All Forum Posts by: Bill Pate

Hi.  I have had buy and hold rentals since 2001.  Over that time period I have been able to grow from one to ten units.  Rental income has been very stable for me over that period.  My personal philosophy on rentals in my market is I like to keep it very basic.  Paint everything white, vinyl plank flooring, etc.  Then I keep my rent on the lower side of the market, screen really heavy, and typically I have very good tenants.  Even if I do have turnover it's typically very short amount of time.  Usually no more than one month.  I have seen market ups and down, but overall rent has been a very stable income for me.  In 2008 when the market was pretty bad I was able to buy more units for pennies on the dollar and pay cash.  In 2019 when the market has trended up I was able to buy a 3 unit with the cash made from the other units.  Overall I am very happy with the performance of my portfolio.  The income is very predictable.

@Matt Carroll the unit needed the carpet ripped out and replaced through out.  That particular unit is 1550 sq ft.  So lots of flooring materials to purchase, and one of the bedrooms was sans closet.  So I had my contractor build a closet and paint to match.  Also I had to purchase appliances including stove, fridge, and microwave.  Most people don't want to provide their own appliances.  Also we had to put a proper door on the bathroom.  Previous owner had actually put a sliding closet door on the bathroom.  So we took that out and put in a proper locking door.  Everything was cosmetic, but because there was so much flooring to do that drove the price up.  My contractor got it all done in three days and I had it rented by the weekend.

If the property has good cash flow on the back end(meaning when finished) then I have no problem using consumer debt to help get it to that point.  I recently bought a triplex, and with down payment and closing costs it took me close to my lower limit on free cash.  One of the units(the most desirable) needed about 5k in rehab to make it really nice and rent ready.  So I put $2500 for the materials on the credit card, and also ended up charging another 2k for inspections etc.  So total debt was $4500.  Sixty days later I have paid off $1500 of the credit card debt with money received in rent from the property.  And that's not using every penny of free cash flow from the property, I always put 10% into a capex fund for each unit each month.  One of the units needed a hot water heater immediately.  That was $800, but used my capex fund to pay for it.  So I have done this many times.  IMHO it just depends on how much debt and how fast you can pay it off with cash flow or sale funds.  If it was $25k vs $5k I would probably not do it.

Go put a 24 hour maintenance inspection on the door.  Then perform an inspection.  I almost guarantee that will cause him/her to call.

If you know the property is going to stay vacant for a while then winterize.  Otherwise I would just leave the heat on set at the lowest setting(usually 50 degrees).  That way you can show the prospective tenants the heat works.  I have had a house vacant for a couple months in the winter without problems.  Just make sure to turn the water main off.  That way if a pipe does freeze it won't leak a lot of water.  You might get some air in the lines when you turn it back on, but that goes away after a couple minutes of running the water.

My rentals tend to do better in a down market. Meaning I can rent them easier because there are more people looking for housing. As far as whether the market is up or down I would never let that get in the way of buying a property. As long as you can get a property that has nice cash flows then you should do well. I just bought a triplex last month. This was not a house hack. And this was the first rental I have ever purchased with a mortgage. Like my accountant told me never let anything get in the way of investing into something you know is going to make you money. The only time I would worry about the market is if you are not planning to hold on to the property long term. Personally I am a long term investor. You should buy multi-family in my opinion. I own both, and while I have done well with both multi-family has less risk. If you want to go SFH then always remember you can take on roommates to help pay the mortgage also.

Hi. So I did something similar to what you are thinking about. I was eligible for a pension from a previous employer worth about $125k. I could have rolled it over into a 401k/IRA or I could cash it in and pay the taxes and penalties. I chose to cash it in and use the money to buy properties. Between what I had saved and the pension money I came out with about $100k. So not a lot of money, but I also live in one of the cheapest markets in the country. At that time I had already owned three rentals for more than 10 years, so I was experienced in all the aspects of being a landlord. I was able to purchase a condo, a SFH, and a duplex with the money. So we went from having three units to having seven in a very short amount of time. Taxes and penalties hit me VERY hard the next year. Because withdrawing the money pushed me into the next tax bracket causing me to lose all of my rental deductions for that year. I ended up owing the IRS $15k on top of the money I had already paid which totaled about $12k. I was prepared for this eventual problem as I set aside $10k of the money I withdrew just in case there was a component I didn't think about. My accountant actually told me he thought I had made a very foolish decision. Fast forward to today. I still have all 7 rental units. I have made all of my money back including what I paid in taxes and penalties. Also I was able to use the equity from the SFH as the majority of a down payment on a triplex I bought last month. We now have 10 rental units from 7 properties. I am 44 years old and make almost as much in "passive" income off the rentals as I do at my regular full time job. The duplex turned out to be a short term mistake. The condo was a good steady investment that I have made nice money. The SFH was a gold mine. In three years I have already doubled the money I put into the SFH between rent, and cash out refi used for down payment on triplex. The duplex was a money pit. I bought it for $25k(not a typo), and put another $25k into it for renovations. Total rent roll for the duplex now is $1200 a month for both units with total investment of $50k. So really not bad numbers, but it took me two years to renovate the upstairs unit with me doing most of the work myself. Lost rent for those two years, but now the unit has been renovated with all high quality work, so maintenance going forward should be very minimal. Just like picking individual stocks you are going to have some that turn out like tin and some that turn out like gold. Mostly though it's about getting a property in the right location at the right price point. All of the properties I bought would cost more than double what I paid today.

I bought a foreclosed condo three years ago that had been completely renovated. It even had all new appliances. No one wanted to buy it because it had a water leak from the outside. I was able to fix the water leak permanently for less than $50 my cost, and lots of calls to the HOA management company. It was a real pain, but I got it fixed. Also I was able to get the condo for half the value because the bank didn't want to deal with the water leak after putting all the money into it to renovate it.

@Steve Y. know the rules, and play by the book.  What I mean is in most states like Ohio you can request the tenant to submit maintenance items in writing.  Then as the property owner you can take up to 30 days to fix issues.  Also you should hire a lawyer.  Any more maneuvering without a lawyer will just cost you more time and money in lost rent.  A lawyer will be able to advise you on next steps without going back to court.

For $4000 I would probably try to get my money back too though.