All Forum Posts by: Eric S.

I started from scratch during college about 12 years ago. I was renting a duplex with a couple friends, and after a year I convinced my parents that they should buy a small house, let me fix it up and manage it while I lived there with my friends, and let us pay them rent rather than some LL. So I found a realtor, looked at around 20 houses, and found one that was in a so-so area that we could move into, but needed a lot of work. Over the next couple years I spent a lot of time fixing things up and learning the ins and outs. When we graduated I stayed there with a couple new roommates until I could save enough to buy one on my own. My home town bank was willing to help me with 10% down since I found a fixer-upper under market value. So I moved my room mates with me, rented parents house out, and still manage it free of charge for them since they helped me out so much. From there I would buy another every couple years. About 5 years ago I switched to another local bank that is much more investor friendly, and that is when it really took off for me. I wish I could have found them years ago.

I would be suprised if you can go after er for the AC repairs. I don't think it's the tenants responsibility to take care of it. If she couldn't let someone in you or your manager probably should have met them to insure it was done. I never trust my tenants to keep up with changing air filters. 

The rest of it you'll need to get a judgement against her first, which means more money invested to go after her. Once that is complete you can turn it over to a debt collector, who will take roughly half IF they collect, or try to find out where she works and file the garnishment yourself. I've done it several times. Most of the time you get a few payments and then they move jobs on you, but have been successful on occasion.

I have several apartments and houses that I currently allow section 8. 4-5 of them are verterans. I think Section 8 can get a bad rap. If you screen them hard they can be as good as other tenants. I have several that I hear from a couple times a year, the place is always spotless, and they've been there for 5+ years now. I've had others that trashed the place and had to evict, but that was partly my fault for not screening when I was new. 

It may be highly dependent on your local section 8 office as well. Our office is very involved and they don't put up with much. If a tenant doesn't pay their portion of the rent I can send the office an email and they will help me prod the tenant by threatening to get kicked off the program. If anyone gets arrested or police have a disturbance at that address, the office usually knows before I do and they will make them come into a hearing. If they're found guilty of a crime they're kicked out. 

I'm not saying they aren't a little extra work, you have an inspection every year, etc... but overall I probably have better luck with my section 8 tenants in low income areas than I do with the tenants who live paycheck to paycheck. 

The best advice I could probably offer is this: make it a requirement among your other requirements, that they let you walk through their current home and see how clean the place is. I started doing this years ago and it really helped. If they hesitate or are currently living with someone else and say it's not possible, I'm very unlikely to consider them. I'm also very unlikely to consider the ones who call on June 29th and need a place by July 1. If they're not responsible enough to plan ahead to keep a roof over their head, they're probably not someone I want living in my rental.

Just replaced ours. My knowledge is limited, but I would want to know:

-Are their county/state regulations, and if so are both septics approved? We had to have ours designed by a licensed engineer, then stamped off by state DNR because previous one did not meet code. Also, are they sized correctly for the number of bedrooms they serve? 

-Check setback requirements. They may be grandfathered in, but we had to be careful to keep it 50' from any foundation, 100' from any well, 200' from any creek I think. That pinned us to a very small area on our property that they would approve

-How is it dispersed? Leach field, lagoon, etc...? We had to have perc tests done on our leach field area. Be sure your field or lagoon is inspected. In our area leach fields seem to last 20 years or so. 

Again, I'm limited in what I know about them, but those would be a couple things that come to mind.

Thanks again everyone for your kind words. I feel like I'm headed in the right direction. It's crazy though how after accumulating all these, I really don't feel wealthy by any means. We still see our neighbors and wonder how they can afford everything while we drive our 100k+ mile cars. I guess we're sinking alot of our income back into property at the moment. 

Brian- I will look into the self directed 401k's. I assumed since we max out our company 401k's that there were no other tax advantage options available. I have opened up a trading account through Motif this year just to purchase a broad mix of stocks outside of our retirement accounts. I'd like to have some money available pre-retirement if it becomes necessary.

Dan- Thanks for the advice. I can't wait to have children and have as much fun as you. I was never the type to want kids. I was always impartial to having them. But then my brother had his and playing with them is so much fun. I love when they come spend the weekend and we get to do all the kid things with them. 

Michelle- I'll look into the local managers more. The ones I have met don't excite me. But if I could find one that would let us do some of the bigger jobs that would probably work out. Did you have a strategy as to which ones you let them manage? My initial thought is I start them out with my most time consuming, low income ones. However that will also mean paying them more due to more service calls, etc... But I think those are the ones I would most like to not have to manage every day. My SFH rarely give me any fits. I think going forward I need to be buying more SFH as opposed to the multi families for that one reason. They don't cash flow nearly as well, but they're almost a set and forget type investment. The tenants stay much longer on average and you attract better tenants.

Mark- I don't know much about investing in notes and deeds. I'm comfortable having my retirement money in stocks so as to diversify my risk. If I were to buy notes outside of my retirement accounts, I assume you can't leverage them like you can a mortgage, correct? You're just purchasing someone's note for that guaranteed interest return?

Jeremiah- Yes, I do feel like local is the way to go, however I worry about putting all of my eggs in one basket. The economy here is good; great schools, large university, best hospitals in state, several large companies, etc... I thought going out of state might spread my risk, but that brings it's own problems. I've looked into some of these turn key companies that sell houses in say Columbus that are rented and fully managed and offering 15% CAPs, but it just seems too good to be true. And if it doesn't pan out I'm stuck with Class C properties that are hundreds of miles away that probably won't sell. 

