Building Wealth with OLD Homes and How to Keep Tenants for Longer

Henry:
Dave, do you buy old houses?

Dave:
I do, but somewhat reluctantly. <laugh>,

Henry:
What scares you about ’em?

Dave:
I just, I am not really good at renovations. I’ve never flipped a house. I’ve done some burrs, but it’s always been sort of hands-on where I live. Now that I’m an out-of-state investor, it just makes me

Henry:
Nervous. Well, I would say that probably most investors feel the way you feel about old properties.

Dave:
Well, I’m glad to hear that because we have a show lined up to help our audience understand how to not be afraid of old properties and how you can actually make a great business out of specializing in that area. Hey everyone. Welcome to the BiggerPockets Real Estate Podcast. I’m your host today, Dave Meyer, joined by Henry Washington.

Henry:
That’s right. Today we’re talking with Lisa Moore. Lisa has been investing for six years and she has really mastered the concepts of finding value add properties, knowing when to cut a property loose and monetize that property, as well as reducing her costs by retention and keeping tenants for a long period of time.

Dave:
So stick around ’cause Lisa is gonna break down all of that for us today. But before we get into our interview, I wanna tell you guys about a special segment that we have for you all today at the end of the episode, brought to you by Deal Machine where they’re gonna break down the five ways you can find a motivated seller. So after we talk to Lisa, make sure to stick around for that special segment. All right, let’s bring on Lisa. Lisa, welcome to the show. Thanks for being here.

Lisa:
Yes, thanks for having me. Guys,

Dave:
We’re very excited that you’re here. Now, I understand that you’ve sort of developed a niche with older homes, but a lot of investors are kind of scared or wary to get into older homes. Why do you go after those

Lisa:
One? They always have a uniqueness to them. We’re always drawn to kind of that quirkiness of older homes. They always have a lot of character. Uh, and my husband, who I also invest with is a gc and he is almost always only worked on older homes. So for us, it’s definitely an advantage when we’re looking at properties that where a lot of people get scared of what the bones will look like. For us, it’s just an opportunity and something that we enjoy doing.

Henry:
Yeah, this is, this is one of those things that, you know, I like to tell new investors is like, you really have to lean into your superpower. And a lot of people don’t really know what their superpower is yet. And it takes time to kind of figure out what your superpower is. But essentially what you’re saying is, I have an advantage because people are scared of older homes. But I have a husband who is a GC and I live in a market where there are a older homes. And so you now leverage this superpower of having someone that can A, either renovate these for you or B, look at them and go, there is no way you should buy this one <laugh>.

Lisa:
Right? Yes. And yeah, and even when I bought my home before I knew him, it was an older home like Salt Lake definitely has a lot of older homes in it. And even then as a single female, I still was not too worried about it. It’s like, I’ll figure it out. Nothing was so overwhelming or overpowering to me that I was scared of buying a home that was built in the 1930s.

Henry:
The other thing too, when you think about older homes is, is a lot of the times people really just are scared of what they think could happen, but they really don’t know. And the key is just to understand that it’s not a problem that can’t be fixed. It’s a problem that can be fixed with money. So when you’re looking at an older property, you have to be able to evaluate it and then determine how much this problem might cost you and then get that much of a discount off of your property.

Lisa:
Yes. And my background is financial analysis, so I’m definitely the number side of things on the business. So yeah, so when we’re analyzing a property, we are definitely being conservative on what repairs could cost. You’re definitely building in more of a buffer because there’s always almost gonna be something that comes up with an older home. So when we’re underwriting, we’re just making sure that I am building in plenty of buffer and being very conservative on what our rehab costs are actually going to be.

Dave:
Man, that’s, that is quite a power couple there. A financial analyst and a GC talking about Henry superpowers. You both have one that, that’s a great place to start from. So Lisa, tell us a little bit about just your background. You invest in Salt Lake, when did you get started and, and what prompted you to start?

Lisa:
So I got started in 2017 buying my first property as a house hack. Um, I moved to Salt Lake in 2016. I grew up in Massachusetts. And when I moved to Salt Lake, I knew that I wanted to get involved in real estate. I knew it was a great way to build wealth and I knew that it could help offset my living expenses. So when I was looking for my first property, my goal was to live for less than what I was in an apartment. And house hacking was a way to do that. So we bought the first, I bought my first property as a single female in 2017. It started house hacking it by renting out a bedroom and met my husband. Then shortly after that and then in 2020 we really started buying and doing small multifamilies. And that was the leverage that we needed. And that gave us the cashflow for us to be able to do it full time.

