4.5-6% for me.

    If you cannot do 90% of the work and don't have a big chunk of easily accessible cash/line of credit you have no business owning a rental. What if you get stiffed for two months, it takes a month to get another tenant/fix house, and then they only pay the first two months rent and get you for a free month. You could end up making half the years payment out of your pocket. It does happen.
    Last edited by dblack1; 01-09-2013, 06:24 PM.

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    • #17
      From a lending standpoint

      Investment property mortgages require 20% down (25% will land a better rate and 20% typically requires paying points so you might as well start with more equity).

      You need reserves (minimum 6 months on EVERY property owned for PITI and any HOA dues - and most want liquid (not a 401K or stock account)).

      Rental income cannot be used to qualify unless you have a two year history on filed tax returns (unless it's multi unit, you're living in one, and it's a government loan as jakesford mentioned).

      The houses cannot be financed in an LLC, must be in an individual's name. While you can "deed it to yourself" in the company name, the Deed of Trust states the Note can become "due and payable" at that point.

      Most lenders cap you at 4 financed properties (including your primary). Fannie Mae and a few lenders will go up to 10.

      Most lenders also have minimum loan amounts in the $40,000 - $50,000 range, so if you're putting 20-25% down you have to be looking at houses in the $50,000 - $62,500 range at a minimum.

      Short sales and foreclosures are typically great deals, but most require extensive work and banks will not lend on houses with major (roof, foundation, etc.) issues. The house must be considered "livable".

      Yes, there are banks that will lend "portfolio" loans (ones they shelve and service themselves) that will ignore a lot of the above, but they are few and far between and if you don't have a standing relationship with someone high up in the bank you're likely SOL.

      The last paragraph from dblack1 above is solid advice.

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      • #18
        I have 2 friends that took months getting people out because of not paying rent and both houses were trashed when they left, one pulled wires out of the walls.
        One of my old neighbors took the front door with them in addition to trashing the place when they left their rental.

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        • #19
          Originally posted by ryuu View Post
          I have 2 friends that took months getting people out because of not paying rent and both houses were trashed when they left, one pulled wires out of the walls.
          One of my old neighbors took the front door with them in addition to trashing the place when they left their rental.
          This is what has me worried about renting my first home. I think it's worth the risk though.
          sigpic

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          • #20
            Screening tenants is the biggest concern imo. As stated above it ain't rosey and warm fuzzies when it isn't going well. Getting in with a good management company is well worth their fees. I had one we used that charged 11% of the rent and was worth every penny. They always had it rented and even deposited in my account. Best to also have a good accountant who knows the ons and outs of the tax code to maximize your deductions and write offs.

            Do you have properties in mind? Are they close to your residence/work? Can you fix Hvac, plumbing, electrical, appliances? Just replacing a burner on an electric range could be a $2-300 service call that you could take care of for a quarter of that or less. Changing the filters in the hvac can help the unit last twice as long, not changing can cut the life significantly. You wouldn't believe what people can tear up for no apparent reason.

            A lease to own arrangement can aleaveate a lot of the problems and the leasers hopefully would take better care of the property as they are buying it but you never know. Just like a tote the note lot and you can get a big down payment instead of just a month security deposit. And when they default, "sell" it again.
            Rich

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            • #21
              I agree with the above. My wife has 6 years of property management experience. She can tell if they are good by looking at the car and appearance. I've lost one month rent in 4 years. I didn't have to go to sheriff office.

              I know a woman that owner finances nice homes. People with shit credit and recent bk that have a substantial down go to her. There are millionss of ways to make money in real estate. They almost all require you to have loads of money.

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              • #22
                Originally posted by dblack1 View Post
                You need a bank that keeps it in house and doesn't report. The two I use do not.

                . I've got a duplex that nets maybe $100 a side. I was negative on it last year due to a fridge, leaking coil, tenant who got me for a month, and a few hundred sq/ft of flooring.

