Hello Lawrence,
Great choice to get into real estate investing. The best thing about investing today is that there is so much information available, absolutely free of charge. As you probably know, BiggerPockets is a great place to seek out information on anything you could possibly want to know.
As to books, go to Amazon, type in real estate, filter the search so you see the top customer reviews, and have at it. Really, you can't go wrong so long as you are continuing your education.
Me personally, I have found great information in the following books:
The Book on Rental Property Investing, by Brandon Turner
Buy It, Rent It, Profit! , by Bryan M. Chavis
Those are just two. The latter is informative in the sense of an instruction guide. Lot's of useful information. The former is a book published here on BiggerPockets, and if you check out the bookstore here, you'll find it along with a lot of other valuable reads.
What I recommend is that you take the time to make sure you understand what it takes to be a landlord, even if you plan on hiring a property management company. Figure out what makes a solid lease. Learn how to screen tenants.
You'll also want to learn the basics of finding deals. The last thing you want while hunting for financial freedom is to become incarcerated in a financial prison. You avoid this by running the numbers and learning how a lease covers your a**.
Better yet, figure out what you want to do with your real estate investing. What path do you want to take? What are your goals? Do you want to manage your properties, or do you want to rehab them? Or both? There are so many different ways to go about real estate. Educate yourself about what each facet entails, figure out which one you like the best, then narrow your focus and educate yourself and become a master.
If you have a passion for this, let that passion guide you down the path of education. Learn from others' mistakes. Don't get disheartened when you hear "no." Gain perspective, gain prosperity.
Hey Geren,
I will start this off by saying that I don't own any 55+ communities, but I have looked into them and fully intend at some point on investing in them. I will explain my thought process as to why I believe they're a good investment. I am sure you have likely come to the same conclusions, but I am a firm believer in diversification of knowledge, and hope that maybe I can provide some thoughts that you have (or anyone else reading this) maybe overlooked.
For starters, when I search for manufactured homes in any particular area, one commonality I see is that the well-kept, well-maintained ones are usually in 55+ communities. Why this piques my interest is simple. Manufactured homes are by and large cheaper than brick and mortar. They wear and deteriorate quicker. Now, this is not to say that all 55+ communities are manufactured home lots, but if you consider that the manufactured homes in 55+ communities are better maintained, then you can take that logic and apply it to brick and mortar.
While we could elaborate on why they're better maintained, the bare bones of it boils down to the fact that people living in 55+ communities aren't as rough on the properties as are, say, families with children. Yes, there are exceptions, but we're looking at the by-and-large of it.
Another pro to the 55+ communities resides in the payments. A lot of people living in these communities have social security, they have pensions, they have some form of financial security. Granted, sometimes it's not a lot, but oftentimes it's enough for them to cover rent payments. While there are always concerns when it boils down to money, people in these communities aren't in a position where they can get fired, laid off, or any variant thereof.
As to the purchase options, I generally see a couple routes. Route one, the member buys the house (be it brick and mortar or manufactured) and they then pay the monthly association/HOA/lot fees. I know someone who bought a house (they own the house, not the land) in a community, yet they still have to pay X amount each month for association fees. If they want access to the gym and the pool, that's a yearly fee. Or route two, they rent the house and pay monthly fees as well. (I am sure there are other routes, but those seem to be the main ones.)
With these communities, you want to take into consideration what it is that you offer to justify any monthly fees. Are there exercise facilities? Is there a pool? You would also need to figure out liability and insurance. The fees also go toward you keeping the entire community cleaned and landscaped. Unless, of course, the owners tend to their own property.
Compared to having a single family home that is susceptible to all kinds of abuse, that is tenanted by someone working a dead-end 9 to 5 and what have you, 55+ communities offer a sense of security from an investment standpoint. I have been inside quite a few houses in 55+ communities, and a majority of them look move-in ready, even though that particular person has lived there for 10+ years. There are always exceptions, but the law of large numbers suggests that it's a good bet.
