All Forum Posts by: Jay Orlauski

@Susan - yes - I did the same thing .. waited too long and believed ( with scepticism) their stories. I have since learned that regardless of the situation - after 3 days late its time for 3-day notice - I know every one has different situations and if they are willing to pay at least half the rent , then I will work with them till the 15th, but beyond that, I have grown to the point that the eviction process must start early on , otherwise, several months can go by without getting rent. I learned the hard way that being too nice for too long is a losing situation. Rent due on the 1st of the month is no surprise to anyone and if they haven't planned properly and decide to make me responsible for their problems - I cannot shoulder their finances any more than the mortgage company would shoulder my monthly payment.

don't give up.. you've already got the hardest part behind you -if they don't follow the court orders , the law will help you get them out. Remember that this is a business and even though sometimes it is tough to not take it personal - you cannot take it personal - use this as a learning opportunity - you learned how to use the court system to get possession of your property back and now you know how to do it. Try to avoid this again by screening very carefully for your next tenants and be sure they know that there is no wiggle room when it comes to paying the rent on time or taking care of the property.

When we had to go through it, yes it was very frustrating and there were times when I was wondering why anyone would put themselves through it - at the same time , there is nothing more satisfying than developing long term positive cash flow while helping put a roof over a family. It takes a certain kind of person to get involved in real estate estate, especially land lording - but you got this far and I would say to keep it up. Evictions is just one of the ugly things we have to deal with in this industry and every job has its down side - but once you have everything up and running smoothly, you will be happy that you stuck to it.

I listen to the numbers....

sounds like I should be adding some more HD stock to the portfolio

"let me count the ways....." the biggest enemy to cash flow is lack of cash flow ( obviously) - but just because a property is positive cashflow right now doesn't mean it will always be. For example the biggest factor in determining cash flow is vacancy - 100% vacancy equals no cash flow. So if your place is not in a desirable area or has too much deferred maintenance, this can be a real cash flow killer if you cannot get it rented out if a tenant leaves. There may be so much cleanup to do that it can eat up a whole years worth of profit. Especially if you have to replace major items like carpet, A/C units, or appliances. The same thing can happen if you have major expenses even while the tenant is still living there - especially if it causes them to stop paying rent and forcing you into an eviction which will eat even more of your profits. The smaller your cash flow is to start with , the bigger the risk of eating into it with major repairs -most investors apply the 50% rule that says your repairs and maintenance will equal 50% or your rental income.

This is just one of the many ways things can go wrong. Another issues is that If your in an ARM ( adjustable rate mortgage) and the interest rate goes up, you can find yourself upside down on cash flow, forcing you to raise rents and possible price yourself out of the market.

Your insurance can go up and increasing your holding costs of the property - and if you made any major improvements , you may end up with a higher tax bill also. All these little things can nickel and dime your cash flow to death.

Personally, this is why I prefer multi-family units vs SFR's because if you have only have one tenant and they stop paying rent or pay late, then you are responsible for the entire mortgage on your own. With multi-family units, you have a little more leeway when it comes to slow payers , as you will have other tenant's rents to help cover the non paying tenant. Doesn't mean you are guaranteed cash flow every month - but it certainly helps cover your expenses in the case of vacancies or non payers.

I'm interested in hearing other investors take on this too.. ....

Lenders want to see a history of income which can be proven by your tax records. If you are collecting income and reporting it on your taxes than you can show income. There are people who do not have jobs but collect social security and must show and award letter to prove their continued income ( as well as tax returns)

One caveat to proving income with tax records is that many investors are trying to show as little income as possible on their tax returns with as many deductions as possible - so it may take awhile to generate enough rental income to qualify for another loan. I'm no lender - this is just some of the things I see happening at the office listening to our on site lender and bringing him pre qualified leads - there are certain things they are looking for - job is not a requirement , but steady continuous income is. Of course every lender is going to have different requirements , but this is probably how these people are still getting loans without an employer.

@anson -that's good info there about how long the propane tank lasts - could make a big difference if you run out in the winter if you don't have year round access.

@Xing - I saw a few investment mountain properties near Bass Lake , here in Ca. that are rented every weekend / week during the summer , but is inaccessible during winter so it can only provide income for about 4 months out of the year - As an investment it would be nice to find something near a lake and ski lift so it could be rented out all year.

My wife and I have thought about that in the past - buy a vacation property that doubles as an income generator - but we usually focused on looking at beach properties in so cal since it's such nice weather all year long in so cal :) - I have literally played in the water in shorts on Christmas day at Newport Beach.

thanks for the input - I think I'm going to do some research and write a blog about my findings

we pretty much use HD and Lowes for most basic repairs - but we also work with our contractor who is able to get supplies at contractor prices and so in some cases we do not have to pay the HD or Lowes prices. If your doing the work yourself without a contractor though, then HD/ Lowes may be your best bet.

When I built my fence last year, I made an excel spreadsheet and called about 10 lumber yards to gets quotes from everyone and charted them all - when all was said and done - HD turned out to be the best deal available to me - I was a little disappointed, cause like you , I thought - there has to be better pricing than that - but it is what it is. They buy in such large bulk it is hard for their competitors to beat their prices. In either case, you should still call around and see if there are any 'wholsesale' supply stores and see if any of them can beat the big boxes - my contractor says even he goes to HD when it's a smaller job so it seems like were all in the same boat.

Fire... great on .. we recently had a camping trip upheaved because the place we had reserved was on fire ( the Rim fire) - so that is definitely a factor - also hadn't thought about wild animals eating pets - thought I remember this being the case when I was a kid in Irvine( of all places)- and it wasn't even a true mountain - just some hills - but those coyotes always found a way to get to my cousins dogs and cats. Great things to beware of..

I've talked to a lot of people who are interested in living away from the city and want to move to the mountains. Maybe they've been watching too many episodes of "Mountain Men" .They talk of the romanticism of saying goodbye to the city and living the tranquil mountains. But, things are a little different there - for example - most people use propane instead of gas and electricity - they have wells and water pumps - there are certain restrictions on fire days or access to rivers - things of that nature.

In any case, I was wondering if any one had any experience with buying a home in the mountains and what kind of experience you had with it. I sort of imagine it like arriving there and then suddenly finding out a bunch a stuff I never thought of before like the road is snowed in 3 month out of the year - or that there is an annual fee to the forestry department for clearing roads or anything like that -

just looking for some insight on some of the things that a normal city dweller may not think about before making a move to the mountains. Would be interested to hear what people have to share about this.