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All Forum Posts by: Corey M.
Corey M. has started 30 posts and replied 106 times.
Post: Lending rate for friend's flip
- Posts 106
- Votes 32
Quote from @Jeff S.:
“This time around, the housing market is a little riskier and overall interest rates are higher.”
Charging a higher rate for a perceived increased market risk will offer no protection if your loan gets contested, wiped out, or stripped. There are better ways to mitigate risk, @Corey M. These include lending only to local, full-time experienced rehabbers, who you've gotten to know, like, and trust, against properties you've walked, and using a sensible LTV.
Lending rates are regional. You might attend a few local real estate clubs and ask around for the prevailing rates in your area for both 1st and 2nd deeds of trust or mortgages, construction loans, etc., as appropriate. Your profile is blank so it's hard to know your location, but I'm sure they will be higher than 7-8%.
If you are lending money in 2nd position, make sure the first position lender is ok with that. Some loan docs don’t allow a second and you don’t want to be in a position where the first-position lender calls their loan as a result.
“The terms of my deal say that even if he makes nothing on the flip I'm helping to fund, he still is personally responsible for the loan in perpetuity, even if he or his business files for bankruptcy.”
Sorry, but a bankruptcy judge would laugh at that. Nor did a lawyer write it, so I’ll guess that you wrote your own paperwork or obtained it online somewhere. Yes? I strongly suggest you speak to a good lending attorney to understand usury and licensing, at minimum, in the state you are making your loans. This attorney will be able to provide you with a set of professionally prepared, enforceable, loan documents. I assume you have a lender's title policy and are named as the mortgagee on your borrower's fire and hazard insurance?
“I refuse to join any club that would have me as a member.” -- Groucho Marx
Similarly, I’d be careful lending to someone who agreed to borrow money at a rate that could increase by 3% per month. What is your purpose here? If you are trying to earn a fair return on your money, why be punitive?
Flips rarely go as planned and often exceed the loan maturity date. Borrowers hate to be nickeled and dime (or taken advantage of with confiscatory rates). Instead, you might keep your rate the same, at whatever rate you agreed, and charge an additional point or two for a loan extension after a reasonable amount of time. This encourages repeat business.
If your charges become too onerous, your borrower will likely pay them – once, and you will never hear from him again. How much then will you make?
It really comes down to that I'm helping a best friend out. I'm lending to make money, of course, but he's someone I've known for 20 years and isn't very likely to run away with my money. Always a chance, but a small one. I've done this twice and been paid without any issue, on-time.
Good to know re: the 1st position deal. Didn't know that was a possibility.
In terms of bankruptcy, it may not save me, but at the end of the day, there's always a risk I lose everything. I put that in there to help my cause, but realize there's a chance I could lose 100% of my money.
I am curious about this lender's title policy and being named as a mortgagee on borrower's fire and hazard insurance. I don't know anything about that, but if the house burns down and he gets paid out, he'd still have to pay me out of pocket. Again, I could lose everything no matter what, but I'm not dealing with a random 3rd party. This is my best friend. What is the value of the title policy and fire/hazard insurance to a lender?
Post: Lending rate for friend's flip
- Posts 106
- Votes 32
To give more context, in late 2021, I lent him $75k at 10% interest but he didn't have to make any payments for six months (though interest accrued during that time). After six months, the interest rate increased by 3% per month until he paid. After nine months, there was an additional penalty of $1k per month on top of the increasing interest rates until the loan was paid in full. He paid the entire amount right at the end of six months, so there were no penalties or interest rate increases.
This time around, the housing market is a little riskier and overall interest rates are higher. He's also flipping multiple properties at once, which makes my deal riskier. The terms of my deal say that even if he makes nothing on the flip I'm helping to fund, he still is personally responsible for the loan in perpetuity, even if he or his business files for bankruptcy.
Is that helpful in determining a fair rate? Unlike the hard money lender, I'm not charging him any points.