Dave:
That’s great. And so we talked a little bit about how you’re looking for older deals and as Henry alluded to, there are older deals that have good opportunity and there are older properties that are just going to be a nightmare. So how, what do you have a process for identifying which properties are good, have potential for value add?

Henry:
Or said differently? Like is there something that you would absolutely not buy, like some feature or something in an older home?

Lisa:
<laugh>, there really isn’t anything that I would say we a hundred percent wouldn’t buy. If it’s to the point where we just can’t get the layout to work or it is just so far gone that it’s basically a tear down. That’s kind of our, our threshold. If it gets to the point where it’s like, okay, like we’ve walked some old houses that the foundation was crumbling, the flooring was just barely non-existent. The layout was super weird. So things like that we definitely would not go for. But if it has a decent layout and if it’s, if the the bones of it are are good and it’s good foundation and good structurally and we can rearrange some walls and do stuff like that, then we’ll we’ll buy pretty much anything.

Dave:
Well how about the flip side of that. Are there any things that you see in a property, an old property, maybe some character or something that makes you really want to buy something?

Lisa:
Yeah, if we just, some of them, the, some of the woodwork, some of the old flooring, um, I mean you’ll go into some old homes and they have some really cool old wood floors that look like crap when you go in there. But you know, you can refinish ’em and they look beautiful. Um, and just some of them will just have different little architecture things within them, different arches or wood trim, things like that. So we definitely look for stuff like that ’cause we can really find a way to, to rehab that. We always like to find something from a property and keep it just to keep that old charm with it. One of our properties had a really cool front door. It was a horrible for a front door, but we refinish it, painted it and made it the, the sliding door for a bathroom. So it just has this really cool old door that we were able to refinish.

Henry:
While we’re on the topic of problems with properties or things that you find in properties that you either like or would not like, I wanna play a little game <laugh>, I’m gonna say some sort of problem or nightmare feature that people seem to come up with in their heads. And then you tell me if you’ve bought a property that has one of these things and if you were able to overcome it and make money.

Dave:
Oh, I like this game. Okay, let’s

Henry:
Go. Sound good? Sounds good. Okay. Perfect. Termites?

Lisa:
Yes, we actually have a property that we own that had termites

Henry:
And you still own it and everything is okay.

Lisa:
Yep. We just had bug people come in, they got rid of everything and then they, whatever it is they call, they basically did a whole treatment around our property and now they come every month to maintain it and make sure it stays good and haven’t had an issue since.

Henry:
Perfect. Knob and tube electrical. Ooh,

Dave:
That was gonna be fine. <laugh>.

Lisa:
I knew that was gonna be one of ’em. <laugh>,

Henry:
The,

Lisa:
The first house I bought still had live knob and tube live and we live,

Henry:
I’ve never seen live knob and tube. Yes.

Dave:
Oh really?

Henry:
Yes, I’ve I’ve seen it in the house but not live.

Lisa:
Yes. So I got a quote from an electric company and they came in and they replaced all the live knob and tube and we were good to go. It was built, we made sure I had that quoted before we closed, so I knew how much it was going to cost. Um, and yeah.

Henry:
Boilers?

Lisa:
No, not yet.

Henry:
Okay. And so for those who don’t know, sometimes these older homes are heated with boiling systems and they, they don’t really make ’em anymore. So you either have to either keep it or completely replace it. Dave, do you have any you wanna talk about?

Dave:
Yeah. Foundation issues?

Lisa:
Yes and no. So we’ve, one of our properties actually, uh, the, the foundation does not look pretty. So we, when we went to sell it, people had a, you know, very concern with it. But we had somebody come in and test it, um, and do whatever they had to do and got the all clear. And we do have another property that we had to put um, like the jacks underneath. So we had to pour a little cement. Mm-Hmm. <affirmative> a little cement pad and put some jacks in and that took care of, they have the footings and that took care of the problem.

Henry:
Septic tanks,

Dave:
<laugh>. No, that’s a good one. Haven’t

Lisa:
Had a septic tank yet.

