All Forum Posts by: Brian Pleshek

@Account Closed

I understand that a credit score maybe "doesn't matter" in some cases, but I can use it to quickly weed out definite Nos.  Require 630 up front, then if they pass that then I can look at the credit history more closely.

Can you make both mortgage payments and your personal expenses if they both go unrented at the same time?  If so, for how long?  If you can't afford to do so for 6 months, you might need to sell them and take your profit and pay your taxes.  If you area able to do so, then maybe you can keep them for a year, maybe refinance to a 30 year and see how the numbers turn out then.  If still not good, then at least a year out, you may have better tax options for selling.

When looking at a property, these numbers should have been run ahead of time.  I suspect that you maybe didn't know the rental market prior to purchasing and maybe only looked at the discount in purchase.  I could be wrong.  Knowing your exit strategies would at least let you know that this was a flip up front and still make the deal because the rental numbers just were not there.

Good luck,

Brian

@Kevin Johnson.  Welcome to Bigger Pockets.

Congratulations on your first deal.  I would save up enough money in reserve to handle about 3-6 months of expenses.  If you don't have a lot of cash at hand as you say, then you might be a furnace or water heater from a big problem.  You should have a reserve for each property, though once you have a LOT of properties, the amount per property in reserve can be lowered at bit as there is safety in numbers.

Once you have your safety margin in place, then start saving for your next down payment.  If you want to continue house hacking, which isn't a bad idea, buy another triplex or quad and move in there.  Rent out where you were before.  

By repeating this until banks stop giving you money, you can acquire a lot of units at the lower owner-occupied rates.  Do this 3 more times and you'll have 11 units and your place to live.  That is a great place to be.

Don't be in too much of a hurry.  Safety first.  Have a plan.  

Good luck,

Brian

What I do is a little different.  If I have a property that I want $1400/month in, I have in the contract that the rent is $1450/month with a $50 discount if paid on or before the 1st of the month.  On day 6, there is a $50 late fee.  I will put up the notice at 12 days.  I can then choose to waive or not and keep the extra fees in my books as unpaid late fees at the end of the lease term.  But if you condition them to early to pay the fees, they will.  I will generally waive the first one and not mention it.  The idea of a discount is there just as a carrot to get them to pay.  And some tenants just pay the extra amount "voluntarily" because they know what the contract  says.  If at the end of the lease they have a few late fees but the property was paid up, notice was given, and it's returned in good shape, I might be inclined to let them off.  If they appear to be a problem child, then I won't accept the rent unless the entire amount is paid up including the late fees.  If I have to put up a second eviction notice, that's it.  It's going to happen.  Fortunately, Ohio is very landlord friendly.

BTW, I think I've read somewhere that in some areas, that not collecting a late fee in a timely manner becomes uncollectable.  The court will side with the tenant with the thinking that your continuation of the lease by not exercising your option to evict over unpaid fees constitutes you having waived them.  So, i'd check before you just charge the fees to the security deposit.  I'd hate to be charged triple damages on $500 worth of late fees by the court.

Brian

House hacking is nice because you get the advancing of owner occupied financing which can save you on the interest rate.  It also reduces your personal expenses so that you have more available to be saving to put toward your next property.  Ideally, you move every 1-2 years or so(whatever the limit is to keep the bank from thinking you're cheating) and rent out your place and acquire a new one.  But you will run into a limit after awhile(4 properties will likely be your first limit) because they don't like you having more than 4 mortgages.  Then you will need to find a portfolio lender who will lend you for some more properties.  But at a certain point(often 10, but it depends on the bank they'll stop as well.  

Realize that your next door neighbor is your tenant.  You have to manage the friend/landlord relationship.  If you don't live next to them, it's much easier to be just the landlord and not just "Tony" from downstairs whose kids go to school with yours and bbq together, etc.  BTW, you're the landlord not the friend. 

You also have to understand that where you live is a lifestyle choice.  Your house is not an asset.  Read "Rich Dad, Poor Dad" if you haven't.  An asset makes you money and a liability costs you money.  So if you live in a nice $900k Southern California house(or whatever you can get there), it's a liability unless it's a rental.  You can choose to live there(if you can afford it) or you can share rent with 3 other college buddies in a 4BR apartment.  So living next to your tenant if it is a means to an end is a business decision.  If you're just trying to get cheap rent for a while, then it's a lifestyle choice.

Sometimes it is cheaper to rent in an area than to buy.  It might make more financial sense to do so.  I don't know your area.  There are investors out there that rent and own properties.  It often comes down to lifestyle.  A single man renting a 1BR apartment in a cheap area for $500/month and owning properties that rent for $1000+.

Cheaper to rent than Buy

Good luck,

Brian

Hello @Anthony Navarro.  Welcome to BP.  You might want to check out the beginner's guide. Also, I can't tell you much about California. From my understanding it is not a very landlord friendly state. But you might want to check with others in your area. Join your local REIA.

Read a lot.  Do 50 hours of reading on this site and elsewhere about real estate.  Then you need to decide which area of real estate to deal in.  You've said house hacking multis.  OK.  Start looking for them.  Then run the numbers on each one.  For starters, this is just for practice.  Try to determine your cash flow and other important metrics.  Compare how the different options stack up.  If your area doesn't produce any good properties, then look 1-2 hours outside your area.  I'm sure there are some communities that have better than others.  

Patience is good.  Make sure you take the time to know what is a good deal and what is not.  But after you have found it, then pull the trigger.  Wouldn't hurt to run your first deal past the forums though just to make sure your numbers are good.

Good luck,

Brian

Welcome to BP.

Ok.  I was reading something(not here) and that was a suggestion.

Should I be looking to turn over my buy and hold properties every 7-10 years to avoid the cap-ex and acquire new ones or is it just better to have the devil you know over the one you don't?

Brian

Yes, that is a Dave Ramsey book.

Yes you can refinance a rental property.  If you have just purchased it, the bank may require it to "season" a bit.  How long is up to the lender, but a year of ownership is usually enough.  Also, a rental property is more "risky" for a lender, so expect a bit extra on the rate.

Good Luck,

Brian