All Forum Posts by: Michael Rogers

Personally, I'd just focus on getting them out of the building and not incur additional legal fees with a trial to get a judgment that you will never collect. 

I think the current tenants will see that you evict non-payers and that will motivate the good ones to pay. The bad ones will leave or be evicted over the coming months as you implement new systems. The important thing is to have a good screening process and get good tenants going forward and remove the bad ones as quickly as legally possible.

As much as the idea of a settlement may feel like it will teach them a lesson, it probably won't and you will only incur stress and bills. As landlords, we never win in court.  there are only degrees of losing. :)

Hey Christie - From what is posted above I'm gathering the following info about your situation.

Overview of Situation

1.  You are a stay at home mom with no current income.  (My wife is a stay at home mom and it is a HARD job that I could not do, so kudos to you for doing this job.)

2. You are new to real estate investing and have not been involved in a house flip before.

3. The hard money lender you reached out to is not willing to lend to you.  He/she has not viewed any of your prospective deals just says no I don't want to lend to you.

Since you don't currently have a steady stream of income (preferably a W2 income) it is going to be almost impossible to get a bank loan on a fix and flip.  This leaves you with a hard money loan, loans from family, or some sort of partnership with someone willing to provide the money and you do the leg work.  My guess is the hard money lender is probably concerned that you are inexperienced and hedoesn't want to take the risk.

Potential Solution

If house flipping is something you are passionate about doing and are willing to invest the time and effort, my advice is to find someone who is successful and in your market and offer to work for them for free or a low rate just to gain some experience.  This will do 2 things; 

1) let you see the full picture of flipping houses and determine if it's something you really want to do. 

2) Give you lots of experience so that you understand what a good deal is.  Teach you how to deal with contractors. How to manage these projects.  Learn the big risks and common pitfalls in the business.  It will also give you a house flipping track record that a hard money lender can review to determine whether they want to lend to you.

Hope this helps.  Best of luck to you!

I'll let others reply to whether or not this is a good deal from a financial return position.  I'll just throw out a little food for thought on considering what to buy for your first property.  

I know several people will disagree with me on Bigger Pockets, but I'm not a big fan of buying a 6-plex for your first purchase.   

1. You are about to get 6 tenants to deal with.  If you don't like being a landlord or aren't good at land-lording, you now have 6 units, 6 tenants to deal with as opposed to one tenant in a house or 2 tenants in a duplex.

2. When you exit out of this property your scope of buyers narrows down dramatically as you get more units in a property.  There are significantly more people interested in buying a single family home than are interested in buying a duplex.  There are more people interested in buying a duplex, than a 6-plex.  Also, when you sell this property the smaller pool of buyers will almost all be investors.  Investors buy only on cash flow multiples and need to buy properties at below fair market value to make properties work.  A potential single family home buyer will be more likely to buy on emotion and purchase a house at fair market value.

Just a couple thoughts to consider when buying your first property.  Good luck!

I went back and read the thread you reference above.  Thanks to Steve Babiak for posting.  

I agree with your concern about renting to 2 unmarried couples (4 individuals).  There is a higher risk of an issue or move-out in that case.  I am always a little more wary of renting to boyfriend/girlfriend couples vs. married couples or just 2 standard roommates.  In the current thread, you mentioned 3 recent engineering graduates that are fully employed.  To me, this is a different scenario than what was noted in the last thread with the "boyfriend/girlfriend" situation.  

At the end of the day, you need to be comfortable with who you are renting to.  So if it makes you nervous to rent to multiple unrelated individuals, I'd just stick to your criteria so you sleep well at night.

I understand.  That is a potentially tricky issue you have to work through when it happens.   However, I will note that married couple get divorced all the time and you are in a similiar situation when they split up when you have a joint lease.  Who keeps the place, how does the new lease work, etc.

What I do is make sure my contract and my conversations with the tenant outlines that they are jointly and individually responsible for the lease and any damages that are incurred.  I also let them know that I require a minimum one year lease and they are all (and individually) locked into that lease even if one of them decides they want to move out.  After they have completed the one year lease I give tenants the option to renew another one year lease or a month-to-month lease.  At that time, tenants can move out and shuffle tenants if one wants to leave and another come into the property.  I do also let them know ahead of time that any new tenants will have to go through my screening process.

To summarize, the 2 things that have helped me work well with these types of leases are:

1. I want good tenants with 600 + credit scores, solid employment, and positive prior landlord references.  Each tenant needs to meet these requirements

2. I go over all of the potential issues that can come up and make sure each tenant understands the exit strategy and consequences before the lease is signed.  I like to have these in the lease and also go over them in person and let them know I don't budge on these.  

Using the above criteria, I've done all right with these types of arrangements.

Good luck!

The 3 Engineering Grads with jobs sound promising.  Personally, I would definitely consider them.  If they have good credit scores and solid jobs, then they should have no issue paying your $3,300 month of rent.  I would aggregate their 3 incomes to see if they meet your income test.  I would think 3 engineers would earn over $120k per year when aggregated together.  I rent to a lot of recent graduates and I have had no issues with these tenants when they share a place.  I do require a 600 or higher credit score for each tenant and positive references from prior landlords, though.

As a side note, in order not to break any fair housing laws, you will need to consider all tenants that inquire and give them a chance to apply at which point you can deny them if they do not meet your defined rental requirements.  It is dangerous to ignore inquiries and not respond to them.  

One of the things I do to ensure I don't have lots of unqualified prospects applying is clearly state my requirements in my ads.  Then, when the prospect contacts me to schedule a viewing of the property I go over my requirements again and ask them if they meet these requirements.  I explain they are still welcome to put in a formal application, but if they don't meet the requirements they will be denied.  This cuts down on a lot of unnecessary applications to sort through. 

I've always had good luck with Title Guaranty & Trust.

Welcome to Bigger Pockets my fellow Noogan!

Welcome to BiggerPockets, Jesse. The podcasts are my favorite, too. 

I agree with you on the spammy guru sites, books, seminars, etc. It sometimes seems like there are as many successful real estate investors that have gotten rich from real estate as there are gurus selling get rich programs. 

Bigger Pockets is a pure site with lots of great info. No gurus. Best of luck!

I heard a funny Buffet quote the other day. 

"If you want to become a millionaire in the airline industry, the then start out with a billion dollars and before long you'll be a millionaire."

His point is the airline industry is a terrible place to invest money. His lesson probably applies to not investing in real estate markets where the trends are declining. Employers leaving, high crime, etc