Henry:
So septic tanks, for those who don’t know this, typically a property, when you have to get rid of the human waste, it can either go through city sewer or there’s a septic tanks that sometimes go in the ground and they can get old and need to be replaced and can be costly. I know it. And it’s, it’s, it’s regional I think where a lot of these things happen. So we have a lot of septic tanks out where I live.

Lisa:
Yeah. I grew up in Massachusetts and we had a septic tank growing up and the more rural areas tend to have septic tanks

Dave:
And they can be very expensive to fix or replace. Yes. Alright, we gotta take a short break, but right after that we’re gonna hear about one of Lisa’s deals that didn’t go so well stick around.

Henry:
Welcome back investors. Let’s pick up where we left off.

Dave:
So Lisa, it sounds like you have a lot of experience with difficult rehabs and it sounds like a lot of them have gone well. But I understand you did a deal recently that didn’t go as well. Can you tell us a little bit about that?

Lisa:
Yes. Yeah, that was last year we bought a duplex. One of the things that we loved about the property was it was actually two separate buildings. So there was a front house and then they had a garage that they had converted. Um, and we built in 90 to a hundred thousand dollars for rehab. ’cause the front house was barely livable. The fact that people were living there was atrocious. But, um, and that was the property. You know, as we started pulling up the floors, we got to the subfloor and we’re like, okay, good. After pulling off like two or three layers, well that wasn’t the bottom subfloor. They had three layers of subfloor. So we ended up pulling up like eight or nine layers of flooring, two subfloors. And it just seemed like it was never ending. It was, it was funny ’cause like each level of floor we’re like kind of trying to tell like, okay, what year was this put in?
Uh, and so that ended up being more than we expected. We ended up building out the attic, which wasn’t a part of our original budget, which was about a 12 to $15,000 add-on that we didn’t plan on. But that one, when we went to sell, the big issue with that one was, aside from it, we budgeted like 90 to a hundred thousand rehab ended up being about 1 25. The attic landscaping were kind of the two main reasons that we went over on that one. But what really got us was we’re investors. So when we buy properties, we’re using DSCR loans. So they’re doing it based on income approach and they’re looking at the property. Well, for two to four unit properties, people can buy them conventionally and not every loan is going to use the income approach. So while we were looking at our numbers in our head, we were like, okay, as investors income approach, we listed it for five 60 under contract. We had multiple offers at and around five 60. But the buyer that we had was buying it with conventional financing. And their lender, even though the income approach was close to our five 60, they would not use it and they’d only use comps, which came in right around 500,000. And we, we went back and forth, we fought with a lender and they’re like, sorry, like investment wise this is going to be done as comp. So that 60,000 really is what killed us on that one.

Dave:
Wow, that’s, that’s a really interesting lesson. I’m sorry that you, you went through that no one wants to learn the painful way, but I think this is an important thing for our audience to pay attention to because Lisa said that she used something called a D-S-C-R loan, which stands for Debt Service Coverage Ratio. And this is a popular loan product for investors because it uses the potential income of the property to underwrite the loan. A conventional mortgage looks at the borrower and the borrower’s individual credit worthiness and their ability to repay that loan. And so it sounds like there was sort of a mismatch where Lisa, it sounds like you were using a D-S-C-R and you said, Hey, the rents can cover this five 60 price. But when the buyer came along, they were the, their bank was underwriting them personally and it didn’t line up. So what actually wound up happening? Did you have to drop the price there?

Lisa:
We did. We, we, we were at the option where we could have backed out and try to find another buyer, but it was a d it was the duplex. So we still were always gonna have the risk of, it could be another buyer that was coming in with conventional financing and mm-Hmm, <affirmative> at that point we, we wanted to sell, we wanted to pay back our private money lenders. And so we ended up losing about 10,000 on that. ’cause we did drop the price to, to the 500,000. ’cause obviously the buyers, they’re like, well we don’t wanna pay five 60. Our, our lender says that it’s only worth 500.

Dave:
So what, what do you do about that? Because that just seems like an unfortunate situation, but how do you prevent that in the future?

Lisa:
So for us, anytime we’re doing any two to four unit property that we may sell, when we’re looking at a RV, we’re basing it on comps, not the income approach. So if the numbers work as the comparables and it looks good, awesome. And if an investor ends up buying it at the income approach, which is more or potentially could be more, then that’s a bonus for us. But we’ll definitely never buy a two to four unit where if we’re gonna be doing major rehabs to a, we’re gonna make sure that we’re always using comparables for our A RV and not the income approach.

