All Forum Posts by: Paul C.

Sounds like a good deal.  I'm in Charlotte, but those numbers are similar to some of my deals.

My biggest regrets have not been with the properties I bought, but with the properties I lost over relatively little money.

You're getting ~6.50% unlevered return.  That's very good!  10-year Treasuries only yield 2.39% and banks pay virtually nothing.

Also, think about opportunity cost when you're negotiating.  If you walk away from a deal over 2k, how long will it take you to find another deal that meets your criteria?  If more than 4 months, you would've been better off just closing the deal and getting $500/month cash flow.

EDIT: I didn't see your post about the HVAC before I wrote the above.  I think it's definitely worth asking for something toward the HVAC, but if they refuse, it's really not going to change much in the grand scheme of things.

FWIW, I used to live in Marietta and had good experiences with Reliable Heating and Air.  They replaced the HVAC system in our personal residence.  From what I recall, they throw in the first year of maintenance and give you a lifetime warranty if you have them regularly service your system.  I don't know if they still do this.  I think it's a good idea to have your HVAC serviced twice a year anyway so if they throw in a warranty on top, that's just a freebie.

My first deal was a 3 bed / 2 bath foreclosure that I bought for 53k in 2012.  It required around 8k of work.

It's been rented to the same tenant for the last 2 1/2 years.  Rent was initially $850, currently $875.

The main challenge was having the guts to pull the trigger and trusting my realtor and contractor.  On paper, everything looked great, but I was skeptical.  Everything went smoothly, though, and that gave me confidence to keep going.  I now have 14 properties and have a package of 4 more under contract that I'm doing due diligence on.

@Bill Gulley

How do you decide when it's time to sell a property?  Can you give us an idea of your entry and exit criteria for single family homes?  What would be an example of a house you decide to sell and what you buy instead?

Thanks

I just came across a story on Bloomberg about Home Partners of America Inc. (formerly Hyperiod Homes Inc.) -- they buy single-family homes and rent them out, but give tenants the option to eventually buy the homes.  In the story, the founder of the firm, Lew Ranieri says:

Single-family homes aren’t a good long-term investment for landlords because upkeep expenses and renovations for new tenants cut into profits, Ranieri said last year.

"Because a house was never built to be rented, the wear and tear on the house makes it prohibitive to keep renting over a period of time because the cost of the rehab becomes overwhelming,” the mortgage-bond pioneer said in an October 2013 interview. “There’s no historic evidence of long-term single-family rental.”

Long-time single-family home landlords, what do you say to that?  Please give us some context like how long you've been a landlord and any other details you're comfortable sharing (geographic area, number of properties, price point, etc.).  What has your experience been?

Here's a link to the full story:

http://www.bloomberg.com/news/2014-11-06/blackrock-kkr-take-majority-stake-in-ranieri-rental-firm.html

We've used Simplisafe and liked it.  The monitoring service can be turned on for as little time as you need and it's a reasonable cost of ~$30/month.  I liked how I could see the system status on my iPhone and arm or disarm the system remotely.  It also let me know when workers or potential tenants came and went.

The only component that needs an outlet is the base station, the rest are battery operated.  Perhaps a battery with outlet like this would do the trick:

http://www.extremetech.com/extreme/184571-chargeall-a-portable-battery-pack-with-120v-ac-wall-plug-outlet-so-you-can-power-all-your-things

I've never used one of these batteries so can't comment on how well they work.

Originally posted by @Scott K.:

Originally posted by @Paul C.:

My biggest fear is that I quit my day job and live off rental income and then my market turns into Detroit.  I'm diversified with stocks/bonds/alternatives so that in the unlikely event my market does turn into Detroit, it won't be a complete disaster for me.

well in the Detroit burbs you can buy properties for 40-50k and rent them out for 900 so that isn't so bad 

Those numbers do sound pretty good.  Out of curiosity, do you know what the longer term trends on rents and home prices in the Detroit suburbs have been?  How much would these houses that currently rent for $900 have rented for in the past?  How much would they have sold for in the past?

As long as rental rates keep pace with inflation and vacancy is manageable, it does take the sting out of declining home prices.  I just don't have enough data to know if that was the case.  If both rents and prices declined dramatically, that would be a problem.

I don't collect additional security deposits when rents increase.  If rent has increased on an existing tenant, it means you're already saving yourself a lot of money avoiding turnover.

I would count that as a victory and move on.  Asking for an additional deposit could make the tenant feel like you're nickel and diming them and leave a bad taste in their mouth.  Not worth it for the small amount of money we're talking about -- which is quite possibly going to be refunded at the end of the lease anyway.

My biggest fear is that I quit my day job and live off rental income and then my market turns into Detroit.  I'm diversified with stocks/bonds/alternatives so that in the unlikely event my market does turn into Detroit, it won't be a complete disaster for me.

I've experienced the opposite. I was more frugal before owning buy and hold rentals because I knew the money would stop coming in as soon as I stopped working. Even though we has a good amount of savings, I was loathe to touch it because I didn't have a consistent way of making it grow (banks pay less than 1% and stocks are too volatile to count on stable growth). Now, with over a dozen buy and holds that cash flow well and some other passive income sources (dividends and notes), I feel less qualms about splurging occasionally because I know the passive income more than pays for it.

I use Quicken to track all my accounts. Most accounts can be automatically updated and then you just have to make sure transactions are categorized correctly (e.g. Restaurants, groceries, utilities, rent, insurance, travel, automobile, etc.) Once you build a history of data, you'll be able to see how much you've spent in each category. I do this every month, quarter and year to identify trends in our spending patterns and to see if there's any area where we can save money. If you get Quicken Rental Property Manager, it might also be good enough for you to track your rental income and expenses once you get your first property. This is what I use for more than a dozen properties and I'm very happy with it.