I am sure that someone else will be able to come along and give you some more details, but I felt inclined to toss out a couple ideas.
Hello Ryan,
I want to start by saying that you're off to a great start. You've got your eye on something and you're asking questions.
I will say this, and this is from experience. Finding a lender who will lend on manufactured homes might be a little harder than finding one who will loan on a standard home. I say this because I went to my primary bank and spoke with a loan officer for the better part of thirty minutes before she told me that they don't lend on manufactured homes.
Now, this is not to say that every lending institution won't lend on such properties, but some won't, and you want to keep your eye out on it.
I am also curious to know. Where I live and where I have lived, I have found it exceedingly difficult to find land that is zoned for manufactured homes. Where I currently live in Texas, they have to be outside of city limits unless they're grandfathered in. And in Oregon, forget about it. So, if you're looking to buy one that is already on a lot, fantastic. If you're looking to buy one from a dealership and have it set on the land, make sure you ensure that the land is zoned.
Assuming you have all of that figured out, then manufactured homes can be a great investment for an investor. Some of the newer ones nowadays are beautiful. Even the older ones can look fantastic. They're spacious, they're cheap, and they merit a decent rent amount, given their value.
Keep us updated on the particulars. Are you looking to get more manufactured homes? Are you going to diversify? Are you going to stay in Colorado? I used to live in Colorado, up in Fort Collins, and absolutely loved it there.
Hello TJ,
This is one of those instances where having a virtual assistant company on hand would be great. You could have them take care of all of this for you.
But, sometimes it's better to learn how to do it yourself.
As to verifying employment and income, their signature on the application authorizes you to make such inquiries. I know that on my applications, it says in big bold letters at the bottom that by signing this, you agree that it is okay for me to reach out to your cited sources and it is okay for them to divulge such information to me. A lot of times when you call their employer, they'll need a copy of the signed application. Have a scanned copy on your computer and email it to them, or if they require a fax, figure out a way to get that handled. Usually once they have that, you can basically ask them pointed questions: How long has [tenant] worked at the company? Is [tenant] hourly or salaried? How much does [tenant] make per (hour/month/year)?
You could also require the tenant to provide you with copies of the most recent pay stubs or a W2.
I have attached a link with some useful information.
https://www.avail.co/education...
I wish you the best of luck and hope that these tenants turn out to be poster tenants.
Hello Caleb,
When it comes to dealing with a tenant's property, you definitely want to follow the letter of the law. Oftentimes, landlords will find that tenants leave things behind or up and disappear. Fortunately for you, you know that your tenant is in jail. (Not so fortunate for him.)
With that being said, you still want to exercise caution in dealing with his property. Even if he verbally says to give it to this person or that person, you still want this consent in writing. If he gets out of jail and has a falling out with the person to whom you released his property, you're going to be in a sticky situation if your tenant claims he never told you to give it to that person.
I have attached a link to the laws in Arizona that outline how to deal with "abandoned" property. Really, it's up to you, but I always recommend following the law. People change their minds, but you won't be held liable if they change their mind after giving you written consent.
https://www.lawforveterans.org...
See also:
https://www.allpropertymanagem...
I hope this helps. Best of luck to you.
Hello Paul,
First off, congratulations on making the step and going to look at a couple of properties. While I generally try and give detailed responses, really, there is a lot to learn in what to look for in a BRRRR deal. You would do well in reading the books regarding that matter here on BiggerPockets:
Buy, Rehab, Rent, Refinance, Repeat by David Green.
The Book On Estimating Rehab Costs by J. Scott
The Book on Flipping Houses by J. Scott
If you don't have time to read them, get them on audiobook.
A quick rundown of a couple things to look for:
Electrical: Check the electrical setup. Do the fuse panels and breaker boxes look old? Can you see any exposed wiring? Paying to have the rewiring redone is a big ticket item. The cable alone to run from the breaker box to the oven is enough to drop your jaw. Not to mention hiring an electrician to run wires through the wall, check the circuits, so on and so forth.