Post: Lending rate for friend's flip
- Posts 106
- Votes 32
I've helped fund a friend's previous flips. He usually gets a hard money loan, but still needs bridge financing for the down and monthly payments. I've previously charged him between 7-8% interest, but that was over a year ago. His hard money loan is at 10% interest and 250k down. What is the appropriate interest rate for me to charge him? 15%?
Post: Landlord rights in regards to Military lease early termination
- Posts 106
- Votes 32
Quote from @Tim Miller:
You basically said it yourself, you are a couch surfing landlord. You seen an ad for this fabulous "Turn Key" property and you didn't do any due diligence. Now the property isn't preforming as advertised due to a tenant moving out in 18 months. It's time to redo your numbers on this property and if you can't get them to work with a turn over every 12 months. I'd say it time to sell and get another property that will. But that will require you to do some work.
Post: Landlord rights in regards to Military lease early termination
- Posts 106
- Votes 32
Quote from @Jonathan R McLaughlin:
@Corey M.
Not a fan of the turnkey model but seems @Chris Clothier was being responsible and accurate in reporting his average and median tenant stays.
Problem is assuming the average outcome is the probable outcome…that’s just wrong and on you.
To be fair, it is one of the most common misconceptions in real estate and elsewhere.
When I did some career counseling at a graduate School most of the young guys said “well I have to make at least the average.
Um, guys, you took math right?
I understand the average and can cover the vacancy, my question was more in regards to the surprise that a lease can be broken mid-term. I get that it's controversial because it involves the military, but it was a law I was unaware of. Hopefully the next tenant stays longer.
Post: Landlord rights in regards to Military lease early termination
- Posts 106
- Votes 32
Quote from @James Hamling:
Quote from @Corey M.:
Quote from @James Hamling:
Quote from @Corey M.:
Quote from @James Hamling:
Quote from @Corey M.:
Quote from @Rodney Sums:
Quote from @Corey M.:
I purchased my 1st investment property from REI Nation last year and a major selling point to me was that the average tenant staying for ~5.5 years. This morning, after ~1.5 years, I was informed my tenant is terminating the lease early, without penalty, because of a military transfer. I looked in the lease agreement and there is no language to support this move. However, there is apparently a federal law allowing for military transfers without penalty. I wish I was aware of this up front, as I would've thought twice about renting to someone who is likely to be relocated during the lease term.
Re-leasing the unit is going to require me to make any necessary repairs and pay one month's rent to the management company for finding a new tenant. In short, this early termination is likely going to wipe out my cash flow for the first year-and-a-half of the lease. It's a huge bummer to have both repair and re-leasing expenses this quickly.
As a landlord, what are my rights here?
- REI is saying the tenant is only responsible for this month's rent, but in my brief googling, it appears they are also responsible for next month's. Is that correct?
- To prevent this in the future, is it within my landlord rights to tell the management company to only lease to a civilian? I want to support the military, but also don't want to lose money on this investment, which will happen if I keep putting in tenants who are likely to get transfers.
I'm sure there are seasoned landlords who knew about this rule, but it had never been brought up to me; I was a little blindsided by the financial hit. Some of it may be recouped by a higher rental fee for a new lease, but it doesn't look like rental prices have increased significantly in the area.
@Chris Clothier, would you mind weighing in?
You need to self manage. I doubt a reputable property manager will screen military applicants for you. This would risk them having a reputation of "discriminating against vets" with lots of google reviews about it.
I also recommend you reconsider having this attitude. No landlord likes vacancies and unexpected turnovers.
Military personnel already put themselves at risk at the direction of millionaires and billionaires with great salaries, housing, healthcare, and security. How selfish is that for civilians to reap the benefits of their sacrifices while trying to avoid renting to them?
Not all landlords are millionaires or billionaires. I am not. Ultimately, I made this investment to ensure I have housing and can put food on the table when I'm older. And I want the same for our military. I appreciate their sacrifices, but on a more macro level, if I'm bringing this up, there must be other landlords who quietly think it to themselves (and think twice before renting to the military). This could be easily resolved if the government just covered the landlord's costs in the event of an early lease termination.
