All Forum Posts by: Alan Grobmeier

Even on 'free and clear' properties you have this thing called depreciation.  Depending on your cost basis, this will wipe out a portion of your rents.  The only 'minus' is that you can only write off $25,000 per year against your 9-5 job.  And there are a ton of other rules (AGI, active investor, etc).  Get ahold of an accountant TODAY!

AG 

I do this a 'little differently'.  I would rope them into a one year lease with a 'clause'.  The clause states that the renter will have to pay one additional month in advance with a 60 day notice to vacate.  This is a 'two-way' street as the landlord can do this as well.  In addition, they will lose 100% of their deposit due to a broken lease.  It is an expensive way for them to go, but gives them the flexibility to get out.

Hope that helps. 

AG

My wife and I own 8 SFR. We do all the management ourselves, but farm out for major repair items. Smaller repair items are usually done thru home warranties. Although a little pricey, it keeps the calls away from us.

AG

I tell my tenants they are responsible for the things like filter change out, etc.  If things BREAK, I have home warranty companies for fixing them.  It costs a lot, anywhere from $450 to about $700 a year, but I have COMPLETE peace of mind that I will NEVER get that 3 am call for a toilet stopped up (or anything else). 

Hope that helps.

AG

Go find owner will finance deals.  You will need money for the down, probably pay a little more in interest, but in the long term (30 years), you will make out better vs staying on the 'sidelines'.  Don't go to the banks until you have the '3 C's' (Character, Capital and Capacity) under control.  Don't even bother with a bank if your credit score is under 750 in today's banking atmosphere.

Hope that helps. 

Good Luck.

AG

My advice:

Don't do it.  The first rule in real estate is location, location, location.  If you buy in a 'war zone' your property will NEVER appreciate.  It really comes down to how much effort do YOU want to put into your real estate holdings.

I have SFRs in good neighborhoods with good schools, etc.  At the present time I have 9.  It takes me about 20 minutes a month to send out all the chase quikpays and do bookkeeping.  My tenants call a home warranty company for fixes, pay the first $75, and these properties basically 'self run'. 

A good friend of mine and I JV on a 4 plex a few years ago. In contrast, we had someone break into the washers and dryers on numerous occasions, a drug dealer, a pot smoker, a gal who had boa constrictors, and more issues in a month than my 9 SFRs had in a YEAR. A reality show would have had less drama.

We eventually sold after a year at a very slim profit, AFTER putting in 40k of improvements (new h2o heater, AC units, roof, etc).  It was literally putting lipstick on the pig and hoping someone would buy it. 

Unfortunately you get what you pay for.  You have to decide if YOUR time is worth that type of effort for that type of money.

In contrast, my former partner LIVES off this type of 'chaos'.  He has 24 doors presently that average about $200-$250 a door positive cash flow, based on 100% occupancy.  But he is HOPPING all the time and this IS his job.  He doesn't buy for appreciation, but cash flow only.  His ROIs, especially compared to mine, are 'killer'.  But there is obviously a price to pay.   

Since I still have a good career, his 'model' is not an option for me.

Alan

I do something a 'little different' than most.  I have an 'escape clause' for my renters.  The renter has to pay ONE months rent in advance, give a 60 day notice AND forfeit 100% of their deposit.  It is in plain English (its own subsection) and so far has never been used.  If it EVER was I would make out like a 'bandit'.  My properties do not stay vacant more than a week or so.  ;-)

AG

I went thru a similar ordeal. I bought a property at almost the bottom in 2010 to live in. I bought ANOTHER property using my VA, converting the other property to a rental. I was clearing about $600 a month on the rental for a couple of years while houses were appreciating like crazy. I eventually sold it for about $100k tax free gain last summer. It should have been an EASY decision to sell, but it was not. After all, how many times do you get to walk away with 100k tax free? I was planning on using this property as part of my long term portfolio. Selling it gave me $100k, but no stream of income like I wanted. I eventually bought another property to replace it and still have a chunk of change left over. :-)

I believe my model could scale to 20 easily.  After that I would probably have to quit my job.  Right now I only have 7.  It takes me all of about 15 minutes to take care of billing.  My tenants pay online via Chase Quikpay.  I ONLY have 3 bdrm, 2 bath, single story houses (SFRs) in good school districts.  There is always a demand for my properties as I have anywhere from 5-30 ppl come by for an open house.  Although somewhat costly, I use home warranties for most of my repairs ($500+ per year).  My tenants don't even bother calling me when something is broken, they call the home warranty company.  My AVERAGE stay is 3-4 years, but I have one tenant is on year 9 with me.  My vacancies are minimal.  Hope that helps.  Alan  

Chris

Rental market is hot in phx right now.  Literally and figuratively.  Depending on the numbers and situation, an investor may want to buy 'subject to' for a long term buy and hold.  Even with it being underwater.  Owner would get credit saved, but would need to be onboard with a long hold time. 

Alan Grobmeier