All Forum Posts by: Chase Busick

@Allende Hernandez That is great! Hopefully it works out that way can avoid turnover, vacancy & any makeready! I'm sure they'll figure something out to make it work. Especially if they've been there for a while, it is probably still under market rent, & would cost them more to have to move..

@Sam Huang I agree with both @Bryce Jamison & @Chris Howell...

After briefly running the numbers, I don't think it'd make sense considering from a COC return, ROI & even 1% rule..

The cost is high, the down payment & closing costs may put it around $95k. 

Gross Scheduled Rent = $33,600, & no extra income.

- Actual Vacancy = Up to 1 to 1.5 month (conservative, not including holding costs, i.e. utilities), $2,800-4200 (Get Average Days on Market for Duplexes/leasings from Realtor/agent or even research yourself)

- Operating Expenses. Taxes & Insurance = around $6k/yr. Property Management (12%) = $4032/yr. Leasing Fee = $2800-2900 (1 mo/ + misc fees). Repairs @ 5% = $1,680/yr. CAPEX @ 5% = 1,680/yr. Utilities for 1-1.5/mo = ~$300-350.

- Annual Debt Service. A $270k loan @ 7.25% = $1,841.88/mo or $22,102.56.

These are conservative rough numbers... With all that laid out it wouldn't pencil out even with making some exceptions.

At the end of the day you'd be utilizing a ton of your own money it sounds like for an on market duplex. If you were to invest the same $90k in treasuries you'd most like get $3,600/yr @ a conservative 4% & not pay state income taxes on it, have a lower risk investment, relatively no headaches, save a lot of time & can go as short as 4 weeks. Even some HYSA are offering over 3%, & CD's 3-4.5%. If you consider doing private lending, you can get most likely 8-12% or more a year.

I understand that owning the property will come with its additional benefits, but you may want to consider some other options like properties closer to the 1% rule, minor value add, looking into wholesale deals, or assuming a loan from an on market property just to name a couple options. 

@Allende Hernandez, I think the other comments are very good & hopefully solidified your decision & action already. I'd ensure to get everything in writing signed.

I am curious who was the primary lease holder at the time you have been screening? Had the mom been working & is out of work too? I understand it is hard for a lot of people, & is great that you are working with them. 

@Wesley W. brings up a solid point on being mindful on how long you should make the agreement. 

There are a ton of DIY remedies & products to utilize. 

I know a lot of people that will put pest management on the tenants as a responsibility in the lease with lawn care. It is a home, and a common thing many people encounter as ant populations come & go with the seasons & how well the people living their treat the exterior of the property. If it is their responsibility, they take more ownership of the house, which will decrease the amount of involvement you may have, increasing their responsibility to care for them. Now if it is something that is out of control & there are clear signs of intrusion through the house, then that may be a consideration for you to investigate in order to seal & prevent them from getting into the house.

Ants & most other critters like safety from the elements as much as people do, they search for food & water too. Ensuring tenants are clean & disposing trash or food waste is important. 

HD & Lowes sells granule poison that can spread around the perimitter of the house, as well as spray, interior poison traps, etc. that would help keeping the ant populations at bay. Exterminators are always nice too & can show the tenants that you care for their well being.

Usually increasing the rent is a major topic & when to do it.. In many people's leases they factor in month to month leases that they will eventually go up to the market rent, whether immediately after the lease or later on. That is up to you & what you want. 

Informing the tenants that you may be increasing the rent as early as possible minimum 30 days prior is great, but you can always do it closer to 60 days out or more. This will give them plenty of time in order to properly plan for such increases, especially if they need to prepare for it or consider moving. Springing it onto them last minute may be rude if it is by a large amount. If it is gradual, then it is not as bad. Moving is expensive & a headache. Costs rising is also a very reasonable thing to trigger rent increases. You don't want to make it too large where they may move out, leaving you with turnover, vacancy & leasing costs. 

Most leases include annual rent increases at a specific percentage of the rent, that way it is known upfront & agreed to. Some give them a one time grace period & emplace a rent increase on the third year, incentivizing them to stay & save.

@Mustafa Mohammad

I think a lot of people would benefit greatly in what you mentioned & it can be very tangible in value. I think with the prevalent rise of AI, we should still take the time to review & ensure that it is in compliance with what we stand for in our business. Many people will love it & equally hate it.

Having AI do most of those things, will save a lot of time for people in order to do so many more things.. We are at the highest productivity levels ever, and it is crazy to see people trying to maximize everything in order to pay for all their fancy stuff. At the end of the day, they are still able to produce & help solve needs within the market, which is the biggest deal.