Roof: Does the roof look up to par? Are there any sagging parts? Around the edges, does the wood look damaged or is there any rot?
Floors: How do the floors feel under your feet? If they feel uneven, are there any abnormalities in the walls? Have the walls been repainted? If yes, and there is an uneven floor, there might be some foundation issues. The fresh pain could be covering large cracks in the walls.
Appliances: Will you need to replace the appliances? What about the HVAC? Water heater? In a single family home, it's not too worrisome, but when you have a multifamily property, you're multiplying the cost by how many units you have. And let me tell you, those prices add up quick when you need to outfit three units with ovens, fridges, HVACs, and water heaters.
Suffice it to say, if you're looking to buy a property to BRRRR it, then it's not going to be close to turn-key. You want to go in with some sense of what it costs to repair a roof, to replace the floor, to fix foundation problems. You would be wise to find a contractor that you trust and have him come along with you. He'll (or she'll) be able to give you a pretty good idea on what will need to be done and might be able to give you a ball park estimate on costs.
I wish I could give you a more concise response, but hopefully this is a decent starting point. I wish you the best of luck and enjoy this journey. It's going to be a blast.
Hello Mark,
There are a few options in dealing with tenants that you want gone. Paying their rent elsewhere is one option, but maybe there is a better option, one that is slightly cheaper.
It is likely that the current tenants have given the previous landlord a security deposit. Since you plan on rehabbing everything, there really is no need for you to keep any of that. Offer to return their security deposit in full and provide them $200, $300 bucks for moving expenses. It's the "cash for keys" method in its most basic form. But read all the way through this before you approach your tenant with your offer.
If they don't want to move on that basis, you can explain to them that when their lease does expire, you will not be extending it. So they will have to move at some point regardless. You can also remind them that electing to wait until their lease is over places no guarantee on them receiving a full refund of their security deposit. And they will not get $300 to help with moving expenses. With the option you are providing them now, they are guaranteed to get their entire security deposit back and they get cash.
You could even go a step farther by going through the application they provided to the previous landlord and see what you can do about finding them accommodations and even setting up an appointment with them to view that apartment. If you go through their application, you can see if they meet other apartments' qualifying criteria. Contact other property managers and tell them your situation: you just bought the property, you want to rehab it, and you are looking for other accommodations for the current tenants. You don't want other property managers thinking you're trying to rid yourself of problem tenants.
If you do chose that route, make sure you don't give the prospective apartment management any of the tenant's personal information. At this point you just want to see if they have any accommodations. If they are amenable, then print off the necessary information and present it to your current tenants. You want to approach the tenants you want to kick out as a professional who has their best interests at heart.
Let your tenants know that you are the new owner, or even that you work for some investors (make someone else the "bad guy"), and that a good deal of renovations need to be completed. You can tell them that there are two options: option one, "I have found another apartment nearby that has a vacancy. I'll be happy to schedule a meeting with them on your behalf. To make the move easier for you, I am willing to refund your security deposit in its entirety and pay you another $300 to help with moving expenses." Or option two, "You stay here until your lease expires. If you choose that option, I can't guarantee that your security deposit will be refunded in its entirety as a lot of work goes into making a unit ready for rental - even if we plan on renovating it. If you move out now, we're willing to bite those costs as a part of doing business. If you stay, you also won't get any money to help toward moving." If one tenant stays and the other leaves, you can also toss out a tidbit about how they're going to have to deal with construction noises for the next month or so.
I am sure there are other options, but there is one for you to think over.
Hello Carlos,
There are a lot of factors to consider in determining what would be a good starting offer.
The main thing to take into consideration would be, what are you planning to do with the property?
Once your plans are established, you want to consider its relative location in conjunction to your plans. Considering zoning restrictions, are you planning to build a house, a multifamily building, a commercial complex? Are you looking to toss on some mobile homes? A storage unit?
