All Forum Posts by: Dan H.

@kevin fox statement matches my reality.  The lowest cash flow property I own is the one I used to live in.  If I refinanced it at 80/20 it does not cash flow.  We have discussed selling it but 1) we like the location and think of gifting it to our child when he comes of age 2) we have some emotional attachment.  We lived there 10 years.  We rehabbed everything in the place mostly doing the work ourselves.  It is the only sfr we have as a rental and it is by far underperforming our second worse rental which itself is far underperforming our third worse rental.  

Still I suspect we will continue to keep it forever (we hardly ever sell a property).  

Good luck

I had a thought on the landlord.  What could he have to complain about if you are rehabbing a trailer.  A trailer that may not be the best will be upgraded.  It will quickly be sold to a tenant that wants a nice trailer.  The quality of the trailer park would increase.  

So I suspect the landlord was asking because he does not desire non-owner occupied and not because he has an issue with someone quickly rehabbing and quickly selling (I.e. Flipping). 

I have seen some below market deals on trailers but because it is not in my area of expertise I have never pursued any of them.  So keep us informed of what you decide and how it works out.  

Good luck

I see a lot of advantages but no one is listing disadvantages:

• need to find turnkey company and PM you trust.  There are many that have bad reputations so do your due diligence.  Note you are typically not an expert in the property location (typically not locale) and they are salesmen.  Research on this site likely can weed out the bad and help find the trustworthy.
• typical turnkey numbers are optimistic.  Typically they are optimistic in Cap expense.  They often under estimate vacancies.  Ask to see real numbers for some they sold and have managed for a couple of years.  Ask to compare to what was advertised at time of sale.  If it is ballpark accurate that is good (even honest people are often optimistic).
• No one will manage the property as good as the person with the financial risk but managing properties takes time and is not feasible when not local.
• Often turnkey offer cheap properties.  Cheap properties do not scale well.  There are many that believe you cannot make money on cheap properties.  I am not that extreme but I do believe it does not scale well.  I suggest reading a blog that is titled something like why you cannot make money on $30K properties (I think you can make money on them but not much for the amount of effort).

My view is that typically an investor can do better without going turnkey but turnkey has many advantages and may be an easy entry into REI (just do your research).

I am not intending to turn you off of turnkey but to point out some of the drawbacks.  For some investors turnkey is a good option (but do your homework).

Good luck

I agree with @Asiyah Kurtz that if you can be successful where you have great passion that is ideal.

In your original post you indicate "have enough rental income coming in that I don't have to work and can live comfortably ...".  I want to indicate long term rentals are not passive; they take work.  My family mostly self manages but has had 3 managed units.  Managed units are less work (and less profit), but still are work.  In fact one managed unit was so much work it is the only unit that we have ever sold just to sell (versus selling one to reinvest).

You also indicated "... I'm also in San Diego where the competition is fierce and (as far as I can tell) few to no cash flow properties are out there...".  In my niche most of the properties I see close would cash flow for me.  For self managed I use 5% vacancy, 5% maintenance (I use 10% each if using a PM), and $250/$300 unit per month cap expense.  I get good loan terms (good credit, good assets, documented good income, etc.) so they may not cash flow with less favorable terms.  My point is that there are niches in San Diego county were cash flow is not hard to find.  It may not be the cash flow of many other locales but having purchased out of state I now stay local.  I know there are some investors who have been successful investing out of state but we have been more successful investing local than we have been at investing out of state (my family has one out of state property left (Alabama lake front) that will likely be sold in the next couple of years - and we virtually never sell).

I am a big fan of investing in So Cal (if you search my posts you will see my list of advantages of investing in So Cal).

Good luck

I agree with @Tim G. that many realtors are nearly useless when things go wrong.  I've been told more than once that the reason to use the realtor is when things go wrong with a purchase.  This is when I have found realtors to be the most useless. I once had a $60K non-disclosure, before I was as experienced as we are now, that you would think the realtor and broker would help with the battle but no help was provided.  I had to hire my own lawyer.