I'm afraid you're right as far as not making it at my job. I have noticed it cuts into my ability to buy more properties more and more the past few years. It's tough to leave the benefits and retirement package though. And I don't think i make enough on the side to do it comfortably yet. I think in another 5 years I will be, but at that point I'm only 10 years from getting a full pension, so it's like do I tough it out, or walk away from the benefits and pension for more time off. I'm sure once I have children you're right, something will have to give.

Thanks again everyone!

Thanks for the fast responses and words of encouragement guys! 

Brian-When you talk about self-directed retirement plans, what are you referring to? My knowledge is limited on all the options out there. I currently have a Roth 401k at my job and my wife and I max out or Roth IRA's each year. Are there other avenues I'm overlooking? And do they come with the same restrictions of not being able to touch them until I'm 55 or 59 1/2? I'm okay with that, but I also would like to have the option to tap some of the money in my late 40's/early 50's if we decide to travel.

I've read a little into the college savings plans for when we have children, but I've also read that there's not alot of advantage to them over other investments since they must be used for college or they get penalized.

I think you're right in that I do need to talk to a CPA. I've had trouble knowing where to begin that search, but haven't asked a lot of locals for advice either. I'll have to start exploring that. I have a feeling that most of them will tell me I'm way too exposed with real estate and need to diversify, but I've felt like it's treated me well.

Brandon- I'd be happy to chat with you sometime over the phone or email and answer any questions. I enjoy talking about it...it's one of my biggest passions! I've definitely made mistakes over the years. 

I agree with you on my time being priceless. I don't mind giving up cash flow to save time. I think my biggest hurdle is finding a manager I can trust. There aren't as many options locally as I expected that don't get bad reviews, and I want to keep my tenants happy. 

And I know I need to get away from the "sweat equity"! It's just hard to stop :) I have hired more out than I used to, but sometimes I feel like that gives me more headaches than if I just do it right the first time. After weeding through a few guys I think I have found some good help now though. But then i always feel bad when I stop in and they're working and I'm just "checking in on things"... I know I've got to let it go :)

Feel free to PM me and I'll chat or give you my number. I always enjoy seeing what others are doing. Best of luck to you!

Hello,

I'm 34 years old and have been investing in rental property for about 10 years. I started when i was in college and enjoyed it enough to continue buying them on the side. I'll try not to drag this on too long, but I'm looking for suggestions or advice on what to do as I move forward. I got married 6 years ago and we are ready to have children. We both work full time and run the rentals in the evenings, so I know when the kids come along something is going to have to give! I handle stress very well, but even now without children there are days in the summer during move out/move in rushes that I start to feel overwhelmed. I would like to continue to grow my business and have recently hired a maintenance man to help take the work load off of me, but I'm torn over where to expand from here. Here is a summary of my portfolio and our income:

Our combined income (excluding rentals): $140k+ (both have great benefits which makes it tough to quit either job)

401k & Roth Savings: Approx $395k

HSA Account: $44k

Savings (personal): $80k (we are not big spenders so this amount increases rather quickly. If I'm not eyeing a rental I'll usually pay down some of the higher interest loans.

Our portfolio is more heavily weighted towards lower income units. These require more work but give me a much better cash flow. It consists of:

54 total units:

-4 multi unit apt buildings (mix of low income and student housing)

-7 duplexes

-9 SFH (all Class B and A properties)

Monthly gross rents: Approx. $27,000

After all expenses we cash flow around $100,000 per year. That number could be higher, but we have started spending money on updating some units, hiring maintenance, etc... the reason our savings don't reflect this extra income is because most of that goes into buying more rentals or paying down loans...also that income is somewhat new. I also have roughly $140k in our LLC account that is being held for a possible upcoming purchase. Most of my big aquisitions have came in the past 3 years. Before that I probably averaged $30k per year cash flow.

The total value of the rentals is roughly $2.75 million. I owe roughly $1.8 million. About 1/3 of the loans are 30 yr fixed at roughly 4.5%. The rest are 5/1ARM over 20 years at 5.25%. Our bank has been good about letting us reset that 5 year lock every few years to keep our rate lower. 

I feel like for my income and starting with basically nothing out of college and no backers, that I've done really well. However I look at my savings and feel like I could be doing better. I made some costly mistakes over the years and have put in a ton of hours and sweat equity but have learned so much. I've also reached a point where I fee like I can no longer work full time, manage the properties, buy rehabs and fix them up, and raise a family. 

I've looked into management companies locally and I worry they won't do as good of a job as I do on finding the right tenants, but maybe I worry too much. Also, I hate the idea of paying them $35-$40 an hour for service calls when I can hire someone for $15 full time. I'm afraid it will eat into all of my cash flow very quickly. But in order to bring on my own manager I don't feel like I own near enough property. I would also have to look over them quite a bit and if they ever quit it would put me back in a bind. The only logical solution I see at this point is to hire a property manager as I start getting a few paid off. 

For growth I've just started to look into other markets, but that really scares me not being nearby to keep an eye on things. Our local market is getting overpriced. I've looked at these turn-key companies and while they look enticing it seems almost too good to be true. 

I guess I'm looking for advice on what people do when they reach this point? My job offers a great retirement package and I started during college, so in 16 years I can retire, so I hate to quit. My goal is to have most of them paid off about the time I'm elegible for retirement. That would give me income until 59 1/2 when I could draw on my 401k When you reached this point did you turn things over to someone, buy turn keys, invest in REITs, or go into something completely different?

Sorry for the long winded introduction. I wanted to try to give as much info as I could. And I'm sure I left out some pertinent information, so feel free to ask. Thanks for taking the time to offer advice!