All Forum Posts by: Erik W.

@Joe Splitrock, certainly.  I worked for the Govt for 23 years in the Army National Guard, so I am very familiar with them talking out of both sides of their face and leaving the layman holding the bag and the legal costs for figuring out what they really mean.  As someone once joked, the reason laws are so poorly written is most lawmakers used to be attorneys, so they make sure to leave enough ambiguity so that their buddies never run out of work.

That said, I believe the point you posted about the land lord challenging the truthfulness of the statement in court is where I find my confidence.  I'm not going to sit around and let the Govt tell my tenants it is okay to steal from me.  Since March 2020, I have filed against three tenants, and all three of them paid up either on or after the court date.  One guy paid up before we went to court, the other two I obtained writs of eviction but allowed the tenants to bring everything current (including late fees and legal fees) before the 60 days to execute the writ expired and both were able to do so.  To be clear: we didn't have any of them give us a CDC form, but we were ready with the strategies I outlined above to take them apart in court.

It's risky and the Federal Govt isn't doing us any favors. Locally, our judges enforce contracts--always have--and my attorney whose office handles an average of 15-20 evictions per week and knows them all felt confident we would have no problems.  As REIs, we have to know our local judges, before we bring anything to court.  That's just common sense. 

@Joe Splitrock, my understanding per consultation with my attorney and this article is you can challenge it.

https://rentalhousingjournal.c...

First off, the CDC moratorium is not that hard to get around, provided you don't have extremely liberal judges who make it say more than what it says and assuming your courts are open.  There are FIVE requirements for the moratorium to apply, and the renter must swear they meet ALL of them under penalty of perjury:

1) I have used best efforts to obtain all available government assistance for rent or housing;
2) I either expect to earn no more than $99,000 in annual income for Calendar Year 2020-2021(or no more than $198,000 if filing a joint tax return), was not required to report any income in 2020 to the U.S. Internal Revenue Service, or received an Economic Impact Payment (stimulus check) pursuant to Section 2201 of the CARES Act;
3) I am unable to pay my full rent or make a full housing payment due to substantial loss of household income, loss of compensable hours of work or wages, lay-offs, or extraordinary out-of-pocket medical expenses;
4) I am using best efforts to make timely partial payments that are as close to the full payment as the individual’s circumstances may permit, taking into account other nondiscretionary expenses;
5) If evicted I would likely become homeless, need to move into a homeless shelter, or need to move into a new residence
shared by other people who live in close quarters because I have no other available housing options.

Source: https://www.cdc.gov/coronaviru...

The kicker is all the tenant has to do is sign the statement, but you, the LL are allowed to challenge it. Now, let's look at what I consider the easiest ways to punch holes in this.

Point 1: Did they apply for section 8 or any local programs?  I would want to see a list of applications with dates and denials.

Point 2: Not much help here unless you are in a very expensive rental market.

Point 3: I would need to see a copy of a letter from employer stating they had reduced hours and that was due to C-19.

Point 4: If they have done anything like buy/lease a new car, take a vacation, bought a major non-essential household item like a TV, or even gone out to eat regularly at restaurants in the past year I think you would have a very good claim that they are not attempting to pay you partial payments.  $50 a month is still something, and most people who still have jobs should be able to afford that even if their hours are reduced.

Point 5: Do they have family with whom they could move in?  Could they have chosen to move out and downgrade to a cheaper unit and still pay rent?  The key phrase here is "homeless" or extremely cramped living quarters with no other options.

If you were to sit down with most of these tenants and run through this list of items and ask if they would be willing to swear in front of a judge under penalty of perjury that all five of these are true, 9 times out of 10 they would say "No" which gives you grounds to evict.

So what I would do is discount the value of the building since the current owner hasn't gotten the gumption to fight to protect his income, buy it if possible, and then proceed to clean house.  This assume there are no other addition restrictions on eviction court in your state/county.

Don't buy the "I'm waiting for my tax return" line.  That excuse is from the same line as "the check is in the mail."  There are income tax refund anticipation loans now.  If they're legit planning on getting a refund and paying rent, they can get the money now and not make the LL wait.

I'm not sure what the plan is for making money in a market where bidding wars are pushing prices up well beyond list price.  Sounds to me like bubble city.  I would be going after assets that are holding steady, appreciating mildly or falling in value for the wrong reason (i.e. irrational fears).  To me, this sounds like speculation and mirrors what was happening right before the "pop" in 2008-2009.  I could be wrong.  Crystal ball isn't working today.

Why do you want this property badly enough to pay over list price for it?

I would've hung up on the clown after his first 2 minutes of ranting.  I don't waste time with people like this.

If I can offer you one piece of advice I wish someone would have offered me when I was a newbie it is this: "Treat your time as precious."

That one piece of advice taught me how to limit the amount of time and energy I spend dealing with difficult people, mostly by avoiding them.  There is no shame in cutting into the conversation with, "Well, it looks like this isn't going to work out for you or me, but thank you for your time...good bye" (*click)

One other example is with prospective tenants.  I used to listen to callers drone on and on for 15-20 minutes with all their sob stories and how their last land lord was a total S.O.B. slumlord who never fixed anything and how their ex-husband had done them wrong and that's why they were being evicted and ..... UGH!

So now I don't even take calls on vacancies.  I have a strict "All calls go to voicemail" for my Google Voice number that I use on our online ads for vacant rentals.  My voicemail message tells all callers specifically what to do if they want more information or to set up a tour for our property.  We do pre-screening forms on our website that asks 5 simple questions that weed out 90% of respondents as totally, obviously unqualified (not enough income, currently being evicted, etc).

Do I missed a few qualified tenants?  Probably.  Do I avoid wasting time with hundreds of unqualified looky-loos and tire-kickers?  Oh yeah!

