All Forum Posts by: Jack B.

So I own about 1.4 million in real estate between four properties, single family homes. It seems like the next step would be to turn a little into a lot by starting to 10-31 exchange some of the earlier properties in my portfolio that have appreciated the most toward an apartment complex. 

I've had a few people mention that this is a lot of work at least initially, but it seems like the next logical step. Otherwise, my options are to hold, sell and buy two single family homes with proceeds from each house, or sell and put the money in index funds.

I like the apartment complex because of economies of scale, and the fact that I could always move into a unit and "retire" while living off the proceeds of the rent.

I usually require a deposit with a cashiers check. With past tenants it has not been an issue, even with the people who are making 40K a year, but this guy seems to have a whimsical "we work around my schedule" attitude. Even with the application process he sent back a different form than the one I had sent him, without his wife's info, and I had to ask for it separately. The guy thought he had terrible credit, even asking me about it privately after the tour. Funny thing is, his credit is 100 points higher than he thought. 

In any case, I will give him a week or slightly more (since we are still trying to coordinate move dates between us) to get the move dates confirmed. I will let him know that until we have confirmed dates and a deposit, I'll be showing the unit since I technically don't have an actual tenancy yet.

Hopefully this will motivate him. But yeah, I've gotten PLENTY of interest from highly qualified people. Incomes of 150K plus, etc. In fact while I was typing this I got two more inquiries. Gotta love postlets/zillow rental manager. 

I'm about two months away from moving with plenty of interest in my house. I get maybe 3-5 contacts a day on average. 

The guy and his family applied (this was like pulling teeth with him) and passed. He makes 156K a year, doesn't have pets, and plans on being here for 2-3 years (most tenants in my neighborhood only last for a year from what I've seen. My other rentals have much longer tenancies, must be the demographic [waiting to buy].

Still, we need to agree on a move date because he has to be out before April 1 and I wasn't planning on moving until April 1. I suggested he ask his landlord if he can stay a couple days longer on a pro-rated basis, and that I would also look into moving sooner myself. 

Well, that was Sunday. After we had the discussion and he passed the background check, he said he had to go on a business trip until Thursday and would be in touch then. Mind you this is after I had brought up that we still need to agree on move on date and collect a deposit. I brought this up more than once in our email exchanges as part of the application process.

I'm thinking of giving him until this weekend to arrange the situation and put down a deposit to hold, otherwise I will start showing the house again. Right now I've explained to leads there is an application pending but I will contact them if it falls through.

I actually make the same amount of money as him unbeknownst to him, although I'm half his age. Still, I'm concerned that he thinks he is/can manage me instead of the other way around. I'm wary of, if there is an issue down the road, saying, oh, I'm going on a business trip, we'll have to deal with this when I get back, if a situation arises where something needs to be addressed.

Still, other than this he seems almost the ideal tenant. I do still have plenty of time to find another lead, however. I think it's worth the hassle waiting for a week to see if this guy pans out, because then I would have likely 3 long term tenants and would not likely have to deal with vacancies in 2016 or 2017. What would you do?

I had a tenant, a new tenant at that, recently text me that she would not be able to get off work to pay by the COB on the 5Th, the end of the grace period. She wanted me to drive 3 hours round trip to collect rent from her. I told her I was not willing to make the trip and she can try to pay via her mobile phone, but she's had plenty of time to make payment and the late fee is $10 per day it is late. She made the payment on time...

I do have another tenant that always pays at the last minute on the 5Th. She has also had utility bills come back delinquent at least three times. I can dock her $25 per violation of late payment of utilities, but I don't. Right now they have been paying me steadily for 1.5 years and plan on being there for 4 years total. That allows me relatively headache free accumulation of additional real estate, rather than chasing money that is still technically on time. I myself used to use the grace period when I was a renter, only because I was busy with college and career.

Thanks, yes I agree. It was not my intent to do it that way. I budget for maintenance out of normal rents not rent increases, though as I mentioned earlier, I would be willing to dip into the extra cash flow to spend where I need to spend, in the sense that I view such spending as a investment (that allows me to charge higher rents and adds value to the property). Still, it doesn't cost much to buy some gym equipment, add a playground, do free movie rentals and giveaways compared to the rents received.

Now that is pretty impressive. Well done. I need to really look into this. I'm going to start small so I'm only speculating with money I can afford to lose if things go sideways, but these are the kind of deals that I'm talking about.

Did you mean it is small enough for a tenant NOT to move out because of it?

Thanks for the feedback all. I did mention that I budget the maintenance (including roofing, siding, repairs, etc.) from the regular rents and that in the event I needed to dip into that extra cash flow to do something to spruce the place up I would.

"In this scenario, expenses have been budgeted for from the normal rent base, however, I could dip into some of this cash flow if needed."

I know when I lived in a an apartment, I usually only saw rent increases (USUALLY) when they did something to improve the place. But when I lived in Seattle proper, my old apartment went from $850 a month to $1,400 a month in the span of 4 years or so. For me I was planning on sprucing up the place, but it doesn't cost much to make a small gym, or playground, etc. What I'm saying is, I plan on adding value for the rent increase, but it doesn't cost as much as the rent increase to add value.

Most of the places I've seen have decent interiors and acceptable exteriors. I was looking at one for 1.4 million recently but the 31 unit complex is right outside the gate to a military base, so that's likely going to be the demographic of renters there. I know that service members and certain members of the intelligence community are allowed to break their lease at the drop of a dime, so in the case of this complex, it's probably a bad buy. But you get the concept of what I'm saying as far as increasing returns to scale/economies of scale? When you find the right deal?

On the other hand Phil Pustejovsky (sp?) says it's better to have 2 paid off rentals that cash flow like crazy than have dozens of rentals mortgaged to the hilt. He said in the same video on youtube, that he used to think it was better to have multiple units leveraged to the max, but now he knows better.

I have yet to find out why he feels that way. What I can think of is that dozens of rentals = much more capital expenditures for updates, and much more work and time involved than two paid off rentals with more than enough cash flow to retire on. Still, it seems with a large enough complex with a PM, over time you still come out far ahead over a hand full of SFH rentals.

I need to do more research on this subject and look at it from all angles. For example, A year ago I was considering buying a car wash as a business. They seemed reasonably priced at 100K, with acceptable cash flow, especially for the money/time invested. But I waited, and I waited, and eventually after much research, it was driving by an old car wash near one of my rentals that I realized why these people were dumping these car washes: most people want to use automated car washes now