All Forum Posts by: Deanna O.

It's going to sound odd, but IMO it's less important WHAT "plan B" is, than that you have one (or maybe 5) other options that you have considered.  Maybe sketch out plan C, D and E, for a property, just make sure you are seeing all of your options. You might even do a basic version of this for property you don't have a chance of getting, to train your brain to see the potential of a property.

 You may find that plan A & B swap places as you work with a property or that plan E or F or G pop out of nowhere and land on your plate (selling as a Rent-to-own, selling a life estate, super-long leases, sale with right-of-first-refusal).An owner rent-back is another option (I've done my first one this year - we'll see how it goes). 

The standard A/B scenario is a flip that turns into a rental position. If you (or market forces!) decide you need to keep the property, Plan C could be Airbnb or renting to traveling nurses, D could be renting out by the room to students or professionals. E might be work "not quite from home" offices for the Covid-trapped, F could be renting to a non-profit for group housing for the disabled. Your "plan D" could be renting to section 8 (some landlords hate it, some are quite happy with it). E could be move into it yourself! The property might be a candidate for a lot split, or the addition of a mother-in-law unit, or tiny home parking. 

There are SO many things directions a project can go once you start thinking outside the traditional boxes!

The two most terrifing moments on your first deal are when you make the first offer, and when it is (yikes!) ACCEPTED!

If you can, start small. If you haven't overextended yourself there is more fallback to make a mistake, which, ironically, reduces your chance of making  "under pressure"  istakes. You can pass on that sketchy rental prospect, because you don't HAVE to rent out right-this-minute.  You can go ahead and fix that ___that turns out to be bad, rather than just "hoping" it won't be a problem.  It's OK if the first property is a "hobby"/training property.

Figure out what YOU want to do, and what . I ended up with 3 small rentals that ALL had foreclosures involved, all needed some TLC, and two had just boatloads of "wierd" in the purchase process; foreclosures, non-performing notes, tax liens, unprobated estates (the most profitable one had all of the above!). I love the "figure it out" part, the "how can I make this fly" part, and the "doesnt' it look SOOOO much better!" parts. Personally, I'm very hand's on, and prefer to be accountable only to myself for either successes or failures.

 The best pieces of advice I've seen on BP;

1- It's better to lose 10 good deals, than "win" one bad one

2 - The deal is made in the "buy", not the "sell"

3- Always have a plan B. You never know quite what the market will do next, or what unexpected things you'll hit in a rehab

4- Have more reserves than you think you will POSSIBLY need. You'll probably need them.

Hm. Salton Sea. $5k cash is cheap, but which area? Is it a 'buildable" lot? My friends & I used to go out to the desert camping all the time back in the day. Salton Sea had all kinds of very cool stuff to explore, but the alkali dust was a bit wearing after awhile. 

Annoyance, or  opportunity? There is actually good fun to be had with unwelcome callers; 

If it's one particular wholesaler, pick an unreasonably high "make me move" price. I suggest 50%-100% over high FMV. Fake delight; "Sure! You know, I've been thinking about what it would take for me to sell that property! It's easy to manage, I like it and I don't really need to sell, so the price is $750k. I'll be using my own Realtor for the deal, of course. I really hate to disturb the tenants, so you'd need to deposit 10% earnest money up front in order to view the property, and I'll want to compensate my tenants for the inconvenience by paying for them to have a night out on the town, so about $250 of that earnest money will be a non-refundable viewing fee. Also if I sell this property, I'll have to line up a 1031 purchase for tax reasons, so it could be in escrow for quite a while until I find something else I REALLY like. You know, something that makes sense financially. Based on the current market, I'm guessing that could easily take 6-9 months. Does this sound like something you are interested in?" (if he calls back raise the your "asking" price by $10k each call).

That SHOULD get you on his  "greedy whacko nut job" list. If not, there are a lot of fun scripts from the bad old days of telemarketers ("Wait! How did you get this number? Lieutenant! Trace this call!").

Property in my investment area has gone up @ 50-75% since Covid, so I've been getting cold calls wanting to buy one of properties. I just say that I would only consider selling for full market value plus enough to make my tenants happy to move. End of calls.

