All Forum Posts by: Ryan Scully

Investment Info:

Small multi-family (2-4 units) buy & hold investment.

Purchase price: $130,000
Cash invested: $15,000
Sale price: $235,000

https://www.zillow.com/homes/fsbo/4701207_zpid/41.758797,-88.3418,41.7557,-88.346998_rect/17_zm/?view=public

Hey Max,  Way to get an early start!  I was 21 when I bought my first investment property and now have my own real estate investment business, with over a 1,500,000 rental portfolio that brings in gross receipts of $17,465.00 a month.  Which begs the question why do I feel like I'm still broke??!!  Haha, The truth is I'm not broke at all.  I am just continually re-investing cash into acquiring new real estate holdings.   So, whenever I do have cash it doesn't last long!  Anyway, I'm telling you all of this stiff for two reasons.  1) To encourage you to move forward with some kind of real estate investment to get started on a path to building wealth. 

2) I'm pretty sure I could give you some good advice when it comes to your first investment... I'm not sure I would do what you're considering after you hear how I got my start, and what I would have done differently.  Feel free to hit me up on Facebook or give me a call.  (I'm also in Illinois) 

YOU SHOULD BECOME A BIG FAT LIAR!

I found that when I told tenants that I was the owner of the building/rental they felt they could ask me for things and try to negociate with me.  Citing that they pay all this money, and the least you can do is "Insert some request here."  Sometimes their request is valid, but many times it's not...  They may ask "why can't you buy one of those new front loading washer and dryers for us?" Or why can't you lower our rent... so and and so forth. You can try and explain that this is a business and that everything must make sense financially for the business but they don't want to hear that and will ultimately have a bad taste in their mouth that you didn't help them.  This puts a bit of a wedge between your tenant landlord relationship.  I have found it much easier to tell my tenants that the owner is some retired lawyer in Florida, and that I am a lowly property manager here that takes care of his units.  Any requests you have I will make a case for to the owner...But I can't make any promises.  It's really the way to go in my opinion, however if you are like good George Washington, you may find this strategy to be unethical.  Some ways that I work this strategy: 

Google voice number that directs to my cell phone: I only give tenants this number so I always know it's a tenant calling me.  I can answer the phone accordingly...

Properties are owned in partners names and eventually transferred to LLC so that even if they ever did a search they wouldn't see that I'm the owner.

I can act as a mediator between the "Owner" and the "tenant" Hey the owner is pretty upset that you are late this month but I convinced him to waive your late fee this time.  I know you're in a tough spot, so I made a case for you.  Just remember the owner counts on this income on time and it is very inconvenient for him when it is late.  If you're late again we will have to charge the fee.  You look like a hero for waiving fee but also get the point across that it wont happen again and that next time "the owner" won't be so willing to do so.  

Many more ways you can work this role those are just a few examples. 

I have a pretty unique strategy for this Johnny. It essentially is through partnerships with individuals who can secure mortgages. I launched a platform which allows the "everyday Joe" to invest in real estate. By leveraging a few of my past deals and my past experience as a mortgage lender, I launched a website and started spreading the word that I am the go to guy for investments in real estate. As Brandon Turner often says I'd rather have half of something than all of nothing! Properties are purchased in the partners name and then transferred to an LLC which we own 50/50.

I'm a multi-unit buy and hold investor that does some flips when the opportunity presents itself.  I'm curious how other landlords/managers keep track of everything. Specifically I'm curious what systems you've developed and what forms/spreadsheets you may be using to stay organized.  I've attached one of mine.

Thanks guys, yeah I know...I'm seeing the positive more than the negative.  I've gone on to quadruple my rental unit portfolio since buying this one... so while it is a sting, I will learn the lesson that needs to be learned and move on!

They Say it's inevitable... One day you will have to evict a tenant no matter how good you think you are at what you do.  I just learned a $15,000 Lesson!  SHAME ON ME RIGHT?

Here's the story: 

This is the first Tenant I ever approved way back when 3.5 years ago November 2010. They haven't been the best tenants in that they often get behind on payments but then will catch up all of a sudden.  At first it was a month behind, and then the next month they would come up with 2 months rent.  Then it got to 3 months behind and after enough hassling they would come up with a nice chunk and pay the 3 months rent.  There was always a good excuse of course.  Well this time I really messed up.  I let them get behind to the tune of 6 months before I realized that they were not going to catch up this time.  The circumstances had changed.  Here's what happened.  December of 2013 they don't pay...Christmas medical bills for mom (blah blah blah) January they don't pay... OK guys what's going on this time?  Oh well we can't pay you right now but we are going to do our taxes and get a nice return back from the Irs and we will pay you then.  February rolls around...No payment.  Guys what's going on?  I thought you were going to catch up with your tax return?  Oh we will!  We are getting  back $5,200 and will pay all the back rent as soon as we get it.  March is now here...and my money is not.  (Upstairs tenants inform me that the mother who lives with them in the unit has passed away) I give my condolences, and they tell me that they did get the tax money but all the funeral expense and everything is so expensive and they are still waiting for the mothers life insurance to pay out...April 5th is now here  and my money is not.  I serve a 5 day notice.  I get an emotional call.  Tenant reads me her 401k financial statement citing that she should be able to get a loan from her 401k which permits loans when financial hardship can be proven.  She tells me that she's submitted the paperwork with a copy of my "delinquent balance worksheet." She tells me the loan is in process, and that she will be able to get a loan against her 401k to pay off the past due balance.  So of course I wait a little longer and that never pans out.  I just got back from the second court hearing (which I won) which cost me a total of about $1,500. (Yeah that's it...and the judge even awarded they pay my court fees and legal fees, not like I'll ever see that though)  They are now up for eviction, and the sheriff will be paying them a visit soon.  PLEASE LEARN A LESSON FROM ME, AND DO NOT EVER LET YOUR TENANTS GO BEYOND 15 DAYS LATE WITHOUT SERVING THEM A 5 DAY NOTICE.  I have learned a lot from this mistake and it's really simple.  on day 15 I could have payed $1,500 and had them evicted.  I would have lost 2 months of rent and had to pay court costs etc.  It would have cost me less than $5,000.  DON'T BE TOO NICE OF A PERSON WHEN IT COMES TO YOUR BUSINESS.  AFTER ALL IT IS A BUSINESS. 

(Sorry for the long rant hope it helps someone though!) 

It's about time you two actually did some work over there... =^ ) 

Well...It depends! (Of course)

How cheap is the money that you are borrowing to do these renovations? If it is low interest money or cash, you then have to ask yourself

"If I took this 75k and leveraged it to buy something else would I be better off?"

I know all about taking a poor performing rental and turning it a great performer through rehab. The biggest benefit in my eyes in not the extra money you make in being able to charge more for rent, but the fact that you will be attracting a much "better" tenant. Someone that will appreciate the work you put into the house and is willing to pay a little more to live in something that has been cared for will most definitely be a tenant that requires less of your time and attention, and will most likely pay on time, and in full, and might even set up automatic payments direct to your bank account. So when considering the question...Should I invest in the betterment of my properties you must consider not only the monetary aspects but also the "non-tangibles" How much happier will you be with really good tenants in your property versus ones that you can bare.