No. No, no, no, no, no.
This is a "You" problem Corey, flat out. The excuses are just that excuses, and I think you know that and are just scrambling for ways to cover that, to lie to self.
It's obviously ridiculous to EXPECT that a property has no maintenance at all, nothing breaks, nothing wears out, nothing at all for 4+ years, I don't even expect that in new construction units, it's why warranties exist, very literally. And to expect a tenant is at minimum 4yrs+ right out the gate, if not 5, is beyond bonkers. HOPE, sure, fine, hope away, but expect, no, I don't believe anyone is that clueless.
I also notice a statement complaining that "now I am going to have to make repairs" meaning you KNOW there is defective/broken things, to an extent that nobody else will lease it without being repaired, and you intentionally neglected it and the tenant living in such, that is morally corrupt and illegal in many if not most places, add on fact of doing such to active duty service member I think is despicable.
No, I don't see many, several or even any others thinking the same. I find that an excuse to justify actions and thoughts on such.
What I do believe many others think is exactly what I am saying here, possibly with a few expletives in addition.
As an added note of thought on this, I won't work with anyone who ever mutters something in manner that you stated, I am being serious. It does not matter how much $ you have or offer, not a chance, it get's a person in the "Dead-2-Me" file. I won't do business, associate, even acknowledge such a person. I know I am not alone in this, which means more loss of $$$$ from the manner of thinking.
If you approached this differently the results could have been wildly different. Did you think about talking to your tenant and asking if he knows anyone else who would be decent and interested in taking over there lease? I have not experienced a single duty station that doesn't have a long list of people ready to jump on a decent place double-time. No vacancy time, no tenant placement fee required, just a modification of lease holder. Done.
The summary is you screwed up in your investing and expectations, and are seeking to take it out on another. If they told you average lease terms were 88 months would you have blindly taken that as the gospel? Or done some D.D. to find what market averages were in that properties location?
You seem very combative given that I explained the situation pretty clearly. You don't have to worry about putting me on a "dead to me" list because I wouldn't hire you anyway.
As I explained, there was a pro-forma from the turnkey company I used. This company has one of the best reputations in this space. The pro forma outlined the expected vacancies and maintenance, which amounted to 5 and 4 percent, respectively. Yes, there will need to be repairs whenever there is turnover. And no, that doesn't mean I knowingly left a house in disrepair. Actually, quite the opposite. But thank you for calling me "morally corrupt" when I provided completely renovated housing to someone for 18 months.
While there was no guarantee someone would stay for 5.5 years, that has been the norm in this company's portfolio. Turning over the house every 18 months is not what is expected in this investment, though it obviously could (and did) happen.
As an investor, I'm trying to maximize my return. I didn't make any mistakes in my calculations. All I said was that I didn't know that military personnel could cut a lease short, and that it's odd the government doesn't compensate the landlord in this situation.
You're making broad and ignorant accusations. There is nothing wrong with the house. I've never even seen it in person. It was purchased and renovated by REI Nation, who has a great reputation. There likely aren't any major repairs unless the tenant did something I'm unaware of. It was thoroughly inspected when I purchased it and it hasn't had any issues. But anytime someone moves out, there's going to be cosmetic work to be done. And every time the house needs to be re-leased, it costs a month's rent. It is not *bonkers* to expect someone to stay in the place for 5+ years since that is the norm under REI, largely because they have top notch management that keeps tenants happy.
You need to take a deep breath before writing in a public forum with such vitriol. I'm an investor who closely read the pro formas and am experiencing someone breaking the first lease I've ever had mid-term. I apologize if I am not an expert in everything real estate, but I have a full time job and hired a turnkey company because I wanted a passive investment.
I have no doubt the place will be rented again quickly. My concern was simply that I am paying a re-leasing fee and for any cosmetic repairs every time someone moves out, and I was expecting a tenant to stay longer than 18 months since they signed a 24 month lease. And because the portfolio norm is 5.5 years, it was surprising to have it cut this short.
