All Forum Posts by: George Ghiorse

You definitely want a new lease signed between you and the tenants immediately after closing unless there is a lender requirement that you must have one prior to closing. I like being able to do my own rather than take over leases so you can use your own terms and also update the rent if necessary. It is beneficial to discuss with the current owner the payment history of the tenants though. I also assume that you have walked and inspected each unit as part of the deal. Inspection would cover deferred maintenance but your own walk through should tell you how well the tenants take care of the unit(s). I typically call and ask previous landlords these questions anyway when I received applications for new tenants. This should be part of your standard due diligence process.

Steven,
No general rule on this. It is a personal preference. Some like to never pay any off, some like to pay cash when they buy, many are in between. I don't plan on paying any off until I'm done acquiring as many as I need for retirement which probably will be 15-20.

Create the LLC first. My partners and I just created a new LLC to buy another apartment complex and we are still shopping.

I think it is very important to set the enforcement precedent early. I make it very clear before and when they move in that rent is due on the 1st and if I don't have it by the end of the day on the 3rd, the late notice goes on the door on the 4th. Sometimes the late notice works sometimes not. Usually when it doesn't, nothing would have made it work anyway so go file. Also, to avoid the "it's in the mail" excuse, I set up a "tenant deposit only" acct at my bank (Wells Fargo), give them 12 deposit slips with the due date written at the top of each one. Then all I have to do is log in to my account to see if it's there and transfer it to another acct. There are no excuses this way because they can go to any branch and they are everywhere. Note, you have to set your rents to different amounts to know which tenant it came from.

I concur with Nicholas. Save both your cash flow as well as live frugally so you can save from your income. This method can speed up that snowball effect. First one is the hardest and they get progressively easier after that. One other thing that can help is if you can find a low downpayment lender. Two of my five houses have mortgages with a local credit union that only requires 5% down. Just make sure that the deal will still cash flow well.

I agree with Judy. Do this first deal with the agent and sign the buyers rep agreement for this specific property. Then if all goes well and you begin to build a relationship, you can sign a new one for a period of time that is not property specific. You should discuss openly exactly what you are trying to do and if you are going to use the same agent to buy then list, will they give you a discount on the list side. If you are a repeat client doing many properties, this should be ok with them. You really need to find out though if this agent really knows about investment property or not because they all say they do and most do not.

Some agents know how to do investment property but in my opinion most do not. Just "interview" a bunch of agents until you find one that does their own investing on the side besides just helping clients. Ask them how many investment properties they own, how many flips they've done, how many other investor clients they have, and what sets them apart from other agents when it comes to investment property. OK, disclosure. I am an agent that owns both single and multi family with a bunch of investor clients. Just find someone who practices what they preach.

Morris, your ROI isn't based on the purchase price (unless you paid cash) but on your cash out of pocket. Also, the return should be net cash flow not gross rents. I'm assuming that your example house of $100k purchase price and $10-12k year would be rents of $1000-1200/mo. It appears that the numbers do work differently depending on location. Here is an example for my area. If you buy a property and the total out of pocket cost for you is $20k and your cash flow is $417/mo = $5k/year that is a 25% ROI.

One more thought for those who say hard money loans is too much work. If you want it to be truly passive, find a hard money lender who wants more cash to lend out. Lend money to the hard money lender at say 8-9%. They then take it and lend it to RE investors at 13-14%. They are short term loans, typically 3-6-9 months. I was recenly offered this so they are out there.

Three ideas for you. One, become a hard money lender. Not truly passive but seems to fall under your revised definition. Two, storage units are very successful. Most people have to build their own because there are very few for sale. I've looked. Wonder why so few are for sale? hmmm. Three, I am a passive investor in a large apartment complex (224 units). This is truly passive for me in that I attend quarterly meetings with my partners and get checks in the mail. One or two of the partners are typically the leads that oversee the property manager and employees and get a small extra stipend for their efforts but they also have significant skin in the game.