All Forum Posts by: Greg Scott

Yes.  It is a great way to accelerate the start of wealth-building.

There is not nearly enough information to make a fully-informed decision.  Based on what is in here, I wouldn't buy it.  

1) Your forecast to get to fully-leased at market rents could take weeks or months.  Can you float another $20K-$30K of negative cashflow?

2) I wouldn't buy in areas with rent control laws

3) Forced appreciation may require investing more in upgrades.  I'd want to see cost / benefit of achieving that.  If you are counting on natural market appreciation, that is something you can't count on. Nobody can accurately predict when or where appreciation will happen.  In this very forum, about three years ago, I argued that same point in a discussion about Austin TX and most argued against me that Austin could only go up because of tech jobs.  Guess what?  Austin is experiencing one of the biggest declines in values right now.

@Drew Sygit is very familiar with the different submarket of the City of Detroit

Yes, you can househack a single family, duplex, triplex, or quad and qualify for low-money down through FHA.

Here is a link for you

FWIW, here is the link to the HUD guidelines for ESA.

@Alecia Loveless it is worth parsing the technicalities here. 

Only people can be in a protected class.  If you deny entry of a service animal, you have discriminated against the person, not the animal, and people with a disability are protected by Fair Housing. 

The main problem with Fair Housing is if someone files a complaint, you have to defend yourself even if the complaint is false or the evidence inconsistent. The complaintant does not have to prove their case first.  Fair Housing has become a very expensive law for landlords, and arguably unfair to the industry.

So many things wrong...

1) The partners should not be staying there "frequently" unless they are on the lease as occupants.  The property manager should have required a full application, plus credit and criminal background checks. If they are not on the lease, why are they being allowed to stay there?

2) How do you know they are emotional support animals? If they aren't even occupants, I doubt your property management has the correct documentation. If your property management says they verbally told them they were ESAs, fire your property manager immediately. They don't know what they are doing. If they have documentation, ask your PM if it complies with the guidelines published by HUD. So many PMs are total whimps when it comes to ESAs. Know the law.

3) One of the guidelines for ESA, published by HUD is that if an ESA shows any aggressive tendencies (arguably lunging towards the neighbor counts) the ESA designation is immediately voided.

I'm guessing the main problem is you have an incompetent manager. 

You do not need a reason to non-renew someone in most locations.  Recently, certain jurisdictions have started requiring those, but only in the most left-leaning areas.  The fact that the leases expire concurrently is not important.

Having a vacancy and turnover adds a lot of cost, and we do the mental math.  If they are sucking up our resources so much that it is worth the cost of a unit turn, we non-renew.  If they are hurting the peaceful enjoyment of the property for other residents and we are concerned they will drive people to move, we non-renew.

If they asked why we non-renewed, our staff just tells them we do not need to provide a reason.

I would be very surprised that the ARV would be the same for a 4/2 as a 5/2. You may want to look more carefully at that before making a decision.

In the scheme of things, this is a fairly minor problem.  You can choose to let them stay and know that you will get lots of text messages, some meaningless.  If you are just done dealing with that, I would non-renew them.  

Here is a simpler way to put it.

#1 priority must be the ability to hold.  Being able to hold in up and down markets, whether you have a great job or got laid off, is important. Holding buys you the option to experience future appreciation.  This is why cashflow is important.  This is why reserves are important.  Those that get crushed in real estate are the ones that MUST sell in a down market.

#2 NEVER count on appreciation.  Your scenario A & B make me squirm.  About 5 years ago on this forum I got into a heated debate with many people about Appreciation Markets vs Cashflow Markets and we were talking Austin TX.  I was the lone voice saying you can't count on appreciation.  Everyone else was saying "high tech jobs", it has to go up. Guess what?  Austin SF prices are coming down.  That said, I only buy in areas with job growth and population growth because you are more likely to get appreciation.

#3 Know your returns.  If you can realistically produce a 10% or 15% return, doesn't it make sense to borrow money at 7%?  Yes!  People talk about paying off their rentals, but if my property is making a 20% rate of return, why would I ever pay off a 7% mortgage?  If I'm good at finding deals, it makes sense to have an ever-increasing amounts of debt.  I hope to die with over $100M of debt!