LMAO.... this reply, it says everything, lol. Corey, I don't know what to tell ya because you clearly have decided you know everything, even though everything else states to ignorance. Each time someone tries to help you just regurgitate the same ignorant statements over and over in a chant "... the pro forma.... the pro forma.... REI Nation.... REI....", yeah Corey, we heard that every time, still wrong no matter how many times you repeat it over n over.
It's looking to me like this is a great example of who SHOULDN'T get into a Real Estate Investment and Landlording. Your expectations are not realistic, your denying self-accountability, and not approaching the entire premise as a Landlord in a accurate or realistic measure.
When getting into REI statistics and averages are ONLY data, they do not translate into results no more then buying a tomatoes translates into a pizza, it is 1 ingredient in the mix that requires ACTIVE work, efforts and actions to create the end result and HOW the process is done has the greatest impact upon output.
Multiple persons have tried to help educate you on the expectations, yet it's still retort of telling people we don't understand, the pro forma.... Casey, some of us have hundreds if not thousands of deals under the belt, which one do you think does and does not know what there talking about here? Take a step back, stow the ego in the trunk for a moment and re-read all of these because your missing the education and opportunity here friend.
Kindly move on.
What is the goal here Casey? There has been a near complete uniformity of response by experienced professionals on this entire topic, and a consistent argument back restating the failed actions that were of failed actions in the first place, EXPECTATIONS from projections.
REI Nation and what they gave for data honestly matters very little, because it is a fundamental and foundational LAW of REI that the investor is ALWAYS responsible for there Due Diligence and knowledge base of what they are doing, this includes acquisition and operation.
The vast majority of things has been centered around this fact that for some reason, keeps getting missed by yourself, we keep laying it down but your not picking it up. What REI Nation is experiencing in tenancy length on AVERAGE is in no way a guarantee or certainty that you will hit and experience exactly that.
Want to call out how others are posting, ok, let's do that, go through and see how most are trying to politely say the same thing and getting nowhere, so I just say it straight forward without tip-toeing around, and I am ever so happy with myself and my life, but thanks for caring, xoxo big guy.
Aside from that I notice 0 response to about 98% of the points I brought up, the mention of unit needing repairs to re-lease, the suggestion for a lease modification SAVING re-leasing fee's that you keep hammering on about....
As a last bit of REI knowledge, if you think this situation is so bad, holly cow don't ever get into sec8 or affordable housing because you'll absolutely loose it, this is about as nice and simple of a situation as they come for Landlording, heck in a lot of ways it's actually a positive as now it can be market priced probably getting more $ and increasing that net cashflow.
I have no interest in arguing with someone like you. Again, kindly stop responding. Also, it's *lose* not loose.
Post: Landlord rights in regards to Military lease early termination
- Posts 106
- Votes 32
Quote from @James Hamling:
Quote from @Corey M.:
Quote from @James Hamling:
Quote from @Corey M.:
Quote from @Rodney Sums:
Quote from @Corey M.:
I purchased my 1st investment property from REI Nation last year and a major selling point to me was that the average tenant staying for ~5.5 years. This morning, after ~1.5 years, I was informed my tenant is terminating the lease early, without penalty, because of a military transfer. I looked in the lease agreement and there is no language to support this move. However, there is apparently a federal law allowing for military transfers without penalty. I wish I was aware of this up front, as I would've thought twice about renting to someone who is likely to be relocated during the lease term.
Re-leasing the unit is going to require me to make any necessary repairs and pay one month's rent to the management company for finding a new tenant. In short, this early termination is likely going to wipe out my cash flow for the first year-and-a-half of the lease. It's a huge bummer to have both repair and re-leasing expenses this quickly.
As a landlord, what are my rights here?
- REI is saying the tenant is only responsible for this month's rent, but in my brief googling, it appears they are also responsible for next month's. Is that correct?