Henry:
This is a genius smart lesson. Everyone should write this down. You’ve got to underwrite especially one to four units as a comps, the traditional comps approach. Now there are some, I I’ve learned that this can be market specific. ’cause sometimes certain markets, I don’t know if it’s the appraisers that decide this, like did they have a meeting and go, alright, we’re just gonna evaluate everything four units on the income approach. Like because here I found it’s hit or miss, some appraisers will appraise our multifamily properties on the income approach and some absolutely will not. There’s no standard for why they do or don’t. And so you just have to understand that you don’t control it. But what can you control? You can control how you underwrite your deal conservatively. And I think that that’s the best smartest approach.

Lisa:
Yes, anytime we’re talking to a lender where we know that we’re either gonna be selling or we’re gonna be refinancing after our rehab, we always ask them, will we be able to use income approach for our A RV? And again, like we still make sure it works as comp, as comparables, but if we can find a lender that will use the income approach, then that’s just a bonus for us.

Dave:
Well that’s a great lesson that you’re teaching everyone. Lisa, when you experience something like this, a deal doesn’t go the way that you planned. How do you sort of take stock of what happened and make sure that it doesn’t happen again? Or you do at least everything that you can think of to try and get it to not happen again?

Lisa:
Yeah, this is definitely one we will not repeat. Um, but after every deal we do, we always try and write down whether it went well or whether it went bad. We always try and write down what, what did we learn? What lessons did we learn? The good and the bad, you know, what, what relationships do we build during this? Do we find some great contractors? Do we find some great agents that brought buyers to us but they also do multifamily that we could potentially buy deals off of. So we, we have it written down, we can review it and we, we know in the future how that deal went.

Henry:
This is brilliant and it’s something that you know we should probably do more often, but uh, it’s something that we do or we did in the corporate world a lot because I worked on software development projects and so whenever a project ends there’s always a lessons learned meeting and there’s typically some template that you fill out that basically says how did everything go? What were the, what went well, what didn’t go well? And you have this documented and a formal document that kind of goes in with the project documentation. And so a pro tip for everybody could be just go online and search for lessons learned project management document and you will probably find tons of templates that you can and just use them for your real estate deals.

Dave:
I was gonna say the same thing, Henry, actually this is just reminds me what we do here at BiggerPockets internally we have things we call ’em retrospectives, you know like after a project is implemented, success, failure, whatever, you just have to take a look back and see what you can learn out of your experience. Especially when you’re new, you know, every deal is going to be a learning experience and the more you can write it down and periodically go back through them to remember those lessons, the better you’re gonna be.

Henry:
I’m guessing Lisa, that this is a practice that you brought to the table, <laugh> from your analysis background.

Dave:
<laugh>? Yes.

Lisa:
Most, most certainly. P paperwork and keeping track of things is not my husband’s strength.

Dave:
Can you tell us a little bit about like the specifics of what you look at? I mean obviously you probably look at how close you were to your underwriting, any variance between your underwriting and actual deal performance. So there’s probably that sort of qualitative side but or quantitative side, excuse me. But do you also just kind of talk it out and talk about some of the more operational or procedural things and how those went?

Lisa:
Oh yeah. We definitely, there’s always no project’s ever gonna go perfect. So there’s always things that even when a project goes well, there’s still things that come up and that happen. So we always discuss, you know, as far as kind of start to finish, like how did the, the buy-in process go? Is there anything that came up in that that we can do better next time or learn from during the rehab? You know, timing contractors is always a difficult thing to do. Making sure that you’ve got the people coming in when they need to and you don’t have painters coming in when they still haven’t finished what they needed to do. Things like that. So we’re always reviewing start to finish and then even when it comes to the selling side of it, how did that go? How did the advertisements go? How much action do we get on it? Things like that. So we review start to finish pretty much everything.

Dave:
And I, I should have asked you this earlier Lisa, but do you always flip or do you hold onto some of these deals

Lisa:
We hold? So our goal is always to hold. We look at it as whatever we buy, we’re gonna hold forever. Obviously we sell properties, we just listed one for sale a couple days ago. But we are definitely buy and hold investors. So we go into it with the expectation that whatever we have, we’ll have for long term. So when we’re doing our rehabs and our remodels, we’re doing them as best of quality that we can do because we don’t wanna deal with maintenance down the road. So if there’s something that we can do to make it better and make it last longer and be of higher quality, we’re doing that.

