All Forum Posts by: Michael Jones

The tenant coming in to see a $375.00 rental is not going to be concerned with the floors. They want to get approved.

Do not spend a dime on covering hardwood.

The answers above are correct but there is one detail to consider.

If you place your properties into an LLC and you own the LLC and manage your property you will have to hire a Lawyer to handle any evictions.

Here is why.

An LLC is consider a stand alone entity separate from the owner. So, if you need to file an eviction and appear in court to evict a tenant you can not go and say I am the owner because the true owner is the LLC and you own the LLC.

You can not go to court representing the LLC without a law license even when you own it.

Just a technicality that can make eviction filings more expensive. However, some owners would pay a lawyer anyway rather than handle the eviction so it may be a moot point.

VA requires a 30 day notice. Check your local county to make sure they follow state law.

Make it part of the deal in your offer to the current sellers.

I will pay x for the property

blah blah blah inspections, appraisal, blah blah blah.....and you must have notified in writing by certified mail that each tenant is receiving a rent increase to x beginning on date x. 

The dirty work is done before you see the tenants.

If you and the tenant can cancel with a 30 day notice you can make that lease for a century but it is actually just a month to month lease.

Two fundamentally different positions being presented here:

Which is better? Cash flow or appreciation. The answer all depends on your values and goals. Only you can answer which is best for you.

Personally, I would never buy a property for the appreciation value and resell only. Not that that is wrong but it just is not my approach. There are plenty of people who can profile a building, make a deal, rehab it, refinance it, rent it and sell it in six months for a $50,000 profit. It is hard to argue with the results if the person is successful.

However, I wonder how many of these deals fall flat or lose big money and the investor does not come on to Bigger Pockets bragging about how they lost six months and $18,000 on a deal they profiled incorrectly and was oversold by a shady contractor.

So as a buy and hold investor that has figured out how to buy apartments and manage them and make steady guaranteed money I would never look at a property to buy and resell on appreciation alone. Again, not because it is wrong but because I know how to make good money in the lane that I am in and why do I need to risk what works by switching lanes? I could crash over there.

On the the other hand I am certain a flipper would look at my most challenging moments when i had rubber gloves on and a stopped up toilet full of feces and a baby toy and say "Are you crazy? No way I would do what you do."

So, its all in what are your goals and values.

With that being said, the original post was asking about the deal and you said your plan was to buy and hold. As a buy and hold investor that has figured out how to make money in my lane I would not walk away from the deal and numbers you posted above. I would run as fast as I could away from it. It does not cash flow. Repeat. It does not cash flow. Once more. It does not cash flow.

You can fix kitchens, you can paint, you can move washers and dryers and you can spend a lot of money. But if you are going to spend $380,000 on a property to buy and hold then the monthly rental income needs to be close to $5,000 per month which is 1.3% monthly return. 

There is nothing you can do to this property in the kitchen or the laundry rooms to go from $2,700 to $5,000 per month income.

Hopefully you never read to the end of my rambling post because you started running away.

Do not let your desire "I really want this to work" talk you into buying a deal that will not cash flow.

I would not evict them this close to Christmas. I would evict them in January......oh wait. That is very close to martin Luther Kings birthday.

So I would do it in January.

Oh darn...that's close to Valentines day and they are so in love.

March only has St. Patrick's day. Lets pray they are not Irish. Speaking of prayer....there comes Easter a few days behind so lets just do it in May. Oh darn again......Memorial day. 

The point....there is no good time to evict but you didn't make that decision. Your tenants did when they decided not to pay their rent and avoid you.

All adults must be screened, pass the screening process and added to the lease.

The fact that she is already pushing you to change the terms of how you manage your properties would be a sign for me to move on to the next applicant.

I do not collect rent. The tenants pay me rent. I just wait for it to come in the mail or through cozy.

Not that it helps now but the first mistake was placing the tenants under a new one year lease. Always leave under a month to month when you buy a property for this very situation. Life would be easier for you today if you could just hand this tenant a 30 day lease termination letter.

If you are planning on living there for two years and then moving and renting it out, the numbers will work a lot better for you if you buy a four plex. You can buy a four plex with your VA loan as long as you live in the building.

Four times the rental income is better than one times.