In the same way that "Chicago" doesn't refer only to the tourist area by the waterfront, museums and downtown, the term "Los Angeles" can refer to the entire LA Basin, "Downtown LA" (the tiny little blip of tall buildings where all the freeways merge), or the metro area designated as "City of Los Angeles". Some iconic "LA" areas like Beverly Hills, Malibu and Compton aren't technically Los Angeles at all (but Long Beach is --connected only by a two block wide stretch of land that is 5 miles long).

A later post by the OP noted that the value of the lot was "at least" $100k. A barely-buildable postage stamp of a lot in an outer part of the LA basin. Yeah, I could see it. A technically build-able in CA is still an expensive gamble. As much as I love my home state, it's crazy. You can spend years and $100k+ jumping through bureaucratic hoops before one shovelful of dirt is turned, OR some city planner decides it isn't REALLY buildable because of set backs, not enough parking, the neighbors sue because they don't want you to cut down the trees, etc etc. 

I've had tenants fix stuff, but over $25/mos they need to get approval BEFORE they do it, and really I'd rather know ahead of time. Some stuff is so small it doesn't matter (paper towel holder breaks), but sometimes it's something I am already planning to replace, covered by warranty, 2nd or 3rd time the item has needed repair, so it needs to be replaced, etc. I explain I always need to be aware of any issues with the property in order to maintain it well over the long run.

Also 40 degrees really IS a huge issue in baking. Too high & you have a Thanksgiving turkey that's perfect on the outside but dangerously raw on the inside, too low and you have one that's dry as jerky and 2 hours late. 

All 3 properties continue paying on time, as usual. All 3 household have benefited financially from Covid stimulus, no one adversely affected yet (one retired, 1 on SSI, 3rd is "essential workers" (grocery clerks). I did touch bases with everyone at the beginning of this, & have been checking in periodically while it's been going on. Since I have only 3 properties that's not hard. Properties are in rural northern CA, where incomes are low, & housing is in extremely short supply. No good tenants are inclined to play games if they have a nice place at an affordable rate. 

 
It feels everyone is starting to scramble to plonk down in a chair before the music ends.
The house across the street just went through a full rehab flip. I heard they were originally planning to bring it on the market for $1.1m, but instead sold it quickly for $998k (1970s larger tract home with a great view in a nice neighborhood). Pre-Covid I think they might have held out for more, with Covid probably glad to get out relatively unscathed.

Strictly personal opinion; The Gov't is printing money through December. I expect the actual fire sales to start shortly after, gradually at first. Some of the effects are already starting, with investors dropping prices on rehabs/flips trying to get out before "whatever" happens (seeing this in far northern CA as well). Banks are getting jumpy & raising HELOC rates, even though Fed rates are low. CC lenders are getting jumpy & looking for any excuse to turn down applicants, since they can't tell if they actually still have a job. What happens after all this who knows.

Similar to Kyle Benham, the paid credit check is the LAST part of the process (after calling employers, etc). I would be glad to have someone give me a copy of their Credit Karma, FICO etc, but everyone has to pass a background check, no exceptions (it's a non-discrimination thing, if nothing else). I've use MySmartMove (SOFT pull),since they first started. I also never have possession of an applicant's SS# (safer for the applicant). 

I own  property in rural Northern CA, so I'm often dealing with "C" tenant prospects...and some D & F. Multiple salmon poaching convictions? Felony conviction for stealing an airplane??? "Only uses ice water to produce shatter in the bathtub"?? Um, no!  No way in heck is anyone moving in without a background check!

I do make clear before I run the background check that it is very, very, VERY thorough, and I give them at least 3 chances to "remember" what might show up. So far I've only had to reject one family for lying. I do applicants one at a time if there are multiple adults (I have them to start with the "worst" one). The deal is that the first 2 credit reports will be deductible from the first month's rent (all adults get screened though). If I reject them for something they already told me about I'll refund the credit report cost. If they lied they are out of luck (eliminates those who KNOW they will fail). I've only refunded once. I'm usually dealing with renters who are on a very tight budget. On the relative scale of turnover costs it's a pretty nominal cost for me, and a landlord's reputation of treating renters respectfully is even more important in a small community than in an urban area.