All Forum Posts by: Frank Adams

99% plus of judgements are worthless because the tenants are judgement proof. Back in my landlording days I had an entire spiel I would tell tenants at initial meeting and lease signing. A friend with an equal number of rentals would always pay to get a judgement and never collected a nickel on any of them.

"Mr tenant let me explain the facts of life regarding rent, it's due on the first of the month and late on the second. On the fifth I'm in front of the JP and by the fifth of the next month you're out of the house.

At that point I'm forgiving your debt and sending a 1099 to you AND TO THE IRS. Fogiven debt becomes INCOME to you. That won't get me any money but it'll allow me to wash my hands of you. And unlike me the IRS NEVER SLEEPS AND NEVER FORGETS.

By the time you've been landlording awhile you'll learn to screen tenants and not rent to deadbeats and liars.

Yes, BUT. It has to be a "like kind" exchange, rental for rental. I think you have to rent the new property out for two years. Then to claim it as a primary residence for avoiding taxes live in it for three years. We did this in 2001 with a California property into a Texas retirement community we liked. It worked great for us because we had a gain of over$250k on the California property.

There are a couple of 1031 facilitators or here that can give you more details.

I lived in Houston and the early 80s were crazy with new subdivisions popping up overnight. Then came the oil crash and IIRC the average house in Houston lost about 1/2 its value between 84-86. By 87 both the VA and the Resolution Trust Corporation had 2 page ads every Friday and Saturday with all of their properties for sale. In 1988 we submitted bids on about 100 or so properties. We won TWO of those bids so I guess we weren't overpaying, I saw a lot of places go for retail market or higher.

I ended up buying most of my 15 acquisitions by finding distressed looking properties in neighborhoods that that assumable VA or FHA loans. Even if I was "overpaying" I knew I could flip them in two days with my ad that read

3/2/2 in XYZ neighborhood, owner will finance with $2500 down.

No buyer asked the price, they were like new car buyers that just look at the monthly payment. With an 8% underlying mortgage at $40,000, a sales price of $65,000 and a payment to me based on a $62,500 mortgage at 11% I was doing quite nicely. If they defaulted, which a few did I could get the place back in less than 60 days.

I also prepared my own documents, warranty deed, deed of trust, note and HUD1 and charged (back then) about $350, same as the title companies.

For my money AHS is a rip off. On a couple of deals I bought the seller paid for AHS, deductible was much lower back then, and I felt as if none of them paid off. Note, back then I did most of my own repairs. I don't know how much a basic water heater or dishwasher costs today but the deductible plus a few months' premium would probably cover either.

The only repair they ever covered (not quite) was a cracked heat exchanger in a gas furnace. As the house had been vacant for a year the local utility inspected the system and said it was cracked. I called AHS and they sent out a poorly trained monkey who said it wasn't. That's a dilemma because I can't get my overnight, heat or water heater on until it's resolved and the people who's job it is to resolve it say there's no problem.

I finally got a supervisor from AHS on the phone who said if I get the heat exchanger out of the furnace they'll "take a closer llook". I pulled it and left it in the garage for the repair guy. BTW, several cracks were easily visible without removing it. When the guy put the new one in he managed to find soot and (it looked like) intentionally tracked it all over the hallway carpet, despite there being no reason for him to have even walked in the carpeted area. The attic access and the thermostat were both in tiled area of the house. I ended up taking AHS and the Realtor to small claims and the real estate agency gave me $300 to shut up about it. 

You don't mention potential income, either gross or net, so we've got to assume it's not real great. If you're unsure about being a landlord then don't become one.

People are always apprehensive about capital gains taxes but taxes in the US are the lowest in the developed world. Besides, paying taxes means you made profit. Not that we should want to pay more than necessary.

I always self-managed, good salary job that I could take off from as long as people could reach me, this was prior to cell phones. I would inspect my properties in the early months of the lease but generally I didn't need to once I had a good handle on the amount of care they were taking.

What cut way down on my turnover cost was requiring a minimum of a two year lease. If they couldn't commit for 2 years I didn't want them and then they would usually stay 4 or more. I would sometimes "surprise" my tenants with upgrades during their stay. New entry way tile, new kitchen floor or something that could be done cheaply, easily and with little or no disruption to their lives. If I felt it was coming up on time for that upgrade I'd rather do it with them in there than add to my task during turnover.

OK I think you're getting the (important) horse in front of the cart.

What's the place worth. I've sold about 40 places on seller financing and I always charged ABOVE MARKET PRICE for my properties.

What's the current (verified) rent on each unit?

What's the potential rent?

What's the term of the leases?

The loan is AMORTIZED over 30 years, but is it a 30 year loan or is there a balloon?

On the information you've provided it's a good potential deal; loan down payment, good interest rate. But it sounds like you're at the initial stage of things. Maybe one phone call with the seller in to it.

Amanda. Did one of us read the OP wrong? I thought the $850 payment was bi-weekly.

Some great answers here that I agree with. You're looking at your first deal, do it wrong, and this sounds like you're trying to force a square peg into a round hole, and it might sour you on REI for life. In addition to screwing up your credit and causing a lot of sleepless night.

We've all be in your position, those of us who handled it right are still doing it. 

BTW, I can even point the finger back at myself. In the two years after I retired (at 52) from my "real" job. I had a lot more time to prospect for properties to flip, by this time I was sick of being a landlord and only did flips, and for the work to get places up to my specs. The problem was that the extra time started to weigh on me and I suffered from a bad case of "gottadoadealitis". In a two year period I bought 6 places, but the two I forced, which it sounds like you're trying to do, never worked out in my scheme and one was a net money loser for me.

Keep looking, you'll find a deal.

Id want to see their lease, I know it's not as tough as mine, an accounting of their security deposit and rent history. You'll have honor the financial terms of their lease but you should be able to change to the "behavior" parts of your lease.