All Forum Posts by: Harry M.

Wow. This makes me very grateful that I live in TX.
My main question is that other than screening for past violations, how does a landlord actually go about making sure that tenants don't do any of those things?

Hey Zadokkolee, welcome to BP! I'm just south of you in Allen.

Are you kidding? I'm glued to this thing!

Andy Collins - single family or 2-4 units? Previously it was 20% down for SFH (1-4) and 25% for 5-10, and for 2-4 units it was 25 and 30% respectively.

So Jon is human after all. I was wondering there for a while ;)

The property has some possibilities, but the problem I see is the amount of money it would take to get into it.
At 5+ units you're looking at a commercial loan. It would be difficult to get a loan of that size w/o some experience to show successfully operating other properties. The other difficulty would be that you'd most likely need to put about 30% down. There are scenarios where the seller can finance a portion, say 10 or even 20%, but again the problem is your (main) lender agreeing to this without seeing that you are in a solid enough position to make this work.
Then there would be closing and other acquisition costs (for ex. the inspection would cost a lot more for a 15 unit building than a SFH).
That puts you at around $140K already, and then there is fixup to consider. Given that the property is pretty cheap for the amount of rent, I imagine there's a decent amount, but you'd have do a lot of due diligence and figure out a good estimate of what it would take.

And then on top of that you need reserves for capital expenses, maintenance, vacancies and so on. You never want to be in a reactive position when there are things coming up that affect your property's rentability and you're struggling to come up with the money, and desperately trying to patch things to tide you over.

If a person could get over all those humps, then it looks like (at leased based on limited info) the property would cash flow. One big factor would be whether the tenants pay all utilities. At 50% expenses, the cash flow would be something like $25K/yr. That's based on an amortizing 20 yr loan at 5%. I may be a little off on that since I don't have experience with commercial. If the owner does pay utilities, you've got to estimate closer to 55-60% for expenses, which brings the cash flow down to more like $16K in the 60% case.

Sorry to be such a downer. I just figure that pointing out the shortcoming of the plan is going to be more useful to you at this point than "rah rah anything is possible".

Best of luck with things.
-Harry

Jimmy Watson - welcome to BP, and don't worry about being a "newbie"! If you've got questions, just post away - the folks here are really friendly and willing to help.
Your experience gives you a huge advantage getting into this. Being able to accurately determine what work is needed on a property and how much it will cost is one of the biggest keys.
Best of luck with your plans!
-Harry

A good tenant that's really dug in for the long haul is worth their weight in gold. If she's been there for 3 years already and not damaged the place, there's no reason to believe she would in the future, especially if you build a good relationship. To me, the value of having a long term tenant far outweighs the little bit of protection you get from the deposit at the risk of upsetting the apple cart. I would NEVER do this for a new tenant, but this is different.

I agree with Serge S. about NNN. Maybe if it were the 3rd or 4th million, but if it was the only million I don't think the returns are quite there. I'd also be nervous with the whole million in one place. It would be a mess if something happened to the tenant. I'd have the same reservations about an apartment complex. Too many eggs in one basket if it's the only million.
As long as interest rates stay around 4%, I'd make the most of that first and max out my ten conventional loans. Most likely SFH's in the 80-85K range that will rent for around 1150-1200, with about a 7-10K cosmetic rehab. That would take about the first 300-350K and get us to a nice baseline of 40K/yr or so of passive income.
I'd keep 100 on the sidelines to have a really nice cushion for my family. No return there, but buying some peace of mind is a worthy use of money in my opinion. I'd use most of the rest to buy properties to fix and flip. With 550-600 remaining, we should be able to ramp up to having four projects going concurrently in my market. If we were about to average a 6 month turnaround, that's 8 per year. If we make 15K per flip, that adds another 120K, for a total of 160K/yr which I'd be happy retiring on. We live pretty simply, so that would be enough for us to hang on to one of those properties per year and rent it, gradually building up the passive income.

Nathan Williams - is your atychiphobia (just had to try it out, heh) coming mostly from not feeling confident about knowing the process - ie. who do I talk to, what do I say, how do I not sound like an idiot - or are you more worried about making a bad decision and losing some of your investment?

Cool! Congratulations, Mehran!