All Forum Posts by: Christopher Gilbert

Screening tenants is pretty straightforward, you can sign up for a service yourself like National Tenant Network (ntnonline.com) or rent prep (rentprep.com) and run the necessary background checks.  If you do not feel comfortable you can also talk to some local realtors and they may be willing to list your lease and screen applicants for you (usually for 1/3 to 1/2 a months rent fee). 

Your state or city should have a standard lease template that you can use, again, check with a local real estate agent and they should be able to at least give you a form number or perhaps will provide you with a blank one that you can fill out yourself.  There are generic lease forms available online but I would stay away from them as the local/state ones have wording that addresses specific laws in your area and the local courts are familiar with them should you ever have any legal issues.

@Will Rodgers 

We used to use unlicensed contractors almost exclusively since they were cheap compared to general handymen but after being in the business for a while we found that there were pleny of insured, legitimate handyman that worked for the same rate.  On top of that once you have been in real estate investing for a while you realize that risk of a lawsuit is much more important than spending a few hundred more dollars on a job.

Generally the insured guys have a few more people in their crew which mean they could either work faster or on mulitple projects at one time which ends up saving you money. 

Most are just guys that used to work for someone else and have enough independance to start their own company and if you can bring them consistent work they can match just about anyones price.

@Brooks Rembert 

We started off picking up rental properties as a hedge for retirement and our initial goal was to pay them off as quick as possible to start replacing our income.  We opted to do 30 year notes figuring that we can always pay at a 15 year rate if we wanted to or if times got tough could drop it to the 30 year payment.

After we started to get a ton of appreciation in the properties over the past few years we tried to refinance to pull some of it out and were not able to because we had too many notes.  Long story short we have several hundred thousand in equity in rental properties and cannot do a thing with it unless we sell them.  The deals today are nowhere near as good as they were when I bought the properties so it does not make much sense doing rollover's into a worse investment.

In hindsight I have turned into a fan of having as many properties as possible with as much 30 year debt as possible.  You never know what financing options will be available in the future but everyone pretty much agrees that rates are only going to go up.  Cash in hand is always better than equity tied up in a property.  With cash you always have options to do whatever you want in the future, pay off your current houses or buy more.

@Nghi Le 

To answer some of your general questions, we ALWAYS at least do a drive by of any property that we are willing to put a bid in on.  We have come across many burned out houses, flood houses, landlocked lots (no road access) and places that were in such bad condition a good wind will bring them down.  You cannot get all the information driving by but at least you can get an estimate to help you determine if you should even bid and if so, how much.

Past experience has shown that at least half of the houses get pulled.  Some are for legal reasons or the owner paid the back taxes and some are probably other investors getting in touch with the owner and putting a deal together before the auction.  Of the ones that make it to auction half are not worth bidding on and the remaining ones generally have no clear "owner" as the previous one passed away and had no direct heirs or will to give the house to. 

@Xi Zhu , National Tenant Network (ntnonline.com) and RentPrep.com both offer full background, rental history, etc. that you can use for screening for a reasonable price.  They also offer rejection letters for anyone that does not meet the criteria which is nice to help cover your liability.

In my opinion if you only have a handful of rental properties I would not bother with an LLC. Just go buy a liability umbrella insurance policy for enough to cover your assetts. The umbrella will give you protection not only from your rentals but also a lot of other situations where you might get sued.

Setting up an LLC will cost you at least $1000 plus you have to pay someone to take care of the taxes for you (several hundred dollars per year), have "meetings" with minutes, etc. Even if you set it up as an S-corp you may have to claim income even though it is tied up in the business and not your pocket which increases your tax burden.

It can also be difficult to get financing in an LLC and credit while it is easy as a sole proprietor to get more mortgages, etc. Putting personal property into an LLC is also difficult and requires some time from a lawyer and tax accountant to make sure it is done correctly.

@Oren H. I am in a similar situation and have not had any luck.  The portfolio lenders that I have found typically only lend for 5 or 10 years max and then want a balloon payment at the end.  I am not sure I will be able to find another refi again after 5 years so I have not been going for it. 

There are options for houses if you pay cash you can fix it and refi within the first six months of owning it but after the six months is up you are out of luck.  I am not sure if this is a Fannie Mae rule or just something that a lot of lenders follow.

You can always put all of your properties under one portfolio loan but the terms that I have found are not really great. I am not willing to trade a nice 30 year 4% interest note on an investment property for an ARM that is going to have a terrible rate in a few years and go negative cash flow.

Let me know if you are able to find anything that has a decent interest rate and at least a 20 year period.

@Lynn Burson  Buying an unlisted lot is not really any different than buying an unlisted house.  Look up the owner in the office of public records and try to obtain a mailing address.  You can send them a letter expressing your interest or better yet, try to obtain a phone number if you can from an online search or using TLO.com or something. 

Generally if the lot is unkept and in bad shape the owner may just want to get rid of it.  When you approach them I recommend you try to gage whether they have a problem that you can help solve by buying this piece of land.  For instance, if they inherited the land they may not be all that attached to it and may find paying the taxes each year to be a burden. 

If you want to keep the land for a while and maybe develop it, another option may be to suggest to them an owner-finance proposition.  This way they can get a steady stream of monthly payments and you get an investment with little money down.

We used to see this quite a bit on shortsales where the selling broker would ask for an additional fee, usually in the several thousand dollar range that would be added onto the total that the buyer would have to pay.  Difference with these though is that it is disclosed up front regardless of who buys the properties. 

I beleive those particular fees were to compensate the seller's agent for having to work with the banks while they sit on the property for a year or more while trying to decide whether to take an offer.  Since the banks will not pay it then they try to get it from the buyer.

You can try REO.com but I have not had much luck with them as most of the listings are old and all the good deals are taken. Individual banks (Bank of America, Chase, Wells Fargo, etc.) also have a section on their website for their internal offerings. They are not easy to find but you can usually do a search for "shortsale" and eventually find them.

Short sales in our area have mostly dried up and there are not many available because the banks see the housing prices are going up and are not approving many of them. I recommend looking through MLS or redfin.com to find anything tagged as a short sale and putting together a list of agents/brokers that deal with them.

Contact these agents and let them know that you are interested in short sales and maybe make an appointment with them to to discuss exactly what you are looking for.  Once you have talked with a half-dozen or so they may be able to bring you deals before or as soon as properties are put on the market.