Henry:
Okay. We have to take one more quick break. We’ll be right back with more from Lisa on how she makes her long-term rentals profitable and how she retains tenants right after the break.

Dave:
Welcome back to the BiggerPockets Real Estate podcast. We’re here with investor Lisa Moore. Let’s jump back in.

Henry:
Yeah, along those lines I would say, you know, people are hearing, you’re buying value add, you’re buying older properties and then you’re holding them. So what are some of the things that you’re doing both to the property or systematically that’s allowing you to monetize these properties? So well

Lisa:
Definitely buying them for a deep discount so we know if the numbers will work. Uh, we also always are conservative with our underwriting, especially now, um, when we’re underwriting, if they say Okay a rent could be 1500 to 1800 for this type of property, we’re gonna be on the conservative side, we’re gonna be closer to that 1500. Because if market shifts, if market changes and rents start to drop, we don’t wanna be stuck assuming we could rent this for 1800 and now all that we can get is 1500. And right now in Salt Lake, you know, this is the market that we know best. Like the rents have dropped a little bit since last year. They’re starting to recover a little bit but you know, nothing drastic, they’re kind of starting to level out. But when we’re underwriting right now, whatever, it’s the rents can be once stabilized. That is what we’re basing whether we buy or not, I’m not building in, okay well if I can raise rents five to 10% in the next, like every year for the next two years and then the numbers work, then I’ll buy it. No if once we have it rehabbed and stabilized at conservative rents, if it doesn’t work then we won’t buy it. And if we can rent it for more than what we underwrote, then that’s just a bonus for us.

Dave:
Okay. So I have a follow up question then Lisa, because you, it sounds like you do these retrospectives or lessons learned on your flips. Do you periodically revisit how your long-term holds are performing?

Lisa:
Yes. Oh yeah. I have multiple spreadsheets. <laugh>? Yeah, <laugh>
And we actually every year we actually write like a year in review and we do meetings, you know, ’cause we have LLCs. So also technically for the LLCs we need annual meetings. But we review our properties every year as well and look and see, okay, how is it performing? Where is it at? Which is why one of our properties we’re selling now we have done multiple HELOCs against it, cash out, refinances against it. We’ve kind of sucked everything out of it, but there’s still a lot of equity left in it. So we know that we can sell it, take that equity and do more with it. So we’re always reviewing the performance of our properties. I

Dave:
Love that. I feel like this is something that it took me a long time to get good at and a lot of people forget about that. Investing is really all about resource allocation and if you are buying and holding onto a property, you are putting a lot of time and money into it and you need to be thinking about like is this the best use of my time? Is this the best use of my money right now? It sounds like most of your deals are doing well, but some of them it’s not a bad thing. It’s usually a success if a deal has run its course and you just no longer are, you know, you could put that money to better use. That’s a good thing. But a lot of people I know just sort of buy stuff, hold onto it and try and get their next deal but never go back and look at whether they should be holding on or refinancing or how to sort of maximize their existing portfolio.

Lisa:
Yeah. And where we’ve held some of our properties for several years in Salt Lake went crazy since 2020 with appreciation, you know, looking at return on equity, the one that we’re selling and we’re at like 1%, I was like, oh boy, yeah this one, this one can do a lot more with the equity in it than, than that. So return on equity once we’ve had pro uh, property for several years is a, a metric that we look at and really kind of cash on. Cash is good when we first buy it, but once we’ve had something for several years, the return on equity is what we start to track and what we look at.

Dave:
So that, that’s great. Lisa and I understand that, you know, one of the things that you really focus on in order to maximize the potential or the returns that you’re getting from your buy and holds is tenant retention. So tell us how you approach that.