If the property is valued at $40,900 and you are planning on building a 3 bed, 2 bath single family home ("SFH"), will the all-in cost be less than that of comparable properties? If you buy the property for $40,900 and it costs you, say, $120,000 to build an SFH, your all in would be $160,900. Are other 3 bed / 2 baths being sold for less-than or more-than that point? If you're looking to rent the property out, what are the rental rates of comparable properties in the area? If the monthly rental rates would not cover the estimated mortgage payments, then it would not be worth it. Apply this thought process to whatever you plan to build.
Determine first the cost of what you want built on the property. Get multiple bids to get a better spread. Once you get a good idea on what the construction costs will be, then you can see where the property needs to be valued at for it to be a good deal for you.
Hello Ellie,
While I have lived in Oregon and have spent a great deal of time educating myself on Oregon Landlord/Tenant Law, at the moment I am working on acquiring properties in Texas and unfortunately don't have the time to find the applicable law to send your way. But I do have a moment to toss out some ideas.
For one, since they are on a month-to-month lease, it's not really a matter of you having addendums for them to sign or not to sign. What you do is instead of renewing their current month-to-month lease, you provide them with your lease and your addendums as a means of continuing tenancy after you have provided them with the appropriate notices. The lease they likely have now is from the management company. Once you buy the property, I don't believe you're obligated to continue on with that management company. You just need to let them know that you are the new owner and that you no longer require their services. You (or the seller) will also be advising the tenants that a new owner is in town, and that you will be advising them of the new procedures. This includes where to send the payment and who to call when maintenance issues crop up.
Of course, if the management company has a contract with the previous owner for management services for a certain period of time, then you'll have a situation to deal with. But, in all honesty, I haven't really spent too much time with management companies, so I couldn't elaborate on the particulars there. (You could probably also ask the current owner to contact the property management company and have him cut ties for you.)
By and large, if you have any documentation that changes anything in regard to the tenants, they have to sign those documents. If you could create documents and the tenants weren't required to sign them to make them legally binding, then that essentially opens the door for ill-intentioned landlords to incorporate new rules and procedures without the tenant knowing, and then take legal action against them when they (the tenants) didn't know. Having all documents signed by all parties also ensures an easier process for you, the landlord, should a tenant claim they had no idea. If you get verbal confirmation but don't put it in writing, the courts generally won't side with you.
As to the property management company, I have pasted a couple links below for you to read:
If I provide tenants with a new lease, do they actually need to sign it? I mean, they have no choice that the property management is changing, so it wouldn't make sense if they need to sign it.
Can I just cross out the property management's name on the current leases, and just add my name to it and provide the amended lease to the tenants (without requiring them to sign anything)?
____________________
Hello Ellie,
Essentially what it boils down to is this: Their current lease is effective until its expiration date. If you plan to release the property management company from their role in the management of the property, it's likely that their leases will leave with them. Their leases will be valid until the month is up. You can choose to continue the lease if you feel it is in your best interest, but I'd like to outline a few reasons why it's better that you give the tenants a new lease - your lease.
To start, a lease is what protects your investment from tenants doing things that aren't in the best interest of the property. Property management companies have different goals from you, and while their leases are usually pretty sound, I've seen some property management companies providing leases that miss a lot of valuable clauses. If you take the time to make your own lease, you get to decide whether it's okay for tenants to park rusty, dilapidated cars on the front lawn. You get to decide whether it's okay for tenants to hang political flags from their windows, visible for all to see and for all to make assumptions about your property. You get to decide whether a tenant is allowed to sublease their unit. Assuming the property management's lease will cover such things is assuming that your tenants will respect your property -- it's unwise.
I generally err toward year-long leases for a variety of reasons, but each time I renew a year-long lease, I provide the tenants with a new lease. It's essentially the same lease, occasionally with an update. It also includes the new dates. So, my assumption with month-to-month leases is that you would need to provide them with a new month-to-month lease with the updated tenancy dates. If there is no property management company, there is no way for you to extend the lease another month unless you copy their lease. (And some property management companies have copyrights on their leases.)
And with contract law, if anything is changed or revised, you must have both parties acknowledge the change. The reason for this is that, suppose a landlord decides to cross out the $800 / month rent and replace it with $1000 / month. Both parties must be apprised of the change and must agree with it. In writing. Even if it's just the change of name.
