All Forum Posts by: Brian Tome

Stainless and granite will get you $100-150 more per month in my market, so I always go with them. It also improves the quality of applications I get and the ARV of my units when I BRRRR out of them.

I prefer to have the nicest rental units in the neighborhood and run them attentively and efficiently.  I may be leaving a little money on the table by "over improving," but I have been renting seven units for the last two years and I have yet to lose a tenant or miss a month's rent.

I recommend making your units nice and screening your tenants diligently.  You will have a much better experience in the long run.

@Bryson Goforth - There is an old saying about being your own attorney.  "The man who represents himself has a fool for a client."  The same should be said about being your own real estate agent.

I buy fix and hold rentals without an agent because I am offering cash and paying well below market value (like 50%).  I can manage it because I am an attorney, my wife is an agent, and we have lots of experience.  I know the legal pitfalls and the construction numbers.  She knows the market and the neighborhoods.  

If you are buying the house you plan to live in, and it is close to market value and in move in condition, you should just pay the extra money and use an agent.  It is temping to try and cheap out because you think you will get a better deal, but the reality is that you cannot possibly learn what you need to know for this transaction in one deal.  A Rockstar agent will be part of 20+ deals like this one every year and know all the potential problems as well as the best people to call to inspect for and or address them.  Heck, my wife has saved deals when the financing was going south just by referring her client to a mortgage broker that was savvier than the one they chose.

The difference in your mortgage (paying $484K or $515K at 3% over 30 years) is about $105.00 a month.  Find yourself a good agent and they will bring you far more value than that.  Then go find a rental property that will cash flow twice as much and focus on making money so you can spend it on the things that make your life better. 

@Christian Orozco - Definitely do not show the unit to anyone until you have their application, income verification, a clear background/credit, etc., and proof of identity.  Then schedule one or two showing times and let them all show up together.  I control flow at the door in the age of COVID, taking them in order and giving each person 15 minutes to walk through.  Before COVID I just let them walk through at the same time.

If you have 5 well qualified tenants at the end of your process, your rent is probably about right.  Even if it is a little low, don't be afraid to leave a little room in it.  Tenants who feel like they are getting a good deal, pay quicker, take better care of your property, call for fewer repairs, and - most valuable of all - stay longer.  An extra $100/month is nothing compared to a tenant who stays for 7 years and pays on time every month!

Happy landlording!

@Daniel Goldfinger - You are getting lots of great advice here!  Thanks for asking the question.  I am benefiting from the insight others are providing you.

I tend to agree with @Steve Vaughan.  If you can move anywhere you want to, pick someplace you love.  You can find a way to live free or cheap through a house-hack or AirBnB arrangement in most markets.  Then you can build from there.  If you like Cleveland, awesome!  But ... 

Just thinking "why put boundaries on your goals?"

@Mike B. - You are getting the "trial by fire" training!  We all go through it each time we do something new.  Good on you for having the courage to take the chance on rental investing, and even more so for having the courage to ask for advice.  You and your wife are going to make a great team, and once you have good tenants in place, you will start seeing the rewards that come from all your hard work.  Before you know it you will have a dozen more and it will get simpler each time.

Best wishes!

@Mike B. - "Prior landlord moved out of the country?!?!"  LOL!  Yeah, hard pass!  What are we living in 1920?  Everybody in the world has access to What's App, Viber, WeChat, Kik, Line, or something that is as simple as installing an app and messaging/calling them direct.  I communicated with a client in Bamako, Mali for many months using What's App before ultimately traveling there to defend his video deposition in a personal injury case.  Look up Bamako.  It is the armpit of Africa (complete with terrorists) and every person there had a cell phone and could answer your Viber call 3 seconds after you dialed the number from the states.

You can also verify property addresses and ownership records to find the landlord's name and phone number in public records.  This lady is trying to "game" you because she has something to hide in her rental history.  Probably stopped paying rent when eviction actions were suspended for COVID and needs someplace to move now that the moratorium is lifting.  OK, that is an unsupported assumption on my part, but her story gets fishier every time you provide more details.  

