All Forum Posts by: Jay DeCima

Monte

First of all, do a google search for ..."HUD, fair market rents".

Then check your state, then the county.

This will tell you the max they will pay for a 1, 2 , 3, 4, 5 bedroom unit.

They may not pay enough if your unit is in a nice area.

Then make your decision.

Good luck.

Fixer Jay DeCima

Is there already a Section 8 renter in the home?

Forget it.  No money in deal.  

Crossing your fingers and hoping for appreciation is not a sign of a good real estate investor.  

Use a small portion of you money to gain some investing knowledge.  Google names of persons that invest like you do (or may want to do).

I have been investing in Northern CA for 40+ years.  At my high mark, I had 250 rental houses (ALL with nice cash flow).  I learned to buy groups of older houses (usually 5 or more) on a single parcel.  Because a bank will not finance this kind of property, I almost always got seller financing...very mutually beneficial.

Good luck.

Fixer Jay

Hi Benjamin, Jan

I call my investing, "investing with a twist".  

With 50 years of experience and 250+ rental homes in Northern Calif. at my high mark, here is what I did. I could never have done it, buying one house at a time.

I did flippers but quickly realized that this is really a job and not investing.  I was taxed at the highest rate (personal income) and I never took the expected amount of money away at closing....you guessed it, it was always lower.

This was not going to help me grow my business.  Also, why would I depend on a faceless bank to tell me how many units I can finance. 

So, I looked for and bought groups of older houses (usually 5+), on a SINGLE PARCEL, in older, non slum parts of town. Very blue collar. Poorly managed units were a plus.  Because these type of units are "ugly" (a temporary phase), and usually 5+ units.....the banks WILL NOT LOAN ON THEM (commercial loan needed).

Sellers of these type of properties know this and will almost always do seller financing (85% of my purchases). Here, you and seller make the terms........remember he is selling you an ugly property.

You will get way more rents on a 5 unit, I call, Colony type property than on 5 single family houses on single parcels with bank loans.  No comparison.

My goal after buying each of these groups of houses was to, over the next 18-24 months, raise rents by 50% (remember they are ugly and below market rent when purchased).........and to raise the GRM (gross rent multiplier) by 2. The GRM is the yearly gross rents divided into the purchase price. (example is year rents of $10,000 on a $70,000 purchase is a GRM of 7). Because I have fixed the units up, an investor (if I sold) would be willing to pay a higher price (my goal of 2 more GRMs).

By raising rents 50% and the GRM by 2 over 2 years, I almost doubled the value of the property (with nothing to do with overall market appreciation).

Bonus:  Many a time I went back to the old seller that was carrying the note I was paying on and asked for a discount on the not I was paying on.  I bought them back for 30-50% off.  Why?  The seller had a bigger need for cash than my monthly payments (college, divorce, etc).

If you like this kind of investing, find the expert doing it.  Try a google search to find them.  Check people carefully to be sure they do what they teach.

Let me know if I can help.

Thanks

Fixer Jay DeCima

Christina

Woah!

If you put $45k down and pay $500 per month negative cash flow --- you are not going to be too excited about your real estate venture in 6 months...You won't feed any better if your negative cash flow was $300 per month.

After doing all kinds of rentals for 50+ years in Northern Calif, I realized long ago that negative cash flow and "crossing my fingers" hoping for appreciation was not good foundation for my planned real estate empire.

Well, like you, because cash flow was most important to me an most newbie investors, I had to have a plan.  50 years later, and 250 rental homes, at my high mark, I will tell you what I did and why it worked..

I buy groups of homes on a single parcel, usually 5 or more.  These will always be in old parts of town, not subdivisions.  Ideally in need of repairs and better management and NOT in war zone areas of town.

These groups may be a combination of small houses, duplex, triplex, mobile, conversions, etc.

Because they are 5 or more units and run down, the banks WILL NOT FINANCE THEM.  The banker will run if she sees you coming into the bank.  The sellers know this and will almost always offer seller financing on these type deals.  You and seller make your own terms. 

By the way, over the years, when I sold, I would ALWAYS OFFER the buyer seller financing with very good terms.  For a number of reasons, no taxes on the big sale, I can sell at higher price because of my terms. (I don't want the new buyer to give me back they property so the max the monthly payment will be is 50% of gross rents). Win-win.

Bonus: many, many times I have gone back to the holder of these notes on properties I have bought and asked if that holder would take a discount if I paid off his note with cash.  The usual discount I get is 30-50% off.

Because I fix these units up and because the rents were low to begin with, I force up appreciation almost 100% in about 2 years.  I control this appreciation...I don't sit on my couch and hope for it.

Find someone to help you on this.  Do some google searchs....Buy that $245,000 duplex when you are at a different stage in your investing, not now when cash flow is so important to you.

Let me know if I can help.

Best

Fixer Jay DeCima

John

I have rented to many, many 100s of Section 8 tenants over last 50 years, and 250+ rentals in Northern Calif.

1st.  Go to   https://www.huduser.gov/portal/datasets/fmr/fmrs/F...

to find the amount Sec. 8 will pay for your county for a 2, 3, or 4 br. rental.

I believe you will see that you should raise the rents to keep up with what Sec. 8 will pay. It is most probable that the tenant will not have to pay more for his portion of rent increase because the max they can pay for their portion is 30% of their income. HUD will pay the increase.

Why do you want to spend money on the inside of the unit when you have a paying renter that you can raise the rent on? If something needs to be repaired, just repair it. 

Don't fix up rentals like you were going to live in them yourself.

Let me know if I can help.

Best.

Fixer Jay DeCima

Stephen

Do forget the resources in the BP Marketplace.  I see you are a pro member.

Good luck.

Fixer Jay DeCima

It is the law in Calif.

My opinion having rented my 250 houses for many years, just put them in.  

Good luck.

Fixer Jay DeCima

Justin

Keep it simple.  Unless she is a bad tenant, see if you can work with her.  However, any time you do not receive rent do a 3 Day notice (California).

A vacancy will cost you $5000.  Do the calculations.

Good luck.

Fixer Jay DeCima

Ed

You will be fine.  I have done this kind of eviction many times in Calif. over 50 years of investing with 250 homes.

I assume you are getting a good deal because of this situation.  My advise is to quickly turn this problem into an expense so you don't have the problem.

How? Get a local eviction attorney.  Ask around at your courthouse for that county.  Almost every county has 2-4 attorneys that only do evictions. Probably cost you less than $1000 including the Sheriff lockout.

The attorney will have the 3 notice served, then file the eviction.  I am sure he/she will include this form, but  make sure......... Prejudgement Claim to Right of Possession.  This is included with the eviction Summons and Complaint served to the tenants.  This form says to the inhabitants, "if you are not specifically on the lease or rental agreement, I want to fill out this form to put me on it".  

Think about this.  If they do not fill out the form, they have no standing in the eviction.  If they do fill out and file this, they are telling the court that THEY WANT TO BE ON THE LEASE TO GET EVICTED.  I have simplified this but realize, there is no way a squatter is going to file this to be put on the lease to be evicted.

Don't loose sleep on this one.  Just evict them.  BE SURE TO HAVE THE HOUSE SECURED AND LOCKS CHANGED AFTER THE SHERIFF LOCKOUT.  Depending on the area get the place fixed up and rented quickly.

Have fun.

Fixer Jay DeCima.

The Sheriff will post a notice of when the lockout will be.  Keep this posted on the house after you retain possession in case a squatter comes in.  The police will see they do not live there and subject to arrest.