All Forum Posts by: Marcus Auerbach

@Steven J. I would say no big deal. He is communicating with you. If I understand correctley he's asking for a change of the agreement. And it sounds like there is even a pretty good reason to do so. Integrity is very important for me, but flexibility would rank right after that. My 2 cents.

The best strategy is the one that fits best to you. How much money or time do you have, how much are you willing to dedicate or spend? 

Are you willing to give it what it takes, write 2000 letters or hang 600 bandit signs or drive 800 houses and knock on doors to close one deal? Or rather pay a Realtor to write 200 offers (because he will not do that just hoping for a commission).

Most sellers are not willing to lower their asking price. Move on. Prepare for a lot of No's before you get a Yes.

@Joe Hughes depends on the timeframe. How long will you need to turn them arround? I try to complete a house within 5-8 weeks depending on the size of the project. I found a good rule of thumb is that I usually cannot spend more than 5k a week. Sounds funny, but a 25k rehab takes about 5 weeks. So for a couple months it probably does not make much sense to get a HELOC or the commercial equivalent CELOC.

@Robert M.  don't let your ego drive your business. Look at the numbers. What do you achieve exactley when you raise the rent by $15? Just to prove a point? I would save that for a day when it matters - choose your battles, you don't have to fight this one.

What again is your turnover cost? A month of vacancy, cleaning up and maybe some minor repairs, your time to deal with fining a new tenant or hoping that your PM makes a good choice?

I would go so far to say that rent increases are a game for appartment complexes. Turnover is already a given, so there is no harm as long as you can re-fill units quickly. And if you get 24 units x $15 that's $4320 a year or $43.200 in property value. Really interesting if you manage 120 units...

My recommendation, do the math and let the numbers guide you.

@Paul Post the LLC does two things for you in my opinion: it offers some legal protection and it shows that you are a professional and you are serious. The latter is the bigger one in my opinion. As for the legal protection what the LLC does set up and operated (!) correctley it limits the impact of a potential law suit to the asset the LLC owns. In other words they dont get to take your home and your car and your 401k. (as always please consult with your lawyer, I am no expert).

Your first line of defense is your landlord insurance policy you carry on your rental property. If that get's breached than your umbrella becomes your second line of defense, usually up to 1 million USD. After that your LLC will be your last line of defense. So I would recommend both, the umbrella and the LLC.

The best protection against lawsuits is to do everything correctley. Make sure you follow all legal requirements, practice good business, communicate well and make sure your homes are safe. If you do that you may never get sued.

@Dok Kim  first of all congratulations to your investments so far, looks like you have a good eye for opportunities. It is an interesting scenario and there are a couple things you can try, but first of all let me say this: maybe it's a good thing that your bank is limiting you to 200k. After all you have to be able to afford the monthly payments. There is a difference between equity and cash and in your case you just borrow against equity. 

This is essentially what got us into trouble as a nation in 2008 - the equity was there, appreciation was good, we know the rest of the story. If you've done the math and its no problem for you the first thing I would try is to talk to differnt banks, especially small local banks and credit unions. it may take two or three, it may take twenty before you find what you want. But it's like shopping for any other product: if you have not bought it before you may not know which store has exactley what you want, so you keep on shopping.

The other thing would be to refinance your home and take a cash out - esentially you get a new mortgage to pay off the old one and for the difference you get a check. The whole thing is amortised (payed back) typically over 30 years. Again the loan to debt ratio will come up, but that's not a bad thing. The way I look at it you have 200k more to start out with than most people. In many good rental areas in the US that's the down payment for 8 single family homes.

Final thought: they say not having (much) money makes you a better investor. I think it's true. You work harder to find better deals and after all you make your money when you buy. After that its just mechnanics.

Yes, we are limited to interior work right now, but I am behind on landscaping projects from last fall and am looking to hit the road running with a new guy in spring.. 

... and that would be in Milwaukee. oops.

I need a guy who can do mulchbeds, trim bushes, plant, do small grading jobs and seed grass. Most jobs are in to northern suburbs. Any recomendations anyone?

Yesterday night I got a text: "Marcus, I've had toilt issues for a couple months now. My BF has changed the ring on it, snaked it several times and again tonight it overflowed. I think its too small and needs to be replaced, or the hardware, but I am no expert. When would you be able to get someone out to look at it?"

I am not overly concerned: a.) she is a great tenant, takes fantastic care of the house and naturally particular and b.) it's late and I am on my second glass of Malbec.

So I text her back: "Hope to get my plumber to you right away tomorrow. If you want to contact him directly here is his number (XXX). If something is wrong with the toilet or the plumbing we will take care of it, but just so you know if it is only clogged, it is your responsibility". Bang, there you go.

She was not happy with my reply. "Hi Marcus, I have to say this is kind of disappointing considering I have rented before and wasn't responsible for maintenance. I will give it some thought before contacting him." She's a great tenant and was a prefect match for the nice little ranch which is in great shape and got fully updated when we bought it. The only problem is (and I did not consider this at the time) there is just one bathroom. So no plan B if the toilet is clogged.

This morning we text some more. She still feels its unreasonable to ask her to pay for the plumber. I think it's very reasonable: pleople flush all kinds of things down the toilet and then expect me to pay a plumber to fix it. But she is a really great tenant and I have made my point, so I confirm I will pay for the plumber. I take a break from my meeting, step outside, call the plumber and make arrangements for them to go there right after noon. Grandma is at home, watching the kids, perfect.

Two hours later another text: "These repairman are redicolous and basically told my mother that we should continue to plunge the toilet after we use the restroom each time and they could show her how much tissue to use. They showed up without tools when they first came in as well." Ok, my plumber comes with a truck full of tools and a trailer full of material, he would even have a new toilet ready if need be. She does not know that, because she is at work - I assume she goes of what her mother is telling her over the phone and gets increasingly frustrated. Another text:

"My expectation is that regardless what the issue is this needs to be fixed today or we have to discuss my lease. I have always been respectful, so I expect to deal with professionals, not individuals who are unprepared and condesending." wow. ok. I start to realize that texting is really not the method of choice when dealing with an emotional situation. Note to self: next time dealing with an issue like this just call and don't text.

So I reply that I will be over there in 15 minutes and leave from the office. When I get there I am prepared to buy a new toilet and if need be update the pluming. One bathroom house with a toilet that does not flush is a problem, she is right, no question about it. 

I know that I will probably walk into a loaded situation, so I put my friendly face on, remind myself to listen more than speak and ring the doorbell. The guys are still there and they look a little beaten, the toilet is fine, just a year old and a name brand. The wax ring was on a little crooked, but not likely to cause an issue. Pluming is perfectly fine, everything got snaked no problem. They just had to plunge really hard and all the sudden it drained. Eureka. 

So I spend the next 15 minutes listening to the full story. They had issues with slow drainage for several months. For some reason they had never told me, but rather tried to fix it themselves. Even replaced the wax ring. I have no idea why she did not tell me, we text every now and then. We look at everything, walk down in the basement to look at pipes and the plumber explains that there is really nothing he could repair. The tenant's mother ensures me that there was nothing in the toilet that was not supposed to be in there. Finally she seems satisfied and we leave. I will stop by on the weekend for a follow up inspection.

Later outside I had to cheer up my plumber and thank him for being so patient dealing with the situation. Sometimes it seems like being able to deal with people is one of the most important skills of a landlord. I am glad that my properties are close to home and work. I dont know how out-of-state landlording can possibly work, at least without a REALLY good property manager. 

I thought I'd share the story for anyone who is considering to getting into landlording and is wondering what is up with tenants and toilets. 

Time for a Malbec.