All Forum Posts by: Sam LLoyd

@Thomas S.  Too true... love it.

My 2 cents:  There are many situations like this that I've been aware of.  As far as damage.... most of them have worked out well....The first thing that comes to my mind is if the house has a septic system.... if you put too much use on that, you should make a required charge of a tank pump.

Next:  A win win should be doable if they are decent people.  They should expect to pay more because of the number of people and the short lease... so make a judgement call and tell them how much it will cost.  Then, make sure you have enough security deposit to make you comfortable.  As far as parking, you can put in your lease a max vehicle count.

But do your screening.  The company is who is responsible... so do your checks on the company.  Make sure they score well with better business, etc... find out if they are are making money, get customer references...

@Thomas S.  Very true on all points, with one thing to keep in mind.  People are less likely to be looking for a new house if they are in the middle of a lease.... yes, in my experience, they will move whenever they please regardless of the lease, but I've also seen that they are less likely to be shopping around if they have just signed a year lease.

Of course, if the tenants are willing to pay more in in order to secure control for a longer period of time, he could look into that.

It all comes down to how hard it is to find good rentors.  In my market, I've never had a problem, if your rents are priced corrrectly  From what you said, I'd probably give them the break, and take a chance on the military.  

However.... and I'm reading into it a little here... the same reason that $50/month isn't a big deal to you, means that it shouldn't be a big deal to them.  It does not make sense that $50/month would make them decide not to go buy a house.  So, in my opinion, they are feeling you out for a discount, in which case, since moving is a pain, there's no reason to give them the discount... unless your rent is on the high side and if they move you will not be able to fill it at the current rate.

Ok, I have to add one.  Long conversation, but here are the highlights:  

"We need to get out of the extended stay hotel because the don't allow pets and our rottweiler has to stay at the kennel."

"We had to move out of the house because of the mold issue that the landlord would not address."

"You'll have to work with us on the security deposit... we should have the money as soon as we receive the judgement against our previous landlord, it''s just taking a while.. you know how the court system is."

That was all the same phone call.  After that, I resolved never to rent to someone who wanted to pay me with money they got from suing their landlords.... so far it hasn't come up again.

I like that listing "Life is just beautiful here"  No mention of how much the units are rented for (unless I missed it).

So, my first thought... is that you have a lot of information to find... I've been working on a couple multis.... and it's a lot of work getting all the information you need, from a reliable source (not the seller), and deciding if it's a good deal.... be super suspect of anything that says 100% occupancy... of course it could be 100% right now... because they just accepted every application they had in order to sell the place.

Second thought... assuming this is the best deal.... go find someone to work with.  It's not so much a matter of how much money you have, but what your management/real estate experience is, and how much cash you have access to.  If you have 600k... you shouldn't have any trouble finding a bank that will lend you 50k.  If you have 50.... you'll never find anyone to lend you the 600k.  The only way I see this working is to find someone who will help you with the down payment... in which case... if they help enough, then you'll be able to find the loan.... or find another investor who has the credibility to secure it and then work with him/her, even though you don't get the whole deal.

Side note... the more you network with other people/real estate investors, the more successful you'll be, so this is a good next step even if you don't get this deal.

@Eric Marofske,

It seams to be in the ball park so far.  I'm planning on long term hold for three of the properties, but I keep going back and forth on the last.... it was purchased as a residence, not an investment, so it wouldn't make money if I had to have it managed.

Example:  triplex, income is about 36000/year, That's 1800 for fixing things.  Most years, I spend less, this year I'm spending more.  The reason I've done better than this to date is because I do all my own big ticket work.  Plumbing and electrical I do myself, while I have a couple guys that work for me on painting, roofs, etc...

I also haven't been able to track it for very long, since most of my buildings have been undergoing improvements. Like I said in my first post, the additional money I need to bring it up to speed is somewhere else on the spreadsheet.  When I bout the 4plex and 2 units needed to be gutted, a garage finished and all the windows changed... those items are up front, not part of the monthly allotment... even though I haven't finished them yet.

I think you are right though.  If I had to hire out everything, 5% would probably come in low on buildings as old as mine.

I put in an annual amount of maintenance... I usually use about 5% of the income, though this could go up or down depending on the age of the building.  Yes, on one hand it's silly since even if the house was vacant, it would still require fixing, but tenants also break things... which is why attaching my calculation to the income works for me.

With my houses, I don't put Cap Ex and maintenance in separate categories.... if there is a major issue when I buy a place I just add the cost of that repair to the offer price to determine what my returns would be... as If I had a higher down payment.  Anything that happens later is paid for out of my maintenance percentage weather it's a 2$ outlet or a 2000$ roof repair.

Now, I only have 4 buildings at the moment, so I don't keep a separate fund.  what I've done is use my Credit cards for any major repairs... that way I get rewards and such... then I transfer the balance for 3% and pay it off with no interest over the  next 12 or 18 months.  I figure the 3% is worth the ability to use that money for other investments now.  If I feel the potential repairs would exceed my ability to pay them off in a year, then I'll start putting money aside.

I anticipate 10% for transaction... it's simple, and it might be close... this covers agent commission, seller requests, and minor things a home inspector might find, as well as appraisals, surveys, whatever. So, you but a house for 100, put 50 into it, sell it for 200... you use 180 in your calculation... so you made 30... or since you put 150 into it, you made 20% ROI... this is if you don't pay yourself anything for your time.

When I'm evaluating a buy and hold, I want to make 10% after a management fee. I manage myself, but that's just a job with a paycheck. For a flip... or investing in anything else short term, I'd want to see more than 10%, but only because I can get close to 10% in a buy and hold. When I'm doing a buy and hold, my ROI annually is supplemented by depreciation, tax deductions, and principal pay down, so my actual returns are way higher. To compete... such as buying a note.... I'd start around 15% myself.

There... those are my thoughts.

I think the answer comes down to mindset.  A vacant lot is an inflation proof savings account.... you don't want to use your savings to pay off debt, especially if you haven't fixed whatever caused the debt in the first place.  On the other hand, a savings account is also there for any unforeseen circumstances. If this is a medical emergency, then pay it off and be thankful you had it.  However, it sounds more like you need to fix your financial situation first.  You need a job, or source of cash-flow that can cover your cost of living and your debts... then look at the different uses for your 'savings'.... don't blow it all on a problem that hasn't been solved.

Another way to look at the vacant land (I have a vacant lot that I'm trying to figure out what to do with too), is that if you are paying taxes on it every year, it's a liability.  Also, there is the opportunity cost of having your money in land when you could have it in a cash-flow producing asset.  As I am trying to do right now, I would recommend getting that money out of the land and into an asset.  I don't know much about your market, but if 175k could buy a condo that brings it a couple hundred/month... that would be better than leaving it there... and you can probably find better investments than that.

Summary:  Get your finances in order.  Get to a point where your income exceeds your expenses, and then decide what to do with the lot... my recommendation would be to put the value into a positive cash-flow property.  Yes, finding a builder who will build on it should be doable, but how to work that to an advantage other than just taking the money.... that's not my thing.

First, your numbers are hard to understand... I can't tell if you're talking about % of value or % of down payment.

My recommendation to simplify things is to go 50/50 equity, but he puts 20% downpayment and you put 10%... with your management making your value into the property equal.... split income, split costs, split profit at sale... more simple numbers.

Next recommendation is to get everything in writing, especially as this may be required for tax purposes.  I have a very negative experience with partnerships, but I know they can work for the right people with the right agreement.