All Forum Posts by: Sam LLoyd

I'd go with wood unless you are continuing a pattern from the floor.  The wood will be easier to replace if it gets damaged.  If the room has carpet, it's easier to get the spacing correct... both of these may not apply if it's your own home.

In my experience.... the lower end units tend to have tenants that move quickly.... they don't have a lot of stuff.  They can find a home at the last minute and move in days.  I've never done section 8 myself, but you might do well to just leave the ad up till the last minute.  Have a backup tenant, but make sure they know that they are number two and can still look for places.  

I've done personal checks before, but with a clause that the lease is not valid till after the money clears... and again, no keys until it does.

I did this 8 years ago, so I'm sure some things have changed, but here goes.....

Unfinished duplex for 195k.  I went to Home Depot an got an itemized list of all material needed to finish the duplex, as well as a quote from an electrician (this was the only licensed work needed).  This included getting Home Depot to work up a quote for the cabinets and countertops, as well as all new stainless appliances.  The grand total was 224k, which is what I got the loan for. I had a 6 mo window to complete the process and get it reappraised, and the opportunity to take one draw in the middle.

I knew I was going to get laid off due to my company losing a couple contracts, so a month later I lost my job and was able to work on the duplex full time.  One of the units was finished, so I had this rented right away which helped a lot.  There was also a treehouse on the property that my wife and I lived in while doing work (we had one bathroom working in very short order).  Once I was in, I wanted it finished so that I could get the rest of the money from the bank, but there was no pressure since any left over would just go to the principal if I couldn't get it finished. There are no codes where I am, so the electrician told me to do the work myself, and charged me a very reasonable amount to come look at my work.  I also learned how to lay tile, laminate, carpet, sheetrock, paint, install cabinets, tubs sinks, toilets... the works.  Right now, I could probably do all of that work in 2 months of easy work, but with the learning curve for all of that, I was pushing up against the 6 month window, and getting very worried that I would not have it done.  While we didn't have jobs, we lived off of credit cards, and used the loan draws to pay the mortgage.  This is probably exactly what the bank did not want, but hey.... I had a real job when they gave me the loan.

There are other changes that we made after things got going.  I found cheap appliances, and instead upgraded the cabinets.  I also found a better deal on countertops, but in the end my totals came up close to the 224k since I was new to estimating material costs, and went way over in some areas. 

It took a while for us to find new jobs and get the credit cards payed off, but the next year we built a cabin on the property, and our total income from the 3 units is about 1200/month now.  And the construction experience has been vital in the rest of my investing.

Note:  Get a contractor bid from Home Depot (and other stores).  They took up to 75% off of some high margin items like light fixtures, and even the $1 off per item adds up on things like sheetrock.

I'm doing something similar, but with a slight twist.  I think it is a little more simple than yours, though I haven't been doing it long enough to report on the ease.

Do one of the following: Quit claim the property to my LLC right after closing... so the LLC owns the property even though the loan and insurance were obtained by myself. OR sign a master lease between myself as owner and the LLC as tenant.  The tenant (LLC) then either pays the owner (me) 90% of gross profits less expenses, or pays me as an owner draw.  

This way all the interaction with my rentals is through the LLC. As far as the tenant an any other party is concerned, the LLC owns the property and I just work for the LLC.

If you ever nee to do a refinance, I can quit claim the property back into my name since the loan will be in my name.

I am completely unfamiliar with your area, but I'd like to highlight the most important points in these responses that would work in any market.  1st, go try to talk with the tenants... all 3 of them.  You really can't make any decisions until you meet them and learn more.  I like the advice to meet in a neutral location if there is a convenient one nearby.

Another point that is very important is the documentation.  Start right now by putting your actions and impressions into a journal.  Every contact in person or on the phone should be written in this journal.

Looks like it's unanimous, but here's my 2 cents anyway.  I never take an ad down until I have the security deposit and a signed lease.  That way everything is very clear.  I also never give them keys until I have 1st month rent.  Making this distinction has helped a lot, and yes, I arrived at this procedure the hard way.

Here's what I've been doing.  After approving an application, I meet with the tenant to go over the lease.  I nee at least the security deposit at that point as well as any pet deposit. If they give me first month rent and any pro-ration if they are moving in earlier, the keys will be waiting for them on the counter when they move in.

If they are tight on money, they can have the keys when they give me rent and any pet fees.  

Almost every time, I get the deposit, 1st month, and pet fees at signing, and the keys are waiting for them.  Example:  Lease for $850, $200 pet deposit, move in on the first.  I took $1900 from tenant, she got a common entrance key, and the unit key was waiting for her.  Another time.... rent 1695, pet fee of 30, I got 3420, plus a pro-rated 56/day for moving in before the first.  Actually, that time I gave $200 off the deposit as an incentive... which I really hated to do, but it was taking longer than usual to fill the unit.... so my total was about 3440.... with 4 days pro-rated.

I've never charged last month rent up front, but I have learned to never ever let the tenant talk me into using their deposit to cover last month....Very bad idea because they then have no incentive to leave the place nice.... and things are already tight for them at that point.

I would call up several of your local real estate brokers and ask them for references for note buyers.  That's how I found a couple in my area.  Make sure you are talking to the broker, as the average agent probably is unfamiliar with buying and selling notes, much less who the local buyers are.  Based on what I've seen, don't be surprised if you can't get more than 18-25k

Awesome question... here are my thoughts:  For me, 5% is the tipping point between debt that I want, and debt that I want to pay off.  So, there are two factors to my answer.  First, when do you intend to invest the money?  If you're going to sit on it for a while, you're better off paying the higher interest loan down and refinancing.  That way you get an immediate return on your money instead of leaving a bundle of cash in the bank to suffer from inflation.  That money is costing you 5% to keep if you look at it this way.  I'd say if you don't intend to buy something in the next year, pay down your loan.

If you want to use it in the next year (even if it ends up taking more than a year,) get that money moving.  If you could invest it at 10% cash on cash, you'll be making great money... that would be enough to cover the interest on your school loans and your rentals.  And, when you do eventually pay these two debts off, you'll still have the asset from your purchase.

As for students loans in and of themselves:  I'll grant that having that amount of debt could seriously damage your buying power, in which case you need to get rid of them and work towards the point that you can buy something.  However, with interest rates lower than inflation, I'd be inclined to use the money elsewhere, and find another workaround for the buying power issue.

I hope these thoughts are helpful, let me know if they are not clear.