All Forum Posts by: Clint Koehn

Thank you all.  I’ve hashed this out with the tenant and ultimately got the rent up to $1,600. And keeping it month to month. I’ll probably raise it $50 - $100 each year until it gets to what I’m hoping to get ultimately. Keeping it simple. 

I have a rental home in the OKC area and it's been rented by the same tenant for (3) years with no increase in rents.  It's a fairly nice 4/2/2 in a good neighborhood. It's currently month to month at $1,450 and comps in the area range from $1,700 - $1,850.

I'm taking over after relieving the terrible management company we had and trying to navigate this as delicately as possible.  They're good tenants, take care of the house, and want to stay where they are but they're likely to get spooked if I try to raise it too aggressively.  

I'd like to get them on a new (2) year lease.  Would it be abnormal to build small bumps into the lease to get it closer to market?  i.e. raise it to $1,550 then after year 1 it increases to $1,650?  If they do not sign a (2) year lease, I intend to raise it straight to $1,650.  If they leave, I could probably do a minimal refresh and get it up closer to $1,800, but I value keeping a good tenant above squeezing a few extra dollars out of the house.

Does anyone include escalation clauses like this into their agreements?

@Nathan Click

Thank you, that is sound advice and pretty much what I expected to hear.   He's much closer to retirement with money burning a hole in his pocket and wants cash monthly.  I'm just about to turn 30 and want to stretch my money into as many properties as possible, same reason I'd be willing to partner up.  It's a relative which I know is often frowned upon but can't imagine a business partner I would trust more to have my back but keep me in check.  Just trying to find a way to make this work.  

I'll try to talk to him and convince him of the benefits of financing but he's very much a cash guy and that's how he got to where he is today.

I'm still just getting started and wanting to grow quickly. I have a partner that I'm aligning with to get to double digit properties as quickly as possible and we want to operate through an LLC. The only issue I am having is he wants to go in all cash and I want to finance purchases. Two main questions here.

1. Is there any way that we could set this up so that each of us could fund differently under one LLC?

2. How could rents be split to fairly to allow me to pay my loan and he keep his returns? I assume just 50/50, pay overhead, then pay loan out of my portion?  So probably two different accounts it would have to funnel to?

P.S. I'm  actually working on getting him to just finance with me so he can use interest payments to further offset gains but curious if any savvy investors out there have done this before moving forward.

Thanks,
Clint

I'm in. Hoping I'll have this first deal working by that time so I can actually contribute!

I second Jimmy. L&L did my home at almost half the cost of the competitors in the market. They're a mom and pop shop and I don't mean to sound politically incorrect but the install guys are all foreign and speak little to no English. Their team didn't seem that detail oriented so I'd just make sure you can be there during the installs to make sure they catch everything. When they did my kitchen they forgot the window sill above the sink and had to go back and make it right. Sent a guy out, on his own, to install the last piece which weight about 150 lbs and I had to help due to the weight. Their operation isn't 5 star but well worth the discounted pricing and I gave them a pass as an honest mistake. If you're there to catch any mistakes they will make it right in my experience and I'm guessing those mistakes are not as common as my experience. Good luck

Sounds like you have a great position early in life. Flipping is good in my understanding for cashing out quickly but the longer term play would be in buy and hold. In your situation I'd suggest going that route as flips are very involved and the last thing you'd want to do in your situation is take time away from your primary income producer, your job which sounds very lucrative and you should count yourself fortunate in that situation. I personally want to do some flipping but only to fund the buy and hold positions. I don't see funding as an issue for you, especially since you're wanting to buy with cash. If you want to get into rentals don't be afraid to use leverage as your friend and get into more properties up front. Just be sure to buy right and leverage responsibly. For instance, Id prefer to put 30% down when I can to hedge against a down RE market and be no more than 70% leveraged. Interest rates are low and probably as low it's only going up from here. Use it while you can and keep your cash for when interest rates are up and money is harder to come by. Just my $0.02 and take it for little as I'm just starting myself but that's my plan. Don't ever sacrifice your day to day job if you don't plan to get out completely and dedicate your time to RE completely.

This is a great real life example. As a renter myself at one time, I think it would be much easier to swallow the increase of you gave them a very clear picture of what you intend to raise the rents to up front and created a plan to gradually increase over the coarse of 6 mo to a year. Those that don't want to buy in will leave and you can raise sooner. Those that want to stay and are good tenants will accept it and be more likely to stay long term if you give ample notice of your agenda and make a plan. Sounds like you have lots of room to improve cash flows though. Those turnovers could give opportunity to do minor improvements and rent proofing (tile flooring as opposed to carpet if that's a concern) that could also raise your rent/desirability.

I'll try to attend this one.  The wife has an ultrasound in the morning so not sure if I'll be able to get there in time.

I have seen a few deals that I'm entertaining now close to the 1.5% marker. Haven't seen 2% yet but still looking!