All Forum Posts by: Carl Millsap

@Taylor Elizabeth Garand send the questions, happy to help. 

@C Rutherford I've used Rent Redi, and some other companies to help gather information. We have Appfolio now.  

1. Do you have qualification standards that you publish /share with potential applicants? i.e. no evictions within the last 12 months etc.

2. What is your time worth? Sure it doesn't take a lot of time but your time has value. We charge an application fee, but we also publish our criteria to prospects so they have a good ideal if they'll qualify before they shell out $60. 

An application fee covers our overhead, and it deters some people which is fine.

3. We have a rubric that we use for the background check, LL feedback, rental history and income into that gives us an up or down or if someone is borderline then we employ risk mitigation items like double deposit, or LEAP policy. This also takes the subjectiveness out of the equation.

4. In my experience the background checks, credit report etc. gives us a better picture. When we see someone has a collection account for unpaid rent that means something.  We use the credit report to help us determine debt to income ratio. $4k a month of income looks good until the credit report shows $3000 a month in payments going out. 

Recommendation: use a service, implement an application fee and see if it yields better results...if not you can always go back to what you're currently doing. 

@Scott Ryan one way to reduce risk is require a double deposit and/ or a rent guaranty policy via LEAP or some other insurance program. 

The available options depend on your state, and type of property you're leasing as well. 

If I'm in a place where it's challenging to get non payers out then I just wait for the best candidate.

If it's relatively straightforward to evict for non-payment then I use the double deposit / insurance policy route for people who score low on our rubric.

Hope this helps.

@Nina Diehl do you have something in your lease that states damage caused by the tenant or their guest is their responsibility? Or something specific about not flushing wipes (to include "flushable" wipes / paper towels? 

If yes, send the bill to the tenant.

If no you have a couple options:

1. Pay the bill, notify the tenant, give them a warning if it happens again the bill is on them.

2. Split the bill with the tenant and give them a warning that if it happens again the entire bill moving forward is on them. Consider this option as paying to learn the business. 

Also...each lesson you learn in this business add a clause for it in your lease this way if your next tenant does it it's already covered. No need to pay for a lesson twice.

 My lease is currently 7 pages....I've learned a lot of lessons. 

Hope this helps.

@GP G. it's your responsibility. 

When you determine your cashflow you should factor in how much taxes and insurance will cost annually to know how profitable the property will be.

The positive is you'll write those off on your taxes, you won't get dollar for dollar credit but it's tax deductible. 

Hope this helps.

@Maranda Tucker Congrats. Here is what has worked for us over the last 3 years...

1. Have you asked tenants about outstanding maintenance issues? Address those and any other issues they bring up quickly. Take care of the tenants.

2. Be present...I'm onsite everyday for renovations. Sounds like you don't need renovations but there should be some type of regular presence.

3. Keep the common areas, parking lot, dumpster area clean. We still have people just drop trash but not near as much as when we took over. 

4. Anyone w/o a current lease, put them on your lease hopefully it has more teeth. For those still on a current lease enforce it.

5. Request police runs via open records for the last 60-90 days that will help identify the bad actors.

6. Put a fresh coat of paint in common areas, power wash the building if it has siding. Ensure lighting works. The cleaner things are the better people feel, it also takes away some of the darkness.

7. Be patient... be consistent.....it's not going to turn around overnight. 

8. Laundry room. If there isn't one consider installing one if possible. 

@Bruno P. We had two homeowners who sold their home and needed to rent. Based on the information we found during our normal application process we did the following: 

1. 1 paid for 6 months in advance w/ deposit. Unfortunately when the 6 months was up we had to evict them.

2. The 2nd paid for the year upfront with proceeds from the sell. 

An couple options you can consider if your laws allow it...

1. Double deposit and first month, or double deposit and 3 months upfront since it sounds like her employment is more of a contract not an actual W-2. 

2. Normal upfront (whatever that is for you) based on your application process and a rent guarantee insurance policy with LEAP or some other company that provides that service. 

These are the two options we take when prospects don't score high enough on our Rubric. 

Hope this helps.

@Ernesto Galindo-Doucette 100% cashflow

@Nikelyia Waters  

1. What is your investment strategy? I invest for cashflow. I run the numbers to see where they land before I even think about walking the property. 

Are you investing for cashflow, appreciation, to offset taxes on W-2 employment? It can be one or any combination of these, the point is determine this first because that's the view you should analyze from.

2. Once I know the numbers, to include gaps in rent etc. then I'll schedule a walk through of the property. 

3. When I walk the property I'm looking for capital expenditure issues: Roof, windows, HVAC system age and foundation condition. These are the big expenses that can ruin your return. 

I won't touch anything with a foundation issue...automatic No. If you're new to this I recommend the same.  Too many properties out there to mess with a foundation issue...just my approach.

4. Once I know the condition of the property I update my numbers with the information from the walk through. 

5. The numbers decide if I move forward nothing else. 

I recommended a friend walk on a 3 house package deal...his agent convinced him to buy the "deal" by stating they would "partner" with him on it despite the numbers not working. The agent didn't sign ANYTHING, my friend bought the properties and had to carry them financially for 2 years before they broke even.

Hope this helps

@Kelly Schroeder  

1. The BRRR method works. My mentor told me you make money when you buy, so ensure the numbers work from the beginning. Determine your buying criteria and stick to it. For me a property has to cashflow from day 1. I don't buy for appreciation, I buy for cashflow.

2. I've refinanced some properties 3 or 4 times to buy more. The numbers for both properties has to work. I won't refinance a property for more than 80% LTV.

3. If you're buying single family / duplex homes get 30 year fixed rate mortgages. If you're buying small to mid size multifamily 8 units or more where the money is only fixed for 3-5 years, get 5 year fixed. 

4. Know your numbers and control expenses.

5. Develop a plan to pay down properties. This way when an opportunity comes up you can refinance and take advantage of the opportunity. 

6. Develop a relationship with multiple banks / bankers. This will make it easier to get financing. 

7. Keep your personal debt level low.