All Forum Posts by: Andy D.

@Roger S. Your negative cash-flow could be offset by an increase in value of the property if you buy under market price. However, that's a gamble and not a good business model afaiac. If you like to gamble you go that route (and only very slowly increase rent).

I don't gamble, and my properties all cash-flow positively at least as long as there are no totally unexpected expenses. I would therefore do what you already described. If she can't handle it, too bad. People can't expect to live in place where someone else (i.e. the landlord) is basically subsidizing their living. I'm not running a charity, and most likely neither are you.

@Brian Garrett Well, as "cash out refi" already implies, you are getting - definitely - cash. By means of refinancing your property that either was bought all-cash (i.e. does not, so far, have a mortgage) or already has a mortgage which you alter by refinancing. Since you are getting cash, you are refinancing to get a higher loan amount than before due to, either, an increase in value of your property or simply because there was so far no mortgage on the property (which, technically, is not really REfinancing).

The idea of a cash out refi is to use the equity in a house (= dead money) to make use of it by investing this money. For instance to buy another investment property. Buying a Porsche with that money, however, would be a very bad idea.

A HELOC is a Home Equity Line Of Credit. So nothing but a line of credit that you can draw on. But don't have to. Like a credit card. But with the property as collateral and therefore typically with a higher amount than your average cc. There are costs associated, of course, and interest rates for the time when you actually use the line (= get the cash) will typically be higher than with a normal mortgage.

In short: cash out refi is money in your pocket coming from a mortgage. (HE)LOC is the ability to get money if and when you need it, but not coming from a mortgage. Terms are quite different. And also, LOCs don't count toward the limit of mortgages that non-commercial/F&F lenders need to adhere to.

I hope this explains...

@Marcus Johnson Thats, in essence, what I do. But there are many people who don't have that luxury and then the question the OP has becomes very relevant.

@Lauren Stamey You're new in the game from the looks of it. In that case save every single penny you "make"! This shall be true till you have ~6 months rent as reserves (like @Christopher Giannino wrote). For every property. Possibly more.

Although @Thomas S. is always so terribly pessimistic ;-) I like to define a pessimist as being an optimist with more experience... So Greg is likley right.

The point? You will be hit with expenses that you never dreamed of could be possible. In addition, by the time you saved up the above mentioned reserve, you will possibly be at a point where you need to start putting money into upkeep which again means that there will not be much left of what you "make", if at all. Don't consider any prima facie positive cash flow as money that is available to you. Not with 1 unit. Once you have more units (by saving money!) and you are more or less diversified, only then can someone who does honest calculations start "taking money out", i.e. using that money in ways that are not related to the existing real estate they own. Reaching this point will most likely take a long time, short of having a windfall.

I hope you terminated their m2m in a timely manner as you only did so early March, rather than late Feb. In any case, you need to end your "relationship" with these tenants - obviously. While I understand you not wanting to put her on the street, the likelihood of the bf getting access to the place once he's out is 99.9% if she stays. She will not (be able to) refuse him access, especially with the kids also being present. So you'll end up with him on the premises again, and then all hell breaks loose, one way or the other, considering his background. She has to leave.

I would therefore never extend her right to stay, irrespective for how long and in which manner. No one has to live on the streets, there would be a shelter if push comes to shove. Then there will be friends, family or whatever other way of getting a roof over her and the kids' heads (and no, not one of yours ;-) ). Tough situation, yes, but she also got herself into this somehow.

If you want to assist her with selling the car, then that might be a nice gesture and good support (possibly), benefitting both sides. But I would draft up a contract with her for that, a simple one, making it clear that she agrees to this and is not being coerced by you to do so blablabla. Kindness more often than not backfires in such situations if one is not doing it properly and protecting oneself.

Good luck.

Oh, and also, as they clearly caused issues and especially since they are m2m: why the heck did you keep them???

I think you are a bit in the wrong place for that question. ;-) Also, out of curiosity, I googled and got a useful (to me) result in 5 seconds. As with any such questions that are in essence asking for legal advice, you should either consult an a lawyer or, in this case, how about simply calling the city to get it from the horse's mouth? Sorry to be of no more help, but again, wrong place to ask - this forum is about real estate, not about such unrelated topics.

Cary, good point on the leveling out, and I tend to agree with your guess In that regard (I also have no data though).

