All Forum Posts by: Andy Mink

Also because the tenant has only been there 3 months they shouldn’t get any slack.  I will tell tenants “hey if you are going to be late with rent at least give me half of it so I know you are trying to make it right, and I’ll work with you”. This shows me that they are just short, but intend to pay when they get the next paycheck.  if they owe you $1000 and it’s 10 days into the month then they are only 20 days from owing you $2000 and then they start to do the math and decide it’s better to just go get a different apartment

Usually the first step in the eviction process is the notice to quit.  I don’t know your states laws, but I would start researching the eviciton rules, and just treat it as if this person is never going to give you another dime and start the eviction process.  If they pay what is due, great, but if they are just going to string you along everyday you wait to start the process is another day you are giving them free rent and more wear and tear on the property.

It’s not a fun situation, and it may be something that is out of the tenants control, but the bottom line is that they signed an agreement, and you need to enforce it. If they didn’t make their car payments then the repo man would be on his way.   You can’t give them an inch, they take a mile.  It’s not fun to be the “bad guy” but it is a lot less fun to lose ten grand in lost rent, lawyer and court fees, and damaged property if this tenant decides to go deadbeat

Give them a notice to quit / vacate / eviction notice.  This might scare them straight.  What kind of deposits are you holding (first/ last/ security?).  I use the buildium program that is setup for online payments, and keeps track of all the financials.  I try to keep record of all contact (texting conversation is best) conversations seem to always change to suit the tenants.  They lie, they all do.  The eviction notice shows that you are serious,  you gotta draw the line somewhere.

Welcome to bigger pockets!  Burlington is a good area for rentals, but you need deep pockets as the per unit pricing can get quite high.  There is good opportunity everywhere, just make sure you do your research before making offers.  Let me know if I can help you. Andy

We just closed a Fannie REO. Paid cash, no inspections or contingencies. We used their title company. Offer accepted January 18 and closed February 25th. original close date was January 29th but it was extended. They are very eager about closing things by the end of the month for some reason. There was delays seeing the paperwork back from Fannie, and our LA wasn't very good, that's probably why she works the REOs. It was stressful, but we closed and it was a good deal on a fixer upper type house. They managed to clean up all of the liens and everything. Im really hoping that their winterizing company did a good job because it has been a brutal winter here and there is oil burning furnace and hot water baseboard heat. I guess we will find out soon!

If you rent it and can hold onto it for 6-12 months (depending on bank) to season it you could do a cash-out Refi and get up to 75% of the appraised value back, that would be all your cash and credit card debts and would still have it to rent and no tax.

Did you buy the REO from a local bank or was it straight from Fanny/Freddie (homepath homesteps)? we just bought a fanny REO and there was a clause on the deed we couldn't sell or put a security interest on it for more then 120% of purchase for 3 months.

If you want to get into investing sooner rather than later then you will need to live at the property for at least a year. This will allow you to get an FHA loan, and only need 3.5% down. (don't forget the closing costs, easily another 3.5% of the property cost) You can buy up to a 4 unit building with FHA, and they will use some of the rent roll on the application to qualify you for the loan. FHA loans are OK to have bad credit. I would also recommend including in your offer for the house the seller to contribute $5000 or more for closing costs (allowable for FHA loans) A co-signer will help a lot, (parent or significant other) This is how we bought our first property, I would recommend finding a 4 unit to buy, deal with living there for a year and save money for your next investment. We found a 4 unit for $192,000, offered $197,000 with $5000 back from the seller for closing costs. We got an FHA loan at 3.75% and it cost about $12,500 cash to close the deal. If we didn't go FHA we would have needed $50,000 or more to close the deal. The Private mortage INsurance is a lot, but it is worth it, it gets you in the game. Good luck

Maybe a better way to say it is that Capex, vacancy, repairs, and PM should be considered when looking at a NEW deal to make sure that the property is a winner. However once you have possession of the property each CAPEX Vacancy repair situation should be handled case by case with a hope for the best approach. Any buy and hold real estate investor needs every drop of cashflow to get into the next deal.

Say you have 5 properties, each property is separated on a spreadsheet with percentages allocated each month for capex, vacancy, and repairs.  5 years later of 100% occupancy, no capex, no repairs.  There is a total of $50,000 in all of these accounts but only $10,000 in your "positive cash flow account".  A great deal comes along for a 4 unit building at a great price,  are you going to use the $60,000 to close the deal or miss out because you have to "save"the money for future capex, vacancy, repairs. 

These numbers are important to consider while analyzing, but basically useless once you are married to the property.

We only have 2 properties at the moment (3rd closing Wednesday fingers crossed).  So I do not account capex and repairs on a monthly basis.  We put all the money from rent into one account for all the expenses, and the balance grows as the months go on.  When we get to a higher balance we will use the money to reinvest.

Very similar to you, the money stays there until it is needed.  I think that capex should be evaluated on a year to year basis, based on the whole portfolio's performance.  e.g. 10 properties, 1 needs a roof that year, it cost $15,000, the cap ex for the year was 15$k, or 3% of the gross revenue, etc. etc.  I don't think it make sense to have separate accounts for all of these projected expenses (capex, vacancy, PM, repairs).  What if you have a capex expense of $6000 when you have only $1800 in that properties "capex account"? 

The reality of real estate investing is that when an expense arises, the money needs to come from somewhere to keep the whole portfolio moving forward.  You cant know what is going to pop up, you can only prepare for it so you are ready with cash or credit when it happens.  By having reserves in proportion to the size of your portfolio you can grow safely. 

 Getting overextended will lead to missed payments and lower credit score, or losing properties or tenants, and you can move backwards lightning fast compared to the slow upward crawl that is the buy and hold investment strategy.  I think the biggest assets for a young / new investor are time, patience, and credit.

"Make as much as you can, spend as little as you have to"  Good luck!

I agree with @Joe Villeneuve I self manage and  self-repair my small portfolio so I do not figure for capex and vacancy.  This allows me to maximize cashflow and try to save as much cash as I can in my "house account"  which is just a slush fund for any and all related house/unit expenses.  I figure if there are big problems that cost a lot I can use a credit card to cover it and then use the cash flow to pay it down as needed. If I can make it 12 months with 6 doors cashflowing $250 I should have $18,000 to handle whatever ethier of the two individual properties need, or try to re-up on another property and hold my breath while we are cash poor.  "Make as much as you can, spend as little as you have too"