- To prevent this in the future, is it within my landlord rights to tell the management company to only lease to a civilian? I want to support the military, but also don't want to lose money on this investment, which will happen if I keep putting in tenants who are likely to get transfers.
I'm sure there are seasoned landlords who knew about this rule, but it had never been brought up to me; I was a little blindsided by the financial hit. Some of it may be recouped by a higher rental fee for a new lease, but it doesn't look like rental prices have increased significantly in the area.
@Chris Clothier, would you mind weighing in?
You need to self manage. I doubt a reputable property manager will screen military applicants for you. This would risk them having a reputation of "discriminating against vets" with lots of google reviews about it.
I also recommend you reconsider having this attitude. No landlord likes vacancies and unexpected turnovers.
Military personnel already put themselves at risk at the direction of millionaires and billionaires with great salaries, housing, healthcare, and security. How selfish is that for civilians to reap the benefits of their sacrifices while trying to avoid renting to them?
Not all landlords are millionaires or billionaires. I am not. Ultimately, I made this investment to ensure I have housing and can put food on the table when I'm older. And I want the same for our military. I appreciate their sacrifices, but on a more macro level, if I'm bringing this up, there must be other landlords who quietly think it to themselves (and think twice before renting to the military). This could be easily resolved if the government just covered the landlord's costs in the event of an early lease termination.
No. No, no, no, no, no.
This is a "You" problem Corey, flat out. The excuses are just that excuses, and I think you know that and are just scrambling for ways to cover that, to lie to self.
It's obviously ridiculous to EXPECT that a property has no maintenance at all, nothing breaks, nothing wears out, nothing at all for 4+ years, I don't even expect that in new construction units, it's why warranties exist, very literally. And to expect a tenant is at minimum 4yrs+ right out the gate, if not 5, is beyond bonkers. HOPE, sure, fine, hope away, but expect, no, I don't believe anyone is that clueless.
I also notice a statement complaining that "now I am going to have to make repairs" meaning you KNOW there is defective/broken things, to an extent that nobody else will lease it without being repaired, and you intentionally neglected it and the tenant living in such, that is morally corrupt and illegal in many if not most places, add on fact of doing such to active duty service member I think is despicable.
No, I don't see many, several or even any others thinking the same. I find that an excuse to justify actions and thoughts on such.
What I do believe many others think is exactly what I am saying here, possibly with a few expletives in addition.
As an added note of thought on this, I won't work with anyone who ever mutters something in manner that you stated, I am being serious. It does not matter how much $ you have or offer, not a chance, it get's a person in the "Dead-2-Me" file. I won't do business, associate, even acknowledge such a person. I know I am not alone in this, which means more loss of $$$$ from the manner of thinking.
If you approached this differently the results could have been wildly different. Did you think about talking to your tenant and asking if he knows anyone else who would be decent and interested in taking over there lease? I have not experienced a single duty station that doesn't have a long list of people ready to jump on a decent place double-time. No vacancy time, no tenant placement fee required, just a modification of lease holder. Done.
The summary is you screwed up in your investing and expectations, and are seeking to take it out on another. If they told you average lease terms were 88 months would you have blindly taken that as the gospel? Or done some D.D. to find what market averages were in that properties location?
You seem very combative given that I explained the situation pretty clearly. You don't have to worry about putting me on a "dead to me" list because I wouldn't hire you anyway.
As I explained, there was a pro-forma from the turnkey company I used. This company has one of the best reputations in this space. The pro forma outlined the expected vacancies and maintenance, which amounted to 5 and 4 percent, respectively. Yes, there will need to be repairs whenever there is turnover. And no, that doesn't mean I knowingly left a house in disrepair. Actually, quite the opposite. But thank you for calling me "morally corrupt" when I provided completely renovated housing to someone for 18 months.
While there was no guarantee someone would stay for 5.5 years, that has been the norm in this company's portfolio. Turning over the house every 18 months is not what is expected in this investment, though it obviously could (and did) happen.