Definitely is a great looking ad.. I think there is a huge amount of people that are indifferent about AI & equally a large amount that swear by it...

AI can greatly increase the ability for agents to create ads, save on money & time. At the end of the day, as long as it serves people, has the right message & is delivered at the right time can greatly affect its performance with the people you are serving. 

What AI are you using?

@Sandra Mcgowan, that definitely stinks that had that happen.

I am surprised nobody else had replied to your post & has been so long.. I am sure you have handled this already & am curious on what you did?

Most likely would be a hard time charging them the entire cost of swapping out to LVP when it was carpet prior.. LVP is normally more expensive, takes more time, & is a different product comparably to carpet. I'd say definitely factoring in the depreciation, age, as well as if they actually made effort to have it professionally cleaned.

When back charging things from their security deposit, you have to provide the tenants an itemized list of what the charges are for... Most of the time, if the unit is crazy bad, they definitely don't get it back, and may be hard to go for additional fees considering they're moving out, but can still be done. I'd just ensure whatever it is you are billing them for or in your itemizations they are as justifiable as possible.

@Don Konipol I like all aspects of your post.

I feel like so many people get sidetracked & focus too much on the crazy headlines, listen to too many of the people that have crazy amounts of doors & more.. A great book, that I first read within personal finance 11 years was The Millionaire Next Door... Too many people think that if I have this, I must be successful, when in all actuality it might not be... Same thing when it comes to almost everything in our daily lives & how we consume/use our money. 

People should focus on the cash flow like you mentioned or how about working on several free & clear proeprties... They should not worry about impressing a ton of people or sell them that owe I have however many doors & am better than others.. There are so many things that happen behind the scenes & can imagine how many issues that many doors can bring. I love your last point with minimizing the amount of risk we bring on too & risk reduction. This can include all our life activities to decrease both inside & outside liability.

@Nicholas Stevenson

Very great post with a lot of in depth questions.

I'd always recommend chatting with more reputable private/hard money lenders in your local area in order to build a relationship with them & learn as much as possible.

I have been doing private lending for about 4 years now & is a great way to be at the top of the totem pole in investments, controlling them & make the right investments on good quality deals & individuals. 

Most of the others opinions were good, and you can always do it privately to learn the ropes, put your money to work, & collect the returns. Usually you can be as in depth as you want, but you should always look to improve your processes from vetting borrowers, improving lending documents, insuring that you are loaning on quality deals, not over extending, and ensuring that you are well protected in the event you may have to take it back in the case of default.

1. $250k is enough to do a deal or two, depending on the pricing of the deals & locations. If you are wanting to pool money, I'd ensure that you have done several private loans yourself to learn as much as possible then solid your borrowers. You do not want to lose OPM & you may need to guarantee them safety with additional provisions in your lending documents.

2. I'd just stick with purchases & 1st position mortgages. Usually the less you give them, the more secure your investment will be & forces the borrower to come up with their own capital & skin in the game to make it more serious. You can always do more, but I'd say should really depend on the borrower, deal & your ability to potentially collect.

3. The lower the LTV the better it is for the lender.. Your lending documents should be in depth to go over a lot of provisions in case of default & general overview of the loan. You want to ensure you get a lender's title insurance policy, ensure that the borrowers set up automatic payment/ACH draft, ensure they obtain the best insurance for the deal (i.e. if it is under renovation, ensuring their policy covers key things while the home is under construction & vacant, there are more endorsements you can get outside of a normal rent ready policy), ensure you are listed as an additionally insured on their policy, ensure they send proof of insurance + utility payments, and more...

4. I'd look to lend to investors that have been in the field for quite some time, have a lot of deals under their belt & still review them as a traditional bank would when going to get a loan or you reviewing a leasing application of a renter. You want to vet them & screen them in order to protect your money & ensure you get it back.

5. I'd just ensure you lend to stable people. Whether singles or married couples, that may have one w-2 working spouse. You can ensure to review their financials if need & portfolio to see how that looks if they are operating well. I'd avoid 2nd mortgages & renovation money, younger investors that haven't done a deal, and stick with your criteria. 

You can always start off small, can also ensure any money that is idle is in a HYSA or keep reserves in a treasury bill or CD just to fight inflation. Can look at more rentals, or a house hack. I'd probably stay away from subject to & try to go with an assumable option if so. Continue to educate yourself, attend events & get in your community.