And who cares whether you like them?  You aren't going to live with them are you?  Never trust your gut!!!  Always trust the process and the tenant's rental/credit/criminal history!  I will give a tenant a break on credit if it is close or they have been good for a while.  I will look at criminal history a little less critically when it is an older conviction.  But bad rental history, late rent payments, evictions, etc. are a deal killer, and these applicants are clearly trying to hide something from you.

Guarantee if you rent to this couple you will regret it!

I would treat them like a couple for screening purposes if they say they are a couple.  Domestic partners, married, whatever, they are two adults renting a property together so treat them as a family unit.  As stated by others previously, never treat anyone differently based on their orientation or relationship status.  If you would rent to a newly married couple, a boyfriend/girlfriend that just got together, or a couple of adult friends/siblings/etc. you should rent to two adults that want to live together for any reason.

However, I would not rent to these particular applicants because they don't seem to have any rental history.  I have found that people often report no history when they have prior evictions, so if applicants can't show two years of good rental history with references, or residential property ownership we don't rent to them.  We will allow cosigners in the case of people who are just starting out in life (i.e. moving out of parent's house), but we won't rent to anyone with a prior eviction and we strictly adhere to all other screening criteria even when there is a cosigner.

Do your due diligence, be patient, and get a good tenant.  There are plenty of them out there, and nothing else will serve you half as well in the long run.

Seems like you got the answer to your question and have a very well rounded assessment of your realtor's motivation/ethics.  My wife is a realtor and we have bought deals her clients passed on, or offered low on.  It is awkward, but we are very up front about it.  For example, we tell the investor that we are also interested and are willing to pay X.  If the investor is willing to pay X or more, we let them make the offer.

It is also helpful that we are always willing to work on projects with her clients and very supportive.  Most of them are good friends as well as clients.

@David Mijares - What we are all trying to say is:

1. You were prequalified with a conventional mortgage product, which will only work if you live in the property you are purchasing.  Therefore, a good strategy might be to "house hack."  House hacking is a term used for when people buy a multifamily property with four units or less (duplex, triplex, quad) and live in one of the units.  This method works because banks will give you a conventional mortgage on a property that has four or less units, and you can live in part of the property and rent the other parts out to generate cash flow.  The conventional financing comes when you promise to live in the property for the next year, so you can live there while making any repairs/upgrades to improve the value and look for another one to buy a year later, and so on.  In this way you can acquire many rental units in a short amount of time with a terrific interest rate and long term financing.

2. Using financing to buy an investment property is much more difficult than buying your own home. It can be done with some work, but you have to get familiar with the different types of money (i.e. hard money, private money, partnerships, etc.) and make sure your deal is really solid in order to make it work. It is also pretty standard for a lender to expect you to have some skin in the game, so they may want to see you bringing a significant portion of the financing to the table, like all the renovation costs or 20% of the total purchase and reno costs. Don't get me wrong. I am not saying a deal cannot be structured differently, but until you have some experience it will be hard to get lenders to trust you with their money on an investment. That's why working with someone from a local REI club or meet up might be a better option. If you find someone that will take a chance on a deal with you, a partnership/mentorship role might be the easiest option for your first deal.

Either way, don't give up.  You can do this.  The only reason some people aren't real estate investing millionaires is because they gave up when they found out a bank wouldn't throw money at their deal just because they thought it was a good plan.  Every time someone tells you it can't be done that way, find another way to do it or another person to talk to about doing it.  Before long you will have a solid portfolio and people calling you to see if you need any money to do deals.

@Thomas Jerome - Gary and John's advice is solid.  You might just want to run three separate alternatives: worst case, best case, and average.  Make sure it works in the worst case, but aim for the best case in everything you do.

Also, John is spot on when he says everyone underestimates holding and renovation costs, and overestimates ARV. I do it every time. I know that I have a tendency to do it, and I still do it. So, keep a healthy reserve and wait for a good deal. One mistake on a tight budget can put you out of the game for a while.

Good luck!