All Forum Posts by: Gary L Wallman

Quote from @Eliott Elias:

I personally rent and own 10 rental properties. 1. Owning my home will not make me any money 2. I can be flexible and can break the lease no matter how the market looks 3. I don't need to do any maintenance    

I own, but Your first point on how Owning doesn't make you any money is a truth most people don't understand.  We are told from conception, usually by REA and lenders (I wonder why them?), that your own home is the greatest investment you'll have make.  Do the math.  Compare the same home as your own home (owned) and as if you were renting it to someone else.  Put in all expenses, who pays them, all income from all income sources, Equity at start and built up through appreciation, and separate them by who pays for each, as in the source pf the funds,...i.e. the rent money is the source of funds for the mortgage, so the tenant is actually paying for it.  Now, project the cumulated totals for each year,...and tell me if your own home is your greatest investment or expense.

Hey Everyone, 

I hope i put this in the correct category. 

I generally do not do yearly rent increases on my properties if the tenant is clean, pays on time, and is overall a good tenant. I might raise 2% every 2-3 years if my taxes/costs/insurance goes up but most of the time I'm generous. Currently, I'm in a little dilemma where I have to raise the rent drastically for my deal to work. I purchased a 6 Unit property in New Jersey. 3 Units are at $900/mo 2 units are at $450/mo and 1 unit is $750/mo. My current monthly income on the property is $4,350.00. It needs to be at $11-12,000. 

The units are all 3 bedrooms 1 bath, and all in good condition. The rents for that type of apartment are currently around $2250/month. I need to raise them to at least $1850-$1950. The tenants that are paying $900 should not have any issues, but the 2 tenants i have that are at 450 and the one at $750 are going to have a heart attack when they see the new leases. 

I really feel bad for them, some of them are older couples, but i don't have a choice.. Just putting this out there to see what you would do in this type of situation. 

I will also offer to renovate their apartment, new kitchen, bathroom, flooring, and a paint job. 
 
PS

The building is not rent-controlled. 

Thanks

Dan

Quote from @Joe S.:

@Jay Hinrichs had a sports jacket that I wore for years that went with almost anything. I used it to go on a lot of my appointments to meet sellers in it. ( in the winter of course. ) The sleeves finally started fray just a bit close to the wrist so I had to replace it. I told my wife and kids that it was my million dollar sports jacket. Lol

my wife has Oh probably 100 to 150 pairs of shoes and thats just in one of our houses.. she is always buying me shoes so I have probably 50 pair and I only wear one at a time I will never wear probably 40 of them.. I have nice ones that that I have had for years and year but only wear to weddings or really fancy type events which is rare these days.

So what are the advantages of buying a NEW CONSTRUCTION HOME? Well, here are some:

- Minimal maintenance worries, as everything is BRAND NEW. And for those things that do pop up, they are likely covered under a home warranty from the builder

- Modern amenities and new infrastructure, with energy efficiency in mind

- Streamlined buying process, with no bidding wars with other buyers

- Builder incentives (normally with builder-affiliated lender) and quick-move in options...and I have been seeing a ton of bigger incentives this fall in the Tampa area as mortgage interest rates rise and buyers have slowed down from 10K to 15K to 30+K in closing credits!

- Many times, early in the process, CUSTOMIZATION - choose options for things like flooring, crown molding, built-in low-voltage wiring for entertainment and internet, etc...

Opportunities to inspect several times during the process, during and after the building process. Having a trusted REALTOR by your side during this process - just like buying an existing home - will help you at every stage

What are your thoughts and experiences with new build homes?

Quote from @Gary L Wallman:

Quote from @James Hamling:

Quote from @John Morgan:

@Shannon Smith

I went out on a limb 7 years ago when I was in a situation like yours. I spent every penny I had in savings to buy a STR. It was my first property and it was risk I was willing to take. It paid off and I've been able to grow quite a bit from putting all the earnings from that purchase back into savings, then buying more and more properties with the earnings. So I say go for it! Good luck!!

 Every Casino across the nation has hundreds of people who hit that jackpot, followed by tens of thousands a day who didn't. 

You risked it all, in a high risk situation, and won.     Where thousands who try the same, reap the odd's and fail at great cost.    It is neglectful and dangerous to direct all to step into a casino and risk it all, because a very few will win. 

The odd's of financial failure and ruin are very high, with odd's of wining exceptionally low. 

Most investors I buy out there portfolios at pennies on the dollar due to a default situation, sing the same song; how once upon a time they risked it all and it came out ok, even a few more times sometimes, until it didn't, and ruined them. 

 James,

Respectfully, are you really comparing RE investing during sky high inflation to casino gambling? Buying hard assets in times of runaway inflation is among the safest bets of all. The odds are heavily stacked in your favor.

Casino's not so much.