Lisa:
Yeah, so for us, like our tenants are our customers. If we don’t have tenants that enjoy living at our places and then don’t enjoy us as landlords, then they’re gonna leave. And vacancy is so expensive, we try to avoid it at all costs. So you know, we try and go at like, we want professional quality but with like personal touch. So when it’s time for renewals, we will do anniversary gifts for our tenants. So we’ll offer them, hey, you know, if you renew your lease with us, we will, we give ’em a list of options and that could be having a cleaner come in for two to three hours, replacing a floor in one of the rooms, painting a room, painting an accent wall, uh, things like that that they help us maintain our property and give little upgrades to them. But it also gives them the choice ’cause it’s where they live, it’s their home.
So like we’ve had people, we’ve given them a of options. She’s like, I want a new light in the bathroom. And I was like, oh, never would’ve, never would’ve thought to put that one on there ’cause it’s a pretty new light. But the tenants really enjoy that. They get some say in what improvements we do and it, it helps keep tenants. We had a tenant that was getting ready to move out and we called them. And that’s another thing, like we literally pick up the phone and be like, Hey, we’ve heard you may not be staying, like what’s going on? Why are you looking to move? And this tenant was like, well we have a dog and a young kid and we don’t have a fully fenced yard and we wanna be able to like be outside hanging out and not worry about our kid or our dog running into the road. We’re like, okay. So it was three quarters fence. I’m like, so if we build the fence along the front, would you say they’re like, absolutely. So for, you know, a a short fence in the front yard, we just saved a tenant for moving out, made them happy and now hopefully they’ll stay with us for a few more years.

Henry:
This is gold, this is what people need to hear. The first thing you said I loved and it’s that our tenants are our customers. And I think that gets lost a lot of the time with new landlords or even even seasoned landlords, there’s sometimes there’s this almost superiority complex between property owners and their tenants and then it creates this tension between like, you aren’t doing the things I want you to do as a tenant and then you’re not servicing your property as this landlord. And then there’s this contention, but people don’t realize that any of that contention costs the landlord money. But if you see your tenants as your customers, ’cause this is a business in any business, you provide a product or a service to a customer and any good business provides a good quality product or a service to a customer who they provide great customer service to.
And if you treat your business, if you approach your business from that mindset, then your relationship with your tenants becomes better because they can trust you that you’re gonna provide them a safe, comfortable, clean place to stay. That’s your good quality product or service. And then the better you treat them, the better your tenants treat your property and in turn treat you. And I think if we as landlords approach tenants as customers and people first, that we will have better longstanding relationships with our tenants and that will make everybody else happy because you’ll be getting your rents on time and you’ll have tenants that wanna stay for a long period of time.

Lisa:
Yeah. And we also get referrals from our tenants. So there is a period of time where we never had to list a unit for rent because the tenants in that, in that property knew that they were like, they became friends. They literally tore down the fence between like the neighbor’s house and ours because they all hung out so much. So we didn’t have to list our units for rent because they’re like, one of our friends wants to move in and like that speaks very highly like for them to refer somebody to move into our property. You know, we’ve had tenants that have been with us for years. One of our tenants has moved three times just to stay with us. She kept moving into the property that we ended up selling, but she’s like, I wanna stay with you guys. Like do you have anything? And we fortunately always did. But a lot of our tenants have been with us 3, 4, 5 plus years, which is awesome. I

Dave:
Love that. I have that at a, a triplex I own. Uh, right now there’s a guy who’s lived there for six years I think. And he’s basically just like the house dad. Yeah. Like he just like brings in people. He like, he throws parties on the back deck. He is always responsible. He’s letting me know every time someone, uh, at something is happening with the house, he’s like, I have a good property manager. But like having that extra layer of care. Um, first of all he cares about the property a lot, but he also cares about the other tenants and it’s amazing. And you only get that if you treat your tenants extremely well and value them as, as much as you value the property itself.

Lisa:
Yeah, definitely. We, we do as much as we can for our at tenant, we try to be responsive, um, and we try and work with them. You know, if somebody can’t pay rent, like do we want to let somebody out at lease early know? But it also doesn’t do any good to keep somebody in. You know, if somebody is getting to the point where they’re having issues paying their rent, we, we talk to them, it’s like, what’s going on? And we’ve had situations where we had a, a tenant that had been with us and they were a good tenant. They’re like, they’re the boyfriend was a construction worker and he tore his ACL. He’s like, I like I literally can’t do my job anymore. He’s like, we’re like, this is our, our plan, our budget to, to get caught up on rent. We’ve already been applying for jobs like by this date we should be all caught up.
And we’re like, okay. Like as long as you can stick to those dates and you communicate with us, if something changes, we’ll we’ll work with you and let that go. But then we’ve had tenants that lost a job and they’re like, we really have no idea. Like when we’d be able to get caught up. So in situations like that we just talk and we’re like, would you be willing to move out instead of like used to, like you can’t pay rent, there’s no point in us forcing you to stay and keep adding on fees ’cause you can’t pay. Right. So in situations like that, like it’s not ideal, but we’d much rather let them out of their lease and just let it be a clean break. We’re not gonna get money out of them. They can’t afford it and it’s no good. Keep piling on and letting it get to an eviction point if they’re willing to move out. And most of the time they’re grateful that we let them break the lease without thousands of dollars of fees. So we try and work with the tenants as much as we can in situations.