                I would've spent around $8k last summer on A/C related issues if it wasn't for my ability to diagnose them and my FIL owning a HVAC business for me to get parts at cost. That is only on 3 units I had issues with. Shit happens, especially in rentals.

                I have to put 20% down at one bank, 25% at another. One bank is 3yr balloon, the other is 5yr. The rates on a 15 yr term right now are between 4.5-6% for me.

                If you cannot do 90% of the work and don't have a big chunk of easily accessible cash/line of credit you have no business owning a rental. What if you get stiffed for two months, it takes a month to get another tenant/fix house, and then they only pay the first two months rent and get you for a free month. You could end up making half the years payment out of your pocket. It does happen.
                Looking at doing flooring in one of the aforementioned properties that I already own. I'm going to rent it out as a sort of learning experience. I'll be doing the flooring myself, as I'm already quite experienced with it. Used to work for a carpeting place installing as a teen.

                Originally posted by ryuu View Post
                I have 2 friends that took months getting people out because of not paying rent and both houses were trashed when they left, one pulled wires out of the walls.
                One of my old neighbors took the front door with them in addition to trashing the place when they left their rental.
                This is what scares me. I've seen it before with friends as well. One of them had a house where they took every last thing, even what was bolted down. They took the windows, the light switches, the power outlets, you name it.

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                • #23
                  Don't forget the tax side. If you're not familiar with filing taxes and the allowable deductions for your rentals, hire someone to do your taxes. There are a lot of things you can deduct. (at least for now, til Barry and his boys overhaul the tax code). For me, any loses on the business side of my ledger, reduce my overall taxes...I like deducting my vehicle mileage as well.

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                  • #24
                    Originally posted by dblack1 View Post
                    You need a bank that keeps it in house and doesn't report. The two I use do not.

                    . I've got a duplex that nets maybe $100 a side. I was negative on it last year due to a fridge, leaking coil, tenant who got me for a month, and a few hundred sq/ft of flooring.

                    I would've spent around $8k last summer on A/C related issues if it wasn't for my ability to diagnose them and my FIL owning a HVAC business for me to get parts at cost. That is only on 3 units I had issues with. Shit happens, especially in rentals.

                    I have to put 20% down at one bank, 25% at another. One bank is 3yr balloon, the other is 5yr. The rates on a 15 yr term right now are between 4.5-6% for me.

                    If you cannot do 90% of the work and don't have a big chunk of easily accessible cash/line of credit you have no business owning a rental. What if you get stiffed for two months, it takes a month to get another tenant/fix house, and then they only pay the first two months rent and get you for a free month. You could end up making half the years payment out of your pocket. It does happen.
                    I also want to add that you'll need the time to do these repairs. Tenants don't want to wait till the weekend for you to get over there to repair something (especially with the AC). And they'll want it repaired ASAP.

                    I had a tenant with water leaking in the bathroom and garage. turned out to be a water line running to the standing shower faucets. I had to tear up the shower tile and found out the line had been pierced by a nail, probably from a guy I used to remodel the shower some time before. It had finally rusted out and started leaking. While the repair wasn't that difficult, the time ate my lunch. Not being able to get there till after 6:30 by the time I got home, changed, grabbed my tools, etc, I only had a few hours to work since they too had to get ready for work the next day.

                    They'll also expect the AC unit to cool the house to 60* when it 102* outside and will call you everytime it doesn't. That's just about the one thing I can't do so service calls/repairs also ate my lunch a time or two.

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                    • #25
                      I consider my self a novice in the rental world. I've been doing it since 2005 and have aquired 10 rentals. The one single best qualifier for a tennant is the vehicle they pull up in.

                      Old car with good tires, clean inside, clean outside= Great tennant

                      Old car with good tires and filthy inside= tennant that will keep the rent paid, but will be living filthy and put some unecessary wear on your appliances, flooring, and surface finishes. Mostly from all the harsh chemicals needed to clean the mess after they leave.