As an investor, I'm trying to maximize my return. I didn't make any mistakes in my calculations. All I said was that I didn't know that military personnel could cut a lease short, and that it's odd the government doesn't compensate the landlord in this situation.
You're making broad and ignorant accusations. There is nothing wrong with the house. I've never even seen it in person. It was purchased and renovated by REI Nation, who has a great reputation. There likely aren't any major repairs unless the tenant did something I'm unaware of. It was thoroughly inspected when I purchased it and it hasn't had any issues. But anytime someone moves out, there's going to be cosmetic work to be done. And every time the house needs to be re-leased, it costs a month's rent. It is not *bonkers* to expect someone to stay in the place for 5+ years since that is the norm under REI, largely because they have top notch management that keeps tenants happy.
You need to take a deep breath before writing in a public forum with such vitriol. I'm an investor who closely read the pro formas and am experiencing someone breaking the first lease I've ever had mid-term. I apologize if I am not an expert in everything real estate, but I have a full time job and hired a turnkey company because I wanted a passive investment.
I have no doubt the place will be rented again quickly. My concern was simply that I am paying a re-leasing fee and for any cosmetic repairs every time someone moves out, and I was expecting a tenant to stay longer than 18 months since they signed a 24 month lease. And because the portfolio norm is 5.5 years, it was surprising to have it cut this short.
LMAO.... this reply, it says everything, lol. Corey, I don't know what to tell ya because you clearly have decided you know everything, even though everything else states to ignorance. Each time someone tries to help you just regurgitate the same ignorant statements over and over in a chant "... the pro forma.... the pro forma.... REI Nation.... REI....", yeah Corey, we heard that every time, still wrong no matter how many times you repeat it over n over.
It's looking to me like this is a great example of who SHOULDN'T get into a Real Estate Investment and Landlording. Your expectations are not realistic, your denying self-accountability, and not approaching the entire premise as a Landlord in a accurate or realistic measure.
When getting into REI statistics and averages are ONLY data, they do not translate into results no more then buying a tomatoes translates into a pizza, it is 1 ingredient in the mix that requires ACTIVE work, efforts and actions to create the end result and HOW the process is done has the greatest impact upon output.
Multiple persons have tried to help educate you on the expectations, yet it's still retort of telling people we don't understand, the pro forma.... Casey, some of us have hundreds if not thousands of deals under the belt, which one do you think does and does not know what there talking about here? Take a step back, stow the ego in the trunk for a moment and re-read all of these because your missing the education and opportunity here friend.
Kindly move on.
Post: Landlord rights in regards to Military lease early termination
- Posts 106
- Votes 32
Quote from @Account Closed:
Quote from @Corey M.:
I purchased my 1st investment property from REI Nation last year and a major selling point to me was that the average tenant staying for ~5.5 years. This morning, after ~1.5 years, I was informed my tenant is terminating the lease early, without penalty, because of a military transfer. I looked in the lease agreement and there is no language to support this move. However, there is apparently a federal law allowing for military transfers without penalty. I wish I was aware of this up front, as I would've thought twice about renting to someone who is likely to be relocated during the lease term.
Re-leasing the unit is going to require me to make any necessary repairs and pay one month's rent to the management company for finding a new tenant. In short, this early termination is likely going to wipe out my cash flow for the first year-and-a-half of the lease. It's a huge bummer to have both repair and re-leasing expenses this quickly.
As a landlord, what are my rights here?
- REI is saying the tenant is only responsible for this month's rent, but in my brief googling, it appears they are also responsible for next month's. Is that correct?
- To prevent this in the future, is it within my landlord rights to tell the management company to only lease to a civilian? I want to support the military, but also don't want to lose money on this investment, which will happen if I keep putting in tenants who are likely to get transfers.
I'm sure there are seasoned landlords who knew about this rule, but it had never been brought up to me; I was a little blindsided by the financial hit. Some of it may be recouped by a higher rental fee for a new lease, but it doesn't look like rental prices have increased significantly in the area.
