All Forum Posts by: Corby Goade

I'd recommend managing at least your first few properties on your own. There are so many details to property management that you just won't get if you don't learn through doing it yourself, which will be invaluable once you turn things over to a PM. I've been managing my own properties for years, and I am still constantly modifying my lease and doing things differently because I'm learning new things and having new experiences with tenants. If I'd never managed on my own, I would have never learned those things and my profits would be diminished because of that. If you just have a property or two, we aren't talking about a full time job. Buy a decent property, find great tenants and you likely won't hear from them for months at a time.

Hi Danny- Welcome! Feel free to connect with me if I can help in any way. Good luck out there!

I think your plan sounds reasonable, it's basically the same way that I got started. However, keep in mind that the market will do what it wants, there's always the chance that you could end up under water in both houses in five years. There are no guarantees. In our area, rents are far less volatile than RE values are, so we try to buy properties that will cash flow no matter what. That way, if you are under water in five years, you can still have your mortgage covered by your tenants.

Probably nothing, but you can use this as a learning experience. You'll have a few options once they move out; you can increase the rent to cover the difference, have the studio metered separately or write a clause into your lease that they pay either a portion of electricity or that they pay 100% over a predetermined amount. There are lots of expensive lessons to be learned in RE. I'm still learning them constantly. Best of luck!

Great questions and thorough analysis @Anne M. From what you've written here, it seems like you'll do just fine regardless of what you decide to do, you're obviously pretty sharp. You've mentioned the benefits of leverage above, which is my favorite thing in real estate and what makes it unique. If I have $25k, I could buy $25K in stocks, bonds etc and reap the rewards when I sell, possibly make a little off of dividends. However, I could buy $100K in real estate, realize monthly returns and benefit from 100% of the appreciation.

That said, we self manage. Some months are great, some months are crazy. Given your concerns above, I'd say the key to making this as passive as possible is finding an excellent and knowledgeable property manager who understand exactly what your goals are and will work with you to achieve them. There are many posts on the forums here about vetting property managers and lots of horror stories too. I'd come up with a process to interview property managers and quantify your findings so that you could make an informed choice, should you choose to invest in RE. Best of luck, happy travels!

A couple things to consider; you mentioned that you weren't sure what to do with the cash if you were to sell. Run your own analysis on other places you might park that money. I'd guess that getting the type of return that you're seeing right now on that property would be tough to find. Of course, there's no guarantee that you'll continue to see the rate of appreciation that you've had. If you do decide that you want to invest in more real estate, why not do a cash out refi? You can get your money out tax free and use it as down payments on other properties. With the type of appreciation you've seen in your property, and in northern California in general, you might not get too far with $300K, but there are other markets out there with better returns. You could always look in to hard money and private lending as an investment option as well. Great problem to have, good luck!

I don't think those numbers look too bad, but that's considering that you're only accounting for 5% vacancy. I would guess that 5% for repairs is not likely going to be enough. I don't know your area, but that might be low for an 8 plex with these types of rents. You're assuming that you can refi in a year, which means you are confident that you can get the value of this property up by 25% in 12 months? Do you have plans and funds to do that? This being an 8-plex, you have to force appreciation via capital improvements, savings to your NOI and raised rents. If I had this deal on my plate, I'd be interested, but I'd be talking to a commercial lender to see what I need to do to get my NOI up and refi asap. The last thing you need is to have five years pass and not have enough equity to refi and either sell at a loss or deal with foreclosure. Best of luck!

Hi @Ryan E.- Yes, I have come across problems, mostly related to my DTI. I don't have a ton of W9 income and you don't get 100% credit for rents, so it can get tight. My advice would be to find a lender to really knows the regulations and understands what you are doing. There are banks and credit unions out there who have underwriting that understand BRRRRs and will work with you, but it will take effort to find them. Once you have 5 mortgages, many banks won't lend you any more, so be sure to ask them up front.

Call your realtor and have them reccomend a title company that can give you some advice regarding your specific circumstance. They'll walk you through the process and give you specific information. Their job is to sell you on their service, so they'll be happy to talk to you about it. 

I'm surprised that so many landlords here don't think of their tenants as their customers. Sure, being a great landlord doesn't mean that you'll keep good tenants forever, or even that they won't break a lease when they have a change in circumstances. And obviously, the customer isn't always right. However, they might be more likely to negotiate in your favor when you treat them well. Or they might be more likely to call you when there is a drip beneath the sink, rather than wait six months until the sink cabinet base has turned to mush. I have a tenant that called me last night because she accidentally broke a window, and wanted to know who she should call to have it replaced. If I wasn't good to her, she may have ignored it and tried to deny that she did it when she moved out.

My tenants are my customers- I treat them well and they treat me well. When tenants move in, I always have a small care package for them, some basic cleaning supplies and maybe a laundry basket. When a tenant pays rent EARLY for six months in a row, I send them movie passes. When a tenant asks if they can plant flowers, I'll pay for half of the perennials. We have a monthly newsletter for our tenants and usually put a quiz or contest of some kind in there and give away a gift certificate for dinner or tickets to a hockey game.

Does is make me more money? Probably not, at least in the short term, but I get a lot of referrals. I've even had tenants move out for a year, then ask to come back a year later. Guess what, I didn't have to advertise or show the house, not even a minute of vacancy. Returning a kindness to someone who has treated you well will come back to you. Maybe not directly, but it'll come back.