                      New car with new tires, and clean interior=potentially a good tennant, need to verify good credit and debt to income

                      New car with blad tires=most likely paycheck to paycheck and one set of tires could mean you don't get paid or have to chase a check. If they have good credit they will eventually pay up with late fees included

                      Old Car, bald tires, dirty interior= helz no!

                      Set up an email for complaints, concerns, and repair requests. All emails will be answered in 12 hours or less. Repairs will begin no later than 24 hours after the request has been obtained. If it's AC related and the repair man can't make it out that day then I'll provide a window unit for the night. 12,000 BTU. Create removeable access panels to all of your plumbing locations. You personally enter the property every 3 months to replace the air filter. Annual plumbing inspections on all water outlets, and under the cabinets.

                      Keep the water in your name. This helps you keep an eye on the bill for any unusual spikes. Possible detection for leaks, running toilets, or unauthorized persons living in the propery showering, washing cloths, using the shitter, etc....... Trust me, you will notice the sudden change if you keep an excel file. Include lawn maintenance in the rental amount. Tennants don't keep lawn well in most cases. Install sprinkler systems that come on twice a week so you don't lose the lawn completely in July-Sept. Remove all carpet and replace with tile and simulated wood floors made from rubber.
                      Last edited by Diabolic; 01-10-2013, 03:49 PM.

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                      • #26
                        Getting a free education here. What application process do you guys use? Did you create your own, or go into lawyer mode?

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                        • #27
                          I like boat storage. With all the HOA's that won't allow you to have a boat on a trailer it makes for a nice group of customers that always pay their rent on time. Try to find land on a main highway within an hour of a bunch of lakes and semi close to fancy neighborhoods.

                          I've got 54 units all designed for boat storage with electricity furnished so they can keep their batteries charged. These guys are some of the most reliable tenants I have ever heard of.

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                          • #28
                            Originally posted by Snatch Napkin View Post
                            I like boat storage. With all the HOA's that won't allow you to have a boat on a trailer it makes for a nice group of customers that always pay their rent on time. Try to find land on a main highway within an hour of a bunch of lakes and semi close to fancy neighborhoods.

                            I've got 54 units all designed for boat storage with electricity furnished so they can keep their batteries charged. These guys are some of the most reliable tenants I have ever heard of.
                            True Story... Mom and Dad live on a lake south of DFW and Dad watches the Storages like a hawk when the lakes get dry and property owners bail in an effort to pick up an existing business with little upkeep for him and mom... Missed out on a few two summers ago when the lake was very low because they (my folks) were building a house. Still kicking himself for it.

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                            • #29
                              Originally posted by Snatch Napkin View Post
                              I like boat storage. With all the HOA's that won't allow you to have a boat on a trailer it makes for a nice group of customers that always pay their rent on time. Try to find land on a main highway within an hour of a bunch of lakes and semi close to fancy neighborhoods.

                              I've got 54 units all designed for boat storage with electricity furnished so they can keep their batteries charged. These guys are some of the most reliable tenants I have ever heard of.
                              I've passed by your place a couple dozen times and never made the correlation. Next time I'm out there, I need to stop in.

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                              • #30
                                Originally posted by Treybiz View Post
                                True Story... Mom and Dad live on a lake south of DFW and Dad watches the Storages like a hawk when the lakes get dry and property owners bail in an effort to pick up an existing business with little upkeep for him and mom... Missed out on a few two summers ago when the lake was very low because they (my folks) were building a house. Still kicking himself for it.
                                Yeah, the upkeep is cake. I buy all of my overhead doors direct from the factory 6 at a time. When a door needs replacing I call Bubba's overhead door to come and hang it for me. All I'm out is their labor instead of paying their prices for a door as well. I might need them once every 5 years. Everything else I can handle.
                                If I ever have an empty unit it gets filled within two days. There's a waiting list for people wanting in that has 15 people on it all the time.

                                Originally posted by Tyrone Biggums View Post
                                I've passed by your place a couple dozen times and never made the correlation. Next time I'm out there, I need to stop in.
                                Yeah you do. I won't be as drunk as the last time I saw you. I swear.

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