Dave:
That’s great. It’s such a good approach. Lisa, I really, I imagine that you’ve analyzed this <laugh> and I seen that this actually is not just good for you, good for your tenants, but it’s also good for the bottom line.

Lisa:
Yes. Yeah, vacancies are the biggest killer to our bottom line. So keeping, keeping tenants in, spending a few hundred dollars at each turnover that is well worth the money as opposed to a, a vacancy.

Henry:
One of the things I’ve noticed when I was managing my own properties was that most tenants either are coming off of a bad landlord relationship or have had a bad landlord relationship in the past. And so I think a lot of them just have an expectation that it doesn’t go well. And so one of the things that we always did was we just had a very casual, comfortable level setting conversation with the tenants when we would first have them sign the lease and it was just something to say, Hey, we are glad you’re here. We want to rent to you. We want to make sure you have a safe, comfortable place to live. If something breaks, please let me know. We will fix it. That is my job. And the, the almost like relief people would have sometimes when we, when we say these things, uh, is great because it just lets them know like, we actually care. We want you to have a comfortable place to live. Let us do our jobs. And uh, it’s, it really is kind of helped set the tone for our tenant relationship going forward.

Dave:
I I love that Henry, I do the exact same thing. I always just have this speech prepared where it’s like I just tell them if they’re reasonable, I’m gonna be reasonable and we’re hopefully never going to have to look at the lease. Like when we’re signing the lease, I’m like, there’s all these legal stuff to protect both of us in case things go bad, but like hopefully we never look at this and we could just treat each other like adults, like fellow human beings and we’re gonna have a great relationship and make this work for both of us.

Lisa:
Yeah, and for us it’s, it’s similar, you know, and when a tenant’s moving into a unit that they see is well maintained and looks nice, like, you know, we keep our properties very nice so we tell them like we care about the property, like this is our investment, this is our livelihood and we don’t want this property to become a slumlord property. We wanna make sure it stays maintained. So please like if there are maintenance issues, anything that comes up, please make sure that you notify us ’cause we want this level of quality that you’re moving into is what we wanna keep it at.

Dave:
Lisa, this is an excellent approach. It’s obviously worked really well for you and for everyone listening, if you wanna take some notes or some pointers that you can apply to your own portfolio, some of the things that we talked about. First and foremost, treat your tenants like customers and make sure they’re happy. Check in with your tenants a few months periodically, but also before renewal to make sure that they are intending to renew and see if there’s anything that you can do to incentivize them to renew. And Lisa, is there anything else you think our audience should know?

Lisa:
Yeah, just be human with them. You know, be open to conversations, don’t be afraid of difficult conversations with your tenants and just treat them with respect and let them know that you are here to make sure that they are happy with where they live. And for us, we don’t wanna lose a tenant, but the only way we wanna lose a tenant is because they’re buying a house or moving outta state. So that’s kind of what we tell them. Like we want you to stay with us as long as possible, but these are the only two reasons we wanna lose you as a tenant.

Dave:
That’s awesome. Well thank you so much Lisa for joining us. We really appreciate you being here.

Lisa:
Thank you, I appreciate it.

Henry:
Thank you again to Lisa for all the great information. If you want to learn more about Lisa and how she operates her business, you can look for that information in the show notes.

Dave:
And don’t forget, we have a special segment from Deal Machine for you now where they’re gonna share five tips on finding motivated sellers. So you definitely want to check that out for BiggerPockets. My name’s Dave Meyer, he’s Henry Washington and we’ll see you guys soon.