With respect to older units I'd just say that this is the "normal" way of things: they only become "old" if they are not updated. This might happen when you have real long-term tenants that never "demanded" an upgrade and landlord maybe also being on the older side with no more interest in upgrading etc. Rents for these places will simply not increase - but I wouldn't call it pressure. They just remain where they were some 10ish years ago. I do agree though that this situation could be considered "pressure" on the rent rate as you can't increase the rent without putting money into the place to upgrade it. But one should not forget that this money has also been put into the new places with higher rents as they are much more expensive to buy compared to what the owner of the old place paid for some 25 years ago (even factoring in inflation). Factoring in wear and tear, inflation and whatnot I'm not so sure that this pressure on the rate really is a result of new construction. I belive it's more a result of not sufficiently upkeeping old construction. Because generally a tenant doesn't care how old a place/building is - as long as it seems to be newish (either because it is indeed new or is as good as new due to a rehab/upgrade). And for this newish state he will pay more as this is what the market demands for new(ish) rentals. Yes, here and there we build differently than we did some 40 years ago but overall, with a proper rehab, you can't really tell afterwards.

All in all I do not see a problem. But it does show that upkeep is important. You can't keep good value if you neglect a property. And there are many, many different ways of neglect...

"But if there is an ever-increasing supply of rental units available in a city with high population growth, than existing properties will undoubtedly experience pressure on rental rates."

I'm not seeing the logic in that statement? If supply and demand are in an equilibrium then in theory there would be no impact on rent - neither positive nor negative (from whichever point of view). So if there is high population growth as well as increased supply of properties following suit then any existing property will remain pretty much the way it is with "normal" appreciation on the property as well as only marginally increasing rent rates (due to increasing cost of living, inflation etc). I see no reason for any pressure on the rates based on the above.

Actually, in all good reality, supply will be following suit slower than the influx of people drawn to this "hot region" simply because cities have no interest in allowing too much, i.e. uncontrolled, growth and will limit the ability to develop new construction. Also, any clever developer will take it easy to not put too much pressure on prices. They would have no interest whatsoever in putting pressure on their margin by building too quickly and having units sit in their hand for too long.

Result of this is an equally limited/controlled availability of rental units, simply also because not every new construction is rented - there are actually people who owner-occupy as well, so I've heard LOL. This will, typically, lead to a (slow) increase in rent rates: more demand than supply drives prices up. This is what I've been taught and this is what I have seen and experienced myself over the last couple years of my real estate endeavor in different markets that were exactly in the position as described above.

@Chad Duval As @Thomas S. said, your contracts are of limited term and therefore can be changed very easily (i.e. basically every month) as long as you notify the tenant of the change as per timeframe described in the lease (and/or local laws, whichever applies).

As regards your statement of "making money" on those pets:  while I get the idea, you probably won't make any due to the additional wear and tear, if not even damages caused by the animals (as a broad and general statement; I personally know no cat that would ever pee on the carpet unless their owners are reckless idiots and don't properly provide for them). A pet fee won't make you money. It will slightly insure you against additional costs caused by pets.

A general comment: the way you ask and state things I would recommend to consult a lawyer to analyze your needs and wants in relation to local laws and have him set you up with proper leases. I feel like you might run into a few issues down the road otherwise.

Good luck.

This could become a real problem. I would consult a lawyer to inform you about possibilities in your state. IF it is allowed to do this without causing legal issues, I believe you would have enough arguments to charge that fee. As to whether you want to deviate from your lease to begin with, well, that's a totally different story. I certainly wouldn't. Not with pets.

I'm a bit surprised to keep reading about "you have to get better tenants, do better background checks, etc". How would this be helpful in this situation? Apart from those people with guns who also HAVE a criminal record (and most probably own the gun illegally) it wouldn't do any good with respect to incidents related to guns. Owning a gun doesn't make that person a bad tenant. Nor will it necessarily lead to incident. If this was a true problem I reckon at least half of all tenants in Texas would have to be evicted or were refused to be rented to LOL.

Of course not having guns on a property typically avoids such incidents. But again, good screening of tenants would not help in that regard.

In any case, apart from the point above I agree with the input that has been given in the prior posts. Get yourself properly informed and then decide on the action(s) to take: Facts --> Analysis --> Action.