All Forum Posts by: Dan H.

I attempt to meet in person and get their contact info in person as well as provide our contact info.  I follow it up with an introduction letter, lease, tenant application (make sure no criminals but I ignore credit check on inherited tenants and so far have not been burned).  There really is nothing special about our introduction letter as it mostly explains who we are and tries to create a tenant/landlord relationship with expectations (we also do not immediately raise rents even when significantly below market - we are terrible at raising rents so miss out on some cash flow).  

There are places in So Cal that can have positive cash flow but it will not match the cash flow of many other places (I have only 1 property that satisfied the 1% rule).  Yet I still choose to buy and hold in So Cal.

Here are some of the reasons I chose to buy and hold in So Cal rather than out of state

- appreciation

- prop 13: I had a property in Alabama shores that the prop tax went up faster than the rents.

- ease of managing local: when a hurricane hit Alabama shores being away meant I was every contractor's lowest priority. Dealing with everything is easier when you can be there.  

- cost to be there: going to Alabama from So Cal was a pain and costly but was sometimes a necessity.  Most of my units in So Cal are in a blue collar town less than 30 minutes from where I live. 

I am only looking for multi-unit properties in So Cal.  Good luck with whether you buy and hold in So Cal or out of state. 

2 per bedroom + 1 is the law here.  So if you were here you cannot deny a tenant that has 7 or less people.  

Like most landlords I require all adults to apply and pay application fee.  Lease is written so that each has full financial responsibility.  

I have had a 3 BR with 7 (5 kids) and they thrashed the place in a short time span.  I kept their entire deposit but their damage exceeded the deposit but not by that much.  I did not try to collect for the additional damages but would have if they had significantly exceeded their deposit. 

It was amazing the damage they did to the carpet.  They also had ringed a beautiful tree that I brought in an arborist to save (fee taken from the deposit).   They had also knocked down a fence but blamed the utilities reader but neighbor states they used the gate like a carnival ride and the kids broke fence (I suspect kids broke fence, set it back upright, did not tell parents, utility reader knocks over broken fence, parents believe utility reader broke fence).  I did not collect for broken fence (too hard to prove even with neighbor's statement). 

So tenant basically covered all damages but my turn around on the unit was almost 2x normal (I typically takes me less than 2 weeks to be able to show a property). Much of this was arborist time to save 2 trees with heavy trunk damage. 

I suggest that you are not a ready to purchase until you have seen enough properties and what they have sold for that you can tell a property that will have offer accepted the first week of hitting the market.  

I believe in my area of expertise I am better at knowing the value than the appraiser.  This is because typically I was in each comp he uses for his comps versus he is typically getting his condition, layout, etc information from the selling agent.  To be frank most agents cannot distinguish the difference between a $1k foundation issue and a $20k foundation issue.  Most agents have not been in the other comps used to know relative condition.  

I received an appraisal once of a unit in good shape.  One of the comps was a unit I pulled offer after seeing it.  The condition was listed as similar.  I can state that I would have needed to spend at least $20k on the comp property to have them be similar condition.  The agent called the condition of the comp good versus it was barely OK.  The appraiser had not been inside the property had to use the selling agents description on the condition.  That selling agent clearly had not seen this property.  I love when an appraisal come in below what I know the property to be worth (this one was below but above my offer so I did not get a price relief). 

My recommendation is you look at every duplex to quadplex that hits the market in your desired market. When you can tell with a lot of confidence the ones that will have offer accepted in a week then you will know what a duplex through quadplex is worth.  You will know what each has recently sold for and the condition, location, etc of each.  You will be able to know this unit will need to reduce price to sell this week or this unit is priced to sell this week.  

Good luck

I like cats but something has to be done.  The dog or pseudo barking dog are not bad ideas but this is probably easier, cheaper, and faster.  

Go to the store and purchase a spray bottle.  Fill it with water and keep it at the unit.  When the cat tries to slide by you give it a couple of squirts with the spray bottle.  Cats hate it and no damage to the cat.  The cat will quickly learn to not enter you unit.  

For the yard they sell motion activated sprinklers.  Same idea.  The cat enters yard, gets hit by sprinkler, quickly learns its old yard is not a good place to hang out. 

I use the spray bottle technique on my own cats to teach them to stay inside because there are coyotes where I live and them getting out could mean they die.  I want it so that even when the door is open the cats will not try to get out.

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I would not keep all the deposit for the breaking the lease but use some of it as incentive to vacate early.  If the tenant knows they are losing their entire deposit for breaking their lease they have no incentive to leave the place in decent, near rent worthy condition.

The sooner they are out the better for you and the deposit money can be useful in getting this to happen.

I did not take into account the Studio rent in my calculations which would increase the cash flow more.  You would have a 2/1, a duplex (3/2 on top, maybe a 2/1 on bottom), and a studio.  I think even if the conversion cost $70K- $90K you would have good cash flow.

If I could find this in my market I believe I would purchase it (but my market has most properties with minimal cash flow and properties with opportunities to improve the property to substantially increase equity are not easy to find).

Same summary: depends on Fishers IN market and what other opportunities there are for investing you capital and efforts.

You did not provide an estimate of the cost to convert the garage to a duplex unit and I am unfamiliar with the IN market (or anywhere outside So Cal).  Also you did not indicate if you expect this conversion to cause the equity to appreciate more than the conversion cost.

Assuming the new duplex unit can rent for $1200 (it is newer than the one getting $1000) you would have $3K in rent ($1200 + $1000 + $800).  At 5% rate you would need to do the conversion for not much money to have decent positive cash flow.  At 4% the numbers look better.  At 5% you would definitely be hoping for an equity gain via the conversion and appreciation as the cash flow alone would not be worth the effort/money.

In my area (home prices are going up here and I think will continue to go up) I think this would be profitable enough at 4% and possibly 5% as the conversion here would result in more equity than the cost to convert a garage to a unit.  The rents would provide a positive cash flow (obviously more positive at 4% than at 5%).  I would get the equity gain from the conversion, equity gain from appreciation of all properties (the appreciation not related to the conversion), and have the tenants pay the mortgage and some of the rent be in excess of the mortgage (monthly profit).

So I think it all comes down to the Fishers, IN market and what else you can do with your capital/efforts (is this the best you can do? - In So Cal I think it would be a pretty tempting purchase especially at 4%).

I purchased a property with a much larger non-disclosure than you are talking about ($60K non-disclosure) and brought in an attorney.  To summarize the attorney indicated that because I had not sold any property, etc. that my damages were low.  I could walk away and sue for damages (a few thousand dollars) or negotiate with the threat to hold up any other sale.

If I had huge damages such as had sold a property to purchase, etc. the attorney believed that I would get the lesser of the damages or the value of the non-disclosure ($60K).

I ended up getting a $9K discount on the property ($750K to $741).  My attorney was recommending trying for a $30K discount but I really wanted the property and the seller was very cool in this whole ordeal and was difficult to get him to budge to that $9K.

BTW I used a real estate agent. In my previous view the primary advantage of using a real estate agent was if something went wrong. Well I was wrong, the real estate agency did virtually nothing. I had to hire my own attorney, do my own negotiations, etc. The real estate agency wanted to collect its fee but did not want to deal with any legal hassle to do so. This may not be a popular view on this site but if you can save some money by not using a real estate agent I recommend you do not use an agent. Their biggest value is finding property on MLS. They are not as good at finding distressed under valued properties (unless they are on MLS and have a dozen other perspective buyers) and have shown to me to be useless at resolving any legal issues. Maybe there are some that would have defended their purchasers but this was a large national real estate agency.