Learn to value your time.  It is precious.  Don't allow goof-balls to steal from your time and energy.

Hi @Bob Ross, welcome to BP.

I too would like to hear the story of hair dressers who own hundreds of rentals.  Most highly successful, full-time REIs I know don't own that many personally.  Are you sure they don't have spouses who work for Boeing?

That said, I suppose it's possible for anyone to own hundreds of properties with or without a bank.  Your question presumes that bank financing is the only way to acquire rentals, but there are many ways to buy without a bank.  Often times, I find lower end (Class C) properties can be purchased using Seller financing, lease options, Contracts for Deed, sandwich leasing, and a variety of other non-bank strategies.  I met an investor at a real estate conference in Indianapolis in 2015 who owned over 80 properties, none of which had ever had a bank loan on them, using those same techniques.

One great way to do this is if you can find a retiring land lord who wants to get rid of his entire portfolio and is willing to owner finance it.  Those don't come along very often, but when they do, it's a gold mine.  

Congratulations!  You're in the exact same spot I was in 2005, knowing nothing about real estate investing.  I was a homeowner at the time (still am), but that's about all I knew.

First, ensure that you're both on the same page as far as your goals, how much time you're willing to put into this, and who will take what roles.  You can do some trial and error learning as you go, but don't assume things like "He'll deal with the tenants"...."She'll clean the units at turn over."  Talk over duties and responsibilities.

Next, decide how you are going to finance your transitions.  Debt (i.e. bank loans/mortgages) is one of the most common sources of money, but certainly not the only source.  Unfortunately, it is also the most common source of bankruptcy.  Folks on here are very enthusiastic, sometimes to the point of forgetting to apply the "doubled edged sword" quality of leverage.  It cuts both ways, magnifying both gains and losses, and when you don't know what you're doing early on it's easy to use debt to cover up bad decisions (overpaying for property, materials, labor, living expenses, etc).  Private money / equity partners are another great resource.  Don't discount those.  Basically, you partner with investors who bring the money and you bring some of your money and the deals to the table.  Share wisdom, profits and losses.

Third, I would try to decide what broad category of investing I want to try, then decide what strategies to implement to try them. Do you intend to be a buy and hold investor (rentals) or a churn and burn investor (flips, wholesaling)? While it is possible to do both, it's harder to both well with limited experience. I recommend trying one approach and see if you like it and are any good at it. Within each category there are tons of different strategies to follow, such as driving for dollars, direct mail marketing, bandit signs, foreclosures, short sales, the dogs of the MLS, residential, commercial, special use, tax lien sales, notes/paper, hard money lending, syndication, estate sales, REITS, etc.

Fourth, connect with a local real estate investment association (REIA). BP is sort of like that, but you'll never get the same level of insight into your local market as you will talking with folks who do this stuff day in and day out. Be advised not everyone at these meetings know what they are talking about, so always get 3-4 views on any given strategy. Watch out for shysters who prey on newbies with too much enthusiasm and not enough wisdom....don't just give anyone money or control of your assets.

Fifth, lots of reading.  For solid advice with practical steps, I recommend John Schaub's Building Wealth One House at a Time if you're into residential rentals.  That's been my main area of expertise over the past 16 years.  Now I'm getting into commercial, but not experienced enough yet to recommend any good books.

That ought to be enough to keep you busy for the next 3-4 weeks or so.  Good luck!

Clear the tax debt first for these reasons.

1) The IRS has almost limitless power to screw up your life.  They do not have to take you to court.  If they decide to take the money, ZIP! it comes right out of your account.  No day in court, no judge to talk to, no attorney to advise you....you wake up and find your account empty.  Yes, I know you're making payments, but "mistakes happen"....especially in Govt.

2) If you don't disclose the debt on a mortgage application, you're not being honest with your lender even if it doesn't show up on your credit report.  A lot of debts don't show up on credit reports, such as portfolio in-house commercial loans that don't report to credit bureaus unless you fall behind.  When you are asked to list all debts, you need to list it, period.  This isn't the time to play hide and seek.

3) You're not shouldering your share of the tax burden even though you have the capacity to do so right now, and your fellow tax payers would like you to take care of this rather than expect us to keep the Govt running while you pump up your personal savings and investing.  Payment plans are for those who can't pay, not for those who can pay but would rather do something else.  Call it doing your civic duty or being a responsible citizen or whatever.  

The IRS is the last entity to whom you ever want to be in debt.  Get 'er done.

Generally, you must apportion the expenses for "common" items.  So for example if you will occupy 60% of the premises then you only get to deduct 40% of the expenses that apply to the whole building, such as insurance, taxes, the property inspection, and other closing costs etc.  Property management will be 100% business since you don't need a PM to run your home unit.

Yep, get used to writing two checks or running two cards for a lot of things during the ramp up stage/closing.  You might be able to fly under that radar running it all thru one account and then making immediate reimbursements from the other, but why risk muddying the water when it's just about the same level of complexity to charge 60% to this card and 40% to that card?  Most companies can split invoice charges easily enough, and once you get set up there should only be a few annual expenses that apply to the entire property.

@Logan Freeman, unfortunately that isn't possible.  As I mention in my initial response, the only reason I got introduced to him was thru a friend of his, who knew me as an investor and friend for almost 4 years before making the introduction.  For lack of a better term, he "vetted" me.  I'm sure you realize how valuable such a person's time is, and if I post that info or start sharing it with people via PM he will be receiving calls from people he doesn't know.

I encourage you to continue seeking out such people via your current network.  No doubt if you've been active in a market for awhile, you'll eventually find a connection who has a lot of experience and is willing to share.  I invested for over a decade before stumbling over this gem.