All Forum Posts by: Chuck H.

Jon,

Property class is something I think about a lot. I have gone back and forth on this. Since several of my rentals are old converted primary homes, I actually have a mix of property classes. We have one Class A, several B, and 3 Class C. I must say the B properties are the easiest, but I like having the mix. My returns are higher on the C stuff and I can get great long-term financing on my A&B stuff.

I would be cautious assuming the Class A properties will have the least management. These tenants have higher expectations and more 'things' to go wrong.

Good post as usual Jon...

Sib,
My wife and I are self-managing 8 properties while we both maintain our day jobs. Some times it is challenging, but overall not a problem as over time we have found good handymen, AC, plumbers, etc. Last year we had 2 vacancies at the same time (One new purchase and one turnover). This was the first time this has happened to us although we have only been at it for 5 years. It was a good time of year and we had both occupied in just a few weeks.

Our mix of property classes is diverse. We have one class A, 4-B, and 3-C - All SFR. Our C and believe it or not our A requires the most time and management.

I will say that we do feel we are getting close to our full capacity. Good luck with your leap into 10+ properties..

The tornadoes missed all of my properties down here in Dallas, but it got me thinking... If the damage takes off the roof, one of the walls or something and makes the property unlivable. Who pays for what?

I get loss of use with my rental policies. Pays up to like 20% of the replacement cost or something. So I am covered for my lost rent - Great. But, what about my tenants, I obviously don't charge them rent (already getting paid by insurance company). If they don't stay with family -- I assume THEY would pay for a hotel. What about utilities or other misc expenses not covered in the insurance claim?

I warn all my tenants that my insurance covers the property, not the contents. I make it clear they should get renter's insurance. Just curious how all this works out with tenants..anyone had a major fire, tornado, or other loss of use claim?

I would like to think everything will run smoothly and you end up with an updated home, new roof, happy tenants, and everyone is excited. Is this your experience??

Brian,

On my last rental purchase I used a LOC secured against another one of my rentals that I own Free and Clear. It is interest only and the current rate is only 5.49%. [The rate can fluctuate (although it never has so far after almost a year)].

Then I pay the line off as soon as I can. Putting day job income against it and rent money. My strategy is long term buy and hold and this takes time, but you end up with properties that get paid off quickly. Once you get 3-4 that are F&C it really snowballs.

I absolutely love these lines of credit. The funds are there and available when you need it - just move it over to your checking account. Only pay interest when you ping it, etc.. I think they work well for someone that wants to buy all cash and then really accelerate repayment. If you are looking for a really low rate that locks in for a long term then this strategy might not work.

Good luck,
Ch.

Nick,

I just had an employer that outsourced the employment verification part of their business. I was talking to their direct supervisor and they still made me call this number. Then they wanted $10 to just verify they worked there and another $5 I think it was to verify the exact salary.

I started to go through this process, but then I needed a PIN. Had to call my prospects, they were going to have set something up with their employer. Then I just said...You know what just let me look at your last 2 paystubs. So my advice is similar to Jonathan's - Ask for paystubs. Paystubs are nice they show, how much they make, year to date totals, verify social security number, etc.

Good luck with the December vacancy. I don't envy that...

Ch.

Michael,

I am in the Dallas area and most of my rentals are over the $1000 mark. But your question hits on something I am contantly scratching my head on: Buy the $30k place that rents for $600 or the $90k place that rents for $1200.

For me it's boiling down to the tenant class. I understand where the numbers are better, but I want to be where the tenant issues are the most uneventful.

I have kind of found a happy medium between the above in the $50k-$60k place that rents for $995.

Ben,

At least for me this is very dependent on the current tenant. We have 3 students living in one of our properties, but they pay the rent on time and the neighbors are not complaining. I saw a keg in the garage the last time I was over there, but that is not a violation either - I can overlook quite a bit when the rent keeps coming in. They are approaching 36 months now and were late with the rent once.

The only warning I would give you is to make it clear that you want to pick up rent once for the entire amount. Not $400 from this guy on Friday, and $500 from this guy on Saturday. Make this clear up-front and stick to it.

Good Luck.

Chris,

I think vacancy rates are very important. I feel it is the most overlooked expense by new investors. The problem with a vacancy is it's a double whammy. You are not getting rent, and you are paying to clean it up and get ready for tne next tenants. Not to mention all the other problems (frozen pipes, vandalism, squaters, etc.)

One good way to measure vacancy rates is to watch when another For Rent sign goes and up in your farm area and count how many days it stays vacant.

John,

I am in the Dallas area as well and I don’t charge an application fee either. We tried it once and charged $40. We ran 2 apps on this vacancy, but the one that did not get the house wanted his $40 back. He kept calling and crying about his $40 to the point where I was concerned he may go back to the house and throw a brick through the window or worse. Long story short, I just agreed to refund his $40.

The other problem is just the logistics of getting the fee itself. Sometimes tenants will drop off the application under the doormat or in the mailbox. This becomes more difficult if an exchange of money also need s to occur. (most of my tenants seem to be on a cash basis)

I also feel you will not get as many applicants with a fee. Most tenants have some scars on their credit. When they see you are charging a fee, they may not apply when in reality they might have still met my criteria.

I feel not charging a fee sets you apart from all the apartment complexes and properties managed by a strict property manager.

One thing I was considering was having the application fee come out of the deposit for the tenant that actually gets the property. Meaning they pay the deposit, but upon move out $40 would be taken out right off the top prior to any damage reductions. This would have me getting at least one application fee per vacancy filled.

Kyle,

I have a rental with a blue bedroom - walls and ceilings. I decided to leave it and have had 2 tenants in there since then. Both asked if they could paint the room - I told them sure as long as its white or neutral colored. Of course, neither tenant painted it and its still a blue bedroom.

For a kitchen, I would probably paint everything white. I suppose if you wanted to leave the ceiling blue, you might be able to get away with this - but you already got the paint out. "As long as you got the refrigerator out, you might as well sweep underneath it."