May I ask why it is that you are looking to avoid having them sign anything? I understand that it might be "a process" to have to go to them and inconvenience them with something that is seemingly mundane, but it would give you a chance to meet your tenants and let them know who you are and that you are happy to help with any issues that may arise. I would even go so far as to ask them how they've enjoyed living there and inquire into any unresolved complaints they may have.
Well, to me it just seems like it could create issues if tenants refuse to sign it for whatever reason.
If I have tenants sign new rental agreements with me, how do I go about this? Should the new rental agreements start on the same date as the closing date? And if so, how much time should I give the tenants to sign it? Closing at the end of May, so I will need to receive June rent from the tenants.
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Ellie,
Really, the main reason you would meet opposition in having them sign a new lease would be if the changes were drastic and not to their benefit. If your lease bumped rent up four hundred bucks a month without you giving any value-add reason for the rate hike, then you could expect opposition. But if you give them your lease which doesn't make any impactful changes, then they won't generally be bothered with it, and then you know that your tenants are abiding by your rules. You know that if you need to do anything in particular, you won't have to read over the property management's lease and wonder whether you can do this or that.
How I would go about it would be this: it would be overall better if you went to them and just let them know that you're the new owner, that you have your own lease that will need to be signed to continue tenancy for the next month. If they have any problems with that, then they get the notice to vacate whereupon you will then find a tenant who is okay with your lease. With an annual lease, when the 60 day to end of tenancy period comes around, that is when I send the tenant a letter asking them if they plan to extend their lease or if they plan to move out. If they elect to stay another year, I schedule to meet with them to have them sign a new lease. If they plan to move, I provide them with the form to end tenancy. While a month-to-month does vary from an annual, it should be about the same.
Your new lease will take effect upon the lease expiration of their current lease. When you take control of the property and have access to their leases, see when their leases expire. See if each of the tenants has given notice of extension or a notice that they are leaving. If any of your tenants have already signed a lease for the next month, then you would need to have your lease prepared for the month after that. Once they sign a lease, it's in effect until its expiration date.
As to giving them time to sign it, what I do with leases is I sit down with my tenant and I go over it line by line. This process is time consuming, but it offers the opportunity to clarify anything about which they may be confused, and it provides me the opportunity to ensure that they understand what it is that I expect of them. I don't want to hear a tenant claim that they had no idea they weren't allowed to bring their Harley inside and rev the engine. I generally get them to sign it then and there. If you tell them to "get back to you," oftentimes they won't get back soon enough.
I do apologize. I tend to ramble sometimes. Have you already closed the sale of the property? Have you had an opportunity to ask the previous owner how he has the management company set up? Your first piece of business is to get the property management company out of the picture. Especially if you want to collect June's rent. Ensure they are out of the picture before you divert rent payments from them to you.
The law always prevails in these situations and I apologize that I don't have my law packet nearby to give you useful information.
Hello Caroline,
You definitely made the right choice by reaching out for guidance. And you will find plenty of it here on BiggerPockets.
Plain and simple, getting your spouse on board with your dream of real estate can be tough. It's a big step, a large investment. There is risk involved. But there is also reward.
What I would recommend is that you educate yourself not only on the pros of real estate investing, but also on the cons. Most naysayers focus on the cons, and if you can prepare yourself to rebut any cons that are presented, you put yourself on a higher ground.
I will try and keep this short and simple. In my opinion, the best way to get your spouse on board is by educating yourself and talk, talk, talk. Figure out which niche you want to get into. Find a property that catches your eye. Do all the legwork and present your Why-It-Will-Work presentation to him.
If you let your passion shine through, others will grow confident. If you exhibit an understanding of the vernacular and can talk in extent about real estate and the numbers, you present yourself as someone who know what they are doing, and oftentimes that is just what some people need.
I wish you the best of luck and I hope that your enthusiasm will radiate and will rub off on your husband.