All Forum Posts by: Adam Johnson

I will probably stir up a response, but I don't even pull credit in my market. I know that renters in my market have bad credit, that's why they aren't owners. I give my tenants an application, then verify the information they give me. If there is a lot of missing information (c'mon, you really forgot your kids names!?) or if I start finding bad information, I start getting nervous. I have a spot on the application for income, and I verify it afterward (I don't ask until after I have the application, just to make sure they tell the same story after I ask them to prove it).

I always call the current landlord, but REALLY like to talk to 2 landlords ago. The current landlord may have a reason to give a "good" reference, he/she may have a bad tenant to dispose of! With that said, 6 years at the same address says a lot if you read between the lines - she hasn't left and she hasn't been thrown out. Her rental is her HOME! She is more likely to respect your property as her own.

The other thing I like to look at is rent/income ratio, though you do also need to consider other living expenses. In your case, the nurse is at about 18%. If she has been at the same employer for a reasonable period, I would approve largely on that alone. Once you start approaching 30% of household income going to rent, you need to start being more careful. I do go higher than that, but my ears are on high alert for other "concerns". At 18%, unless she has other very large living expenses, she is well within the affordable range and is more likely to pay the heat bill on time and generally take care of her family and YOUR property.

Look at the car she is driving, does it go along with the story? If her car is modest (doesn't mean junk, just means not "flashy") and seems to be taken care of, that's a plus. If it is a luxury car and/or a model that doesn't seem appropriate for the stated income and her story, look closer at other information. I have had tenants go above and beyond for their car at the expense of my apartment!

Sometimes it boils down to a very unscientific "gut feeling". I had an applicant that I was very hesitant about. She was at the high end of my income/rent desired range, she had just left her husband (lot of drama in her story about that!), was moving in with a boyfriend and her daughter. While she filled out the application, I was chit-chatting with the daughter, she was 10 or 11 years old, and I found the daughter to be very respectful and quite the conversationalist. Had it not been for the conversation, I may not have approved the application. I did approve it and she has been one of my better tenants for over a year now. Another lesson/experience - if the kids are animals, they probably learned it from the parents. If the kids are decent, respectful, and seem to have good heads on their shoulders, they probably learned that from having parents with similar traits.

This was a rather lengthy response, and I could ramble on for another 20 minutes if you let me. Long story short, keeping in mind that I haven't seen the application or met the prospect, I would approve this in a second and not wait a week.

One final thought that may spark another topic - if you are unsure of your exit strategy on this property, your new nurse tenant might be an option. You might consider a creative financing arrangement and allow her an opportunity to buy the property from you over time. There are a number of ways to do that - new topic?

Best of luck

Like everything, this is a numbers game. I am going to take an opposing viewpoint to most of the other responses. I think no money down is possible ANYWHERE buying ANYTHING. First thing to do is listen, second thing to do is ask. By that I mean that you have to listen to what is important to the seller, then you have to put that into a solution that could work for them as well as you, and then ask for it.

I recently purchased a 5-unit that was fully vacant with a mortgage that was going bad. I negotiated with the lender to assume the mortgage (the mortgage was supposedly not assumable!) with my contribution being that I would fix the property, get tenants in there, and make it perform again. Now, this is not what I would necessarily consider no money down, since I had to pay for repairs out of pocket. However, the repair money came by way of use of existing lines of credit, so effectively, it ended up being no money down. I did not bring any money to close the deal.

It is VERY important to first see if the purchase makes sense. In my case, the ARV was around $ 100,000, I assumed a $ 57,000 mortgage, and spent around $ 10,000 in repairs. The rental income has paid the lines of credit back down due to high cash flow, and I continue to pay the mortgage. I am currently talking to lenders about a secured line of credit leveraging my equity on this property so that I can do more deals like this.

I started RE investing with no money, so I am a big fan of no money down because for a very long time, that was all I had. I would NEVER use this strategy for a full value purchase!!!!!! I use this only when I see equity to be gained very quickly. Essentially, instead of putting money down, I am using that equity for my down payment and backing into the deal.

Most lenders look at me like I have 3 heads, but that's ok. When I bring one of these deals to them after a year and they see how much equity/cash flow these deals are throwing off, they are buying me lunch to learn more. This strategy sometimes takes a couple steps in order to place the financing with a traditional lender (such as hard money, then fix/stabilize, then take it to the lender to refi), but when you put no money down, the return on your investment is "infinite". I like that a lot!

Adam

Maybe another approach to take would be this - use your lease terms to enter the property yourself to take some pictures and/or video of the interior. If you are marketing to investors, they should be more receptive to writing an offer on the contingency that it is subject to a walk through inspection after the offer is written. An investor might also understand your position better, as well as understanding why the tenant is being difficult and being less concerned about a tenant that is putting up a fuss.

This approach accomplishes a few things - it keeps things friendlier with the tenant longer, so you don't lose your income while marketing the property; it allows you to focus on marketing right now before having to potentially deal with an eviction; it allows you to present a "real" scenario to the tenant after you have accepted a contingent offer, ie., if the prospective new owner is somebody that specializes in owner-financing or lease options, it might prove to be a BETTER option than the tenants current situation with you looking to get paid and move on rather than wanting to be the bank.

This approach also reduces the unknowns and what ifs that you currently have. It also helps minimize disruptions of the tenant's quiet enjoyment of the property while you try to sell it, and possibly allows you a little "quiet enjoyment" of the sale process without ticking off your tenant and starting a rumble.

At the end of the day, if I were in your shoes, I would try to kick the eviction ball down the road. It may still come to that, but it likely will not. Coming at the problem from a different angle may calm everybody down and leave everybody on much better terms.