@Chris Clothier, would you mind weighing in?
Your problem is not the tenant. It is believing Pro Formas. 5% Vacancy doesn't mean each and every year its exactly 5%. But even on average it going to cost much more than 5% of rent annually. 18 mo average occupancy is a fair assumption. Then add in 1 month vacancy and 1 month leasing cost. So the cost is 2 months rent every 18 months. Add that make ready costs on average 1000/turn. Then for a property with 1000 rent you are looking at 3000$ every 18 months or 18% for vacancy costs. Not 5%. The problem is no turnkey provider will be able to sell anything with the real numbers. And 5.5 years is highly unlikely to be a typical tenancy.
Post: Landlord rights in regards to Military lease early termination
- Posts 106
- Votes 32
Quote from @James Hamling:
Quote from @Corey M.:
Quote from @Rodney Sums:
Quote from @Corey M.:
I purchased my 1st investment property from REI Nation last year and a major selling point to me was that the average tenant staying for ~5.5 years. This morning, after ~1.5 years, I was informed my tenant is terminating the lease early, without penalty, because of a military transfer. I looked in the lease agreement and there is no language to support this move. However, there is apparently a federal law allowing for military transfers without penalty. I wish I was aware of this up front, as I would've thought twice about renting to someone who is likely to be relocated during the lease term.
Re-leasing the unit is going to require me to make any necessary repairs and pay one month's rent to the management company for finding a new tenant. In short, this early termination is likely going to wipe out my cash flow for the first year-and-a-half of the lease. It's a huge bummer to have both repair and re-leasing expenses this quickly.
As a landlord, what are my rights here?
- REI is saying the tenant is only responsible for this month's rent, but in my brief googling, it appears they are also responsible for next month's. Is that correct?
- To prevent this in the future, is it within my landlord rights to tell the management company to only lease to a civilian? I want to support the military, but also don't want to lose money on this investment, which will happen if I keep putting in tenants who are likely to get transfers.
I'm sure there are seasoned landlords who knew about this rule, but it had never been brought up to me; I was a little blindsided by the financial hit. Some of it may be recouped by a higher rental fee for a new lease, but it doesn't look like rental prices have increased significantly in the area.
@Chris Clothier, would you mind weighing in?
You need to self manage. I doubt a reputable property manager will screen military applicants for you. This would risk them having a reputation of "discriminating against vets" with lots of google reviews about it.
I also recommend you reconsider having this attitude. No landlord likes vacancies and unexpected turnovers.
Military personnel already put themselves at risk at the direction of millionaires and billionaires with great salaries, housing, healthcare, and security. How selfish is that for civilians to reap the benefits of their sacrifices while trying to avoid renting to them?
Not all landlords are millionaires or billionaires. I am not. Ultimately, I made this investment to ensure I have housing and can put food on the table when I'm older. And I want the same for our military. I appreciate their sacrifices, but on a more macro level, if I'm bringing this up, there must be other landlords who quietly think it to themselves (and think twice before renting to the military). This could be easily resolved if the government just covered the landlord's costs in the event of an early lease termination.
No. No, no, no, no, no.
This is a "You" problem Corey, flat out. The excuses are just that excuses, and I think you know that and are just scrambling for ways to cover that, to lie to self.
It's obviously ridiculous to EXPECT that a property has no maintenance at all, nothing breaks, nothing wears out, nothing at all for 4+ years, I don't even expect that in new construction units, it's why warranties exist, very literally. And to expect a tenant is at minimum 4yrs+ right out the gate, if not 5, is beyond bonkers. HOPE, sure, fine, hope away, but expect, no, I don't believe anyone is that clueless.
I also notice a statement complaining that "now I am going to have to make repairs" meaning you KNOW there is defective/broken things, to an extent that nobody else will lease it without being repaired, and you intentionally neglected it and the tenant living in such, that is morally corrupt and illegal in many if not most places, add on fact of doing such to active duty service member I think is despicable.
