All Forum Posts by: David Krulac

@Caleb Graham I've bought and sold over 1,000 properties for my own inventory. I talked about the first purchase in bigger Pockets Podcast #82. I looked for months, and looked at SFH, apts, houses on leased land, mobiles homes and everything that was cheap because I had so little money and had just started a new entry level job 9 months earlier. Houses/properties that I liked I could not afford, and properties that I could afford I did not like. I looked at MLS property, FSBOs, private ads, signs on properties, word of mouth, everywhere I could think of/find. A co-worker told me of a house being auctioned on his street (a cul-de-sac). It was owned by the state highway department and was originally bought to put in a limited access highway interchange. The neighbors protested the interchange emptying into the middle of a subdivision and cause the state to redesign the highway. They ended up owning the house for 7 years and renting it out for below market rent before an act of the legislature and the signature of the governor before it could be sold. It was poorly advertised and I might have missed it if not for the co-worker. It was newer, and nicer than any of the other places I looked at. I had never been to any auctions and never bought any real estate, yet prevailed at the auction, buying a 17 year old brick 3 bedroom house with hardwood floors, ceramic baths, and a brand new roof. I could not have bought a better house and first house hacked, then rented the whole house and kept for 24 years.

One thing that I look at is the sales history of the property.  I bought a multi-unit property and kept it for 37 years, coincidentally the previous owner had owned the property for 37 years.  Therefore, there were only 2 owners in 74 years.  On the opposite end I see investment properties that have a different owner every other year, like 3 owners in 6 years or 5 owners in 10 years.  I suspect in many cases the frequency of ownership change is an indicator of the quality of the property.  If the pwnership frequently changes perhaps the property doesnot live up to expectations so the owner dumps it to some other sucker, I mean owner. However, its highly unlikely that an owner will keep a dog property, that loses money, constantly requires repairs for 37 years.  Just a thought, now I also look at the ownership history when buying an investment property.  

In group rental situations, our lease says EACH tenany is responsible for the total rent if one skips out or leaves.  Solves that situation before it happens.

Had a similar situation, inherited a tenant from a former building owner, where the 3br rent was $550 month.  Obviously this is way below market, surprisingly there are a lot of below market rents out there. 4 months before the lease expired I informed the tenant in writing that the new rent if they chose to renew would be $750, a $200 a month increase.  They complained loudly and reported me to Section 8 and the head of the office called me and said that the rent increse was too high and unconsiencable.  My repose to both the tenant and Section 8 was that the $200 increase was still below maket rent and the tenants was free to move somewhere else where rents were cheaper.  The tenants looked hard for 4 months and could not find any property with lower rent and ended up sign the renewal, and subsequent renewals with annual rent increases for 3 more years. If the tenant had chose to leave, Iwould have rented the place either market or section 8 for more rent that they paid.  

The clock starts when you settle on the relinquished property, 45 days and 180 days.  The way to extend this is to start looking for the acquired property BEFORE you settle on the relinquished property.  Most people don't start looking until the the settle on the relinquished property, start earlier!  You can do a Reversed 1031 buying the acquired property first then sell the relingquished property.  I have done many 1031, and never did a Reverse 1031 and was advised by the Qualified Intermediary that they are more difficult and expensive. 

@Bob Asad I have had great success buying and renting SFH, but also doing other real estate actions. I am currently working on a big flip, of a property that I never rented. I have done land subdivision and develpment, and have owned multi-family, as well as commercial property. I have bought and sold over 1,000 properties for my own inventory, and did Bigger Pockets Podcast #82, and have spoken coast to coast from Manhattan to San Francisco on real estate topics, and wrote a book on my experiences.

So I can't say I did it all on SFH, but renting houses has been a big part of my real estate investments since I first started investing. (the story of my first investment in told in the BP POdcast #82). I've refined and updated my buy box, currently SF detached houses built since year 2000, with 3 bedrooms, 2+ baths, central air, and 2 car garages, in areas with good schools, low crime and economic growth. In different states I have bought SFH in the fastest growing counties in those states. I seek out tenants who will stay a long time, reducing vacancy, and turnover costs. I have had multiple tenants who have stayed 30 years+ I have a 24 year tenant who just signed a new extension. Excluding properties recently purchased my average tenant stays 12.5 years. They also mow the lawns, shovel the snow, pay most if not all utilities, and provide most of their own appliances. I do not raise rents every year. I almost always raise rent at the end of a lease, and when there is a turnover, I raise the rent higher than I would for a continuing tenant. The 24 year tenant who just renewed is paying $460 more under their new lease. I rely on the Fair Market rents on the HUD website, www.HUDuser.org and my rents are almost always above the median rents on that site.  I also look at other online sources for comparable rents and try to make sure that I don't fall to the bottom 50 percentile. When market conditions are on the down turn like 2008, I was always full, and seldom had vacancies.  I may not have been raising rent every year, but I never lowered rent either, same for the COVID year. Renting SFH is not as flashing as some other real estate, but its always steady and people always need a place to live. 

@Butch Greene  The buyer/borrower needs to get exemption from their lender.

@Butch Greene We have had similar situations, one involving an FHA buyer of a two unit, where both units were under lease. FHA requires the borrower/buyer to be owner occupying the building, but state law requires that all lease transfer to the new owner and cannot be terminated solely due to ownership change. In that case and others we have had FHA allowed an exception until the lease expired, then the buyer must occupy. In some jurisdcitions they are talking about life time leases that can't be terminated unless there is a lease violation and are automatically renewed, don't know how FHA would look st those situtions.

I'm primary long term rental person.  I've had tenants stay for 30 years in the same place.  There are properties that I haven't seen in several years that run like clockwork.  Currently have a 24 year tenant, who has agreed to a new 3 year extension, where they take care of all utilitites, lawn service, snow removal and minor maintenance up to $400.  Somce years I only pay taxes, and insurance, other years there are maintenace issues.  Also have a 9 year and a 10 year tenant. Long term tenants and lack of or low amount of vacancy is a key issue to profitability.  I look for single family detached houses with 3 bedrooms and multiple baths, and adequate storage.  Also look for non-rental neighborhoods with good schools and low crime rates.  I'm also willing to experiment with different techniques.  In Bigger Pockets Podcast #82, I talked about my "Tenant Self Management Program."  I rented a house at 25% rent discount for 3 years, where besides paying all utilitites, lawn, snow and maintenance, the tenant also supplied all appliances including range, refrigerator, washer, dryer.  I also did not clean or paint the house and left all that to the tenant.  In addition, they were required not to call me unless there was an emergency. 

and don't forget Federal Corporate Transparency Compliance under FinCin