My current realtor I only use to help find properties. She and I both know that I know the market better than she does and that we are the experts but have not had the time to get a realtor license. She provides the access to MLS and sometimes the properties (most properties we buy only provide access after acceptance of offer). She knows that we likely have more contacts to address issues and really would be surprised if we ever asked her for assistance with an after sale issue.

Maybe I simply have not found that great realtor but we have used quite a few realtors.  The last one I used that was not our normal realtor convinced us not to put short time limit on offer/negotiations.  While in slow negotiations with owner another offer came in.  I should have went with my belief and not listened to the realtor who was too inexperienced at under market properties and believed our offer was going to be accepted.  If he brings us another property that we like we will not be using his advice in the negotiation.

I also think Tim G advise on how to get of the tenant is correct.  It is often best to pay them to move out with a condition that the move-out satisfies your move-out instructions (I recommend a check-list).   This helps ensure that the property is vacated to your expectations.

Good luck

Similar to @Russell Brazil my mom started her investing fairly late in life (~60 years old around the year 1998).  I doubt her and my step dad ever made more than $50k between the 2 of them and my Mom was generous to a fault (I.e. Every year their donation reduced their actual income significantly and much of her generosity she could not write off such as letting someone down on their luck live with them for extended period of time all the time (multiple people, multiple times)).  

She sold an investment property that had belonged to her Mom and purchased a beach property (duplex) using the revenue from the one property as down payment and her good credit to finance.  She bought at the right time and its value went up.  She leveraged that property to purchase a quad at the right time. It's value went up and she leveraged that equity to purchase beach front in Gulf Shores Alabama that was on the sand.  She loved this property but it ended up not being a great investment and has been sold.  This property initially went up in price and she leveraged it to purchase Lake Front in Alabama.  

Her properties were worth millions (in less than 10 years never making more than $50k in salary) when she got ill.  She was definitely the drive in the relationship.  My step Dad still owns each of the properties except Gulf Shores but does nothing with them.  He has hired a PM for each of them and is retired. 

The timing worked out great for my Mom and I suspect would be tough to match the equity gains starting today.  But it is a perfect example that it can be done on a small income starting late in life.  

In your 30s is still young.  I would start with a house hack if I were in my 20s or 30s.  

Good luck.  

If there is a 3% vacancy rate and no issue finding a renter I would not take a sub 500 credit score.  Why would you?    The ability of a landlord to ding credit is the biggest stick the landlord has.  If a tenant has poor credit there is nothing to ding if he trashes the place and breaks his lease.  

I recommend not changing your criteria because he is active military.  His credit score is sub 500 for a reason.  Active members military can be responsible, pay their bill, etc.   This potential tenant apparently has not done that.  

So I would accept sub 500 in a market where finding good tenants were difficult. 

By the way the only time I have been significantly burned by a tenant is when I let the tenant convince me to rent to them even though they had poor credit. 

Good luck

I trust Broaddus Construction.  Not the fastest (by far), maybe not the cheapest (but I think he is cheaper than most).  He does top rate tiling; good enough that he has done tile in my own home twice (bath/showers) in addition to what he has done for me in the rentals.  My master bedroom bathroom shower is one of the best tile jobs I have ever seen (river rock pan, river rock accent, tiled walls with tile inset).   He has done many aspects of a rehab and he tells me when it is going to be cheaper to use a painter or other contractor.

Mostly I use him because I trust him in every aspect (quality, honesty, etc.).

Note I use my handyman for many things including demolition.  Find a handyman you can trust will result in savings.  I would tell you mine but he is unable to keep up with the jobs I have for him.

Good luck

I have purchased a single family home with seller financing in San Diego but the seller wanted the typical investor property down payment (I put $40K down on a $167K purchase).  I did get a reduction of interest rate over traditional finance, reduced closing costs (no appraisal, etc.) and a much easier close process (minimal documentation was required).

I think you will need to work hard to find a seller willing to finance with a small or no down payment in San Diego.

Good luck