No, I don't see many, several or even any others thinking the same. I find that an excuse to justify actions and thoughts on such.
What I do believe many others think is exactly what I am saying here, possibly with a few expletives in addition.
As an added note of thought on this, I won't work with anyone who ever mutters something in manner that you stated, I am being serious. It does not matter how much $ you have or offer, not a chance, it get's a person in the "Dead-2-Me" file. I won't do business, associate, even acknowledge such a person. I know I am not alone in this, which means more loss of $$$$ from the manner of thinking.
If you approached this differently the results could have been wildly different. Did you think about talking to your tenant and asking if he knows anyone else who would be decent and interested in taking over there lease? I have not experienced a single duty station that doesn't have a long list of people ready to jump on a decent place double-time. No vacancy time, no tenant placement fee required, just a modification of lease holder. Done.
The summary is you screwed up in your investing and expectations, and are seeking to take it out on another. If they told you average lease terms were 88 months would you have blindly taken that as the gospel? Or done some D.D. to find what market averages were in that properties location?
You seem very combative given that I explained the situation pretty clearly. You don't have to worry about putting me on a "dead to me" list because I wouldn't hire you anyway.
As I explained, there was a pro-forma from the turnkey company I used. This company has one of the best reputations in this space. The pro forma outlined the expected vacancies and maintenance, which amounted to 5 and 4 percent, respectively. Yes, there will need to be repairs whenever there is turnover. And no, that doesn't mean I knowingly left a house in disrepair. Actually, quite the opposite. But thank you for calling me "morally corrupt" when I provided completely renovated housing to someone for 18 months.
While there was no guarantee someone would stay for 5.5 years, that has been the norm in this company's portfolio. Turning over the house every 18 months is not what is expected in this investment, though it obviously could (and did) happen.
As an investor, I'm trying to maximize my return. I didn't make any mistakes in my calculations. All I said was that I didn't know that military personnel could cut a lease short, and that it's odd the government doesn't compensate the landlord in this situation.
You're making broad and ignorant accusations. There is nothing wrong with the house. I've never even seen it in person. It was purchased and renovated by REI Nation, who has a great reputation. There likely aren't any major repairs unless the tenant did something I'm unaware of. It was thoroughly inspected when I purchased it and it hasn't had any issues. But anytime someone moves out, there's going to be cosmetic work to be done. And every time the house needs to be re-leased, it costs a month's rent. It is not *bonkers* to expect someone to stay in the place for 5+ years since that is the norm under REI, largely because they have top notch management that keeps tenants happy.
You need to take a deep breath before writing in a public forum with such vitriol. I'm an investor who closely read the pro formas and am experiencing someone breaking the first lease I've ever had mid-term. I apologize if I am not an expert in everything real estate, but I have a full time job and hired a turnkey company because I wanted a passive investment.
I have no doubt the place will be rented again quickly. My concern was simply that I am paying a re-leasing fee and for any cosmetic repairs every time someone moves out, and I was expecting a tenant to stay longer than 18 months since they signed a 24 month lease. And because the portfolio norm is 5.5 years, it was surprising to have it cut this short.
Post: Landlord rights in regards to Military lease early termination
- Posts 106
- Votes 32
Quote from @Joel Allen:
@Corey M.
I’ve found that military renters are overwhelmingly great tenants that who pay on time and take good care of the place.
Don’t let this one instance change your investing strategy...it may have been an anomaly. In fact, a Rand Corporation study of active duty Air Force members found that the average tour length (length of time in one location) is 53 months for enlisted Airmen and 34 months for officers. I imagine the other military branches are fairly similar.
It’s worth getting to know the specifics of your nearby military base. As an example, some bases host large 1-year schools for military members. So, those students will likely only be at the military base for a year before moving on. Understanding these nuances about your specific location can help better manage your expectations about average length of tenancy.
That's a good tip. I will look into that. Thank you.