Gary

 I did not realize easy it was for people to give advice without having enough information before reading this forum.  I also did not realize how easy it is for people to speak in generalities before reading this forum.  1) The nature of this casino comment is not wrong.  There is a risk associated with investing in real estate, stocks, or any business, and to belittle that by making a sweeping statement like "the odds are heavily stacked in your favor" is a very poor way to give advice.  The risk of losing may be lower but the bet is astronomically larger.  2) Statistically speaking, there are no "odds stacked in your favor here" because that statement assumes there is a controlled environment and essentially 1 variable, to place a bet or not (i.e. a casino table game with fixed rules).  There is no controlled environment here, there are different rules in different locations, rules change (e.g. interest rates), and the biggest variable of all is the person behind the bet... @Shannon Smith could be the smartest least experienced person this network has ever seen and could easily make a mistake by working too quickly and end up losing "ALL OF OUR SAVINGS".  Especially now, with the risk of a looming recession.  

@Shannon Smith - Not trying to be a downer, but nobody should be telling you to "go for it, have fun" based off the little information that's been provided.  There are better questions for you to ask and for the group here to ask you before any real advice could be given.  Suggest you start by asking more specific questions or providing a lot more detail.

Quote from @John Morgan:

@Shannon Smith

I went out on a limb 7 years ago when I was in a situation like yours. I spent every penny I had in savings to buy a STR. It was my first property and it was risk I was willing to take. It paid off and I've been able to grow quite a bit from putting all the earnings from that purchase back into savings, then buying more and more properties with the earnings. So I say go for it! Good luck!!

 Every Casino across the nation has hundreds of people who hit that jackpot, followed by tens of thousands a day who didn't. 

You risked it all, in a high risk situation, and won.     Where thousands who try the same, reap the odd's and fail at great cost.    It is neglectful and dangerous to direct all to step into a casino and risk it all, because a very few will win. 

The odd's of financial failure and ruin are very high, with odd's of wining exceptionally low. 

Most investors I buy out there portfolios at pennies on the dollar due to a default situation, sing the same song; how once upon a time they risked it all and it came out ok, even a few more times sometimes, until it didn't, and ruined them. 

We have $100,000 savings in the bank. We found an amazing and unique $500,000 house with 5,000 taxes. We can put 10% down and with closing costs spend about $75,000. We will easily spend the remaining $25,000 in misc furnishings, paint, etc. We will have to live off of our checking account and the income from this house for one year until we get a bonus check from work. This house is already generating $3,000 per month on just 1 of the bedrooms in a 5 bedroom house. I feel like it’s such a great investment cash flow wise so we shouldn’t pass it up…but I’m super nervous given we’d be spending all of our savings right now. What would you do? 

Getting tired of dealing with tenants.  Can I sell my houses with loans on them as owner finance deals?

Quote from @Jeff S.:

He knows he won’t get more than the appraised value and probably a lot less than if you leave the place vacant, @John Roberts. You’re afraid you’ll be forced out if he sells the place.

You guys are playing a game of chicken with each other.

In fact, if you are a desirable tenant (pay your rent on time, take care of the place, don’t make the landlord crazy, etc.) why would anyone who buys the place want you out, unless they also run a restaurant and want yours? Is this likely? Would the place be easy to re-rent? Do you truly have no other alternatives if you really must move (and/or does he believe that?)

Not a lot to go on here without more info but I suspect you hold stronger cards. A signed lease from a long-term desirable tenant will maintain the value of his appraisal. Don’t forget, you’re providing the cash flow. How much is an empty restaurant worth, unless there are higher and better uses?

There doesn’t appear to be any benefit to you by signing a lease with a 60-day notice clause. It only makes it easier for him to sell, buys him time, and adds risk to your continued tenancy.

From what little you wrote, and I realize we’re talking about your livelihood, I would refuse to sign a lease with the 60-day clause and, assuming it even makes financial sense to you, offer to pay the appraised value. An agent, if he has one, would think clearer on this. You might discuss this with a knowledgeable agent yourself.

You already said he’s an accidental landlord and wants out. Now he runs from you? This is telling.

Hi Jeff.  Thanks for the advice. Like I said earlier, we are in a very rural and small town (our county has a population of 8160).  We do really well with sales and are always busy.  We employ on average about 20 people.  The building right now would appraise for $75-80K (which he admits).  He is asking for $150K just because we have a 'revenue-producing' business in this location.  I know that is not a whole lot of money in the grand scheme of things, but $70K over appraisal is still ludacris and not very business smart, which we told him and he quit offering it to us for a few weeks.  Just this week he started asking us again to purchase it, but still at the $150K.  He isn't listing it through an agent, just on his own.

I feel that we are a very desirable tenant.  We have been in this building for 11 years this month, never late on a rent payment, and have paid for every single improvement that has turned this building from an empty shell to a full-service restaurant.  This building is almost a hundred years old and was once an appliance repair building.  We have spent tens of thousands of dollars over the last 11 years to make this a restaurant and what it is today.  I don't think it would be hard to rent it out again if the new tenant was wanting to run a restaurant.  It is pretty much a turn-key situation, minus our equipment of course. We are the busiest and most popular restaurant in town.  

I am going to object to the 60-day clause, but this guy has the money and is stubborn enough to make us leave if we don't sign the new lease.  What is the normal language in a lease agreement for the owner selling the building while it is leased?

Thanks again for everyone's input.  It's nice to know that I am not the crazy one.