David:
Hey BiggerPockets listeners, do you feel overwhelmed by the number of ways to find a motivated seller that wants to sell their house at a discount? Well my name’s David Leko and I created the software deal machine that’s helped people close their very first real estate deal over 10,000 times in the past seven years. So I know the biggest reason why people don’t have success finding their deal quickly is because they hear about all the ways you could find deals. They try all of ’em, throw everything against the wall, see what sticks, but ultimately get burned out and spread their time and energy so thin they haven’t truly invested enough time into any certain strategy to finally get the result. So gonna break down the top five ways to find a motivated seller and I’m gonna give ’em to you in the order that you should approach them in.
So if you’re just starting out, the number one way is driving for dollars. Now these are homes that are run down that you’re gonna drive around and look for and ultimately write down the contact info and then look up the owner and either door knock or reach out with mail or a text or cold call to see if they want an offer on their house. This is very helpful to them because these homes are in such disrepair they wouldn’t qualify for a normal buyer to come in and buy it with a loan. So if they need to sell their house quickly and you’re the one they call, you could help them liquidate that within 30 days or less, which could be very helpful and they’re willing to give you a discount for that speed and convenience. A bonus as you get to learn your areas and most really, really advanced investors may not be driving for dollars as much as you can because they could just spend dollars to reach them in more expensive ways.
But you can actually drive around, find these lists, you’ll have less competition. The number two way is to look at tax delinquent properties. So the county actually publishes this and you can also get it inside of the deal machine software, but in Indianapolis there’s a million residents and about 1700 people that were tax delinquent in 2023 that had single family homes. So I reached out and it turned out there was somebody in Utah who bought five investment properties two years ago, but he hadn’t had any success getting a contractor to actually fix it up. So he’s kind of pulling his hair out, sold it to me, one of those properties for 20,000 less than he paid for it, plus he paid for the back taxes. So I was able to do a deal, help him out. Um, and then I even recommended my contractor if he wanted to try that for some of his future deals.
So great scenario where a high earner still took a loss on that property just to get rid of it. So this is a great motivated list and it’s free to get as well from the county. Number three is liens. So that’s homeowners that maybe didn’t pay their, you know, contractor to remodel their bathroom. And the contractor is saying, Uhuh, well you know, you didn’t pay me, you can’t sell that house unless given me a portion of it first. So it means they’re in some type of financial trouble. This can be a great list to actually pull and get, um, motivated sellers and help them out of a tough situation that they might be in. Um, there’s many types of liens. Uh, it could be maybe they didn’t pay their federal taxes, maybe their homeowners association needs some to pay dues. Um, so those are two examples.
The third thing is code violations. So this means that somebody maybe hasn’t cut their grass and the city had to do it for them to keep the environment safe for their neighbors and that’s not cheap. Could cost 400 bucks to cut a small lawn. So those bills add up and if they’re not taking care of their property, it means it’s not rented out. They have a renter that’s not cutting it or they’re just not paying attention. So this could be a great for you to just unload a problem property for them, um, and typically get a great price for that. Um, the fourth way is pre-foreclosures. Again, all these lists are free provided by your county in some type of format. Pre-foreclosure means they have actually not paid their mortgage payment. And in some states that means they have 30 days before it’s auctioned off after missing just one payment.
Crazy, I know. So you could get the list in the courthouse, often they’re posted to a bulletin board and then you could actually drive reverse drive for dollars. So it means you go to all those properties, knock on the door and say, Hey guys, I just wanted to let you know you’re on this list and we could help you save your, your credit. But most importantly we could give you peace of mind that you can take money away and have a place to live instead of wondering when is my house gonna be auctioned? Um, will I be able to stay here next week? And so you can give them that certainty by driving around and seeing if they want to sell their house. And then, uh, the other one is fifth one is probate. So let’s, if the owner has died with no will, oftentimes these types of properties, um, you know, they’re gonna be owned by the kids that have, you know, four kids and maybe they don’t want to deal with a rental property or can’t agree on what to do with it.
So you can reach out and actually do those deals. And I give you these lists in this order because the simplest is of course driving for dollars when the owner’s still living. Um, and that’s a list that you can find just by getting out there and looking. So you’ll learn your area. That’s the very first one. Uh, and the next ones are all free lists you can get from your county if you know where to look. Um, and of course we provide this all in the Deal Machine app as well. You could try a free seven day trial of deal machine and get this information for no cost by going to deal machine.com/bp. And of course, check out the Deal Machine podcast to hear all 25 ways that I’ve put together to expand this list and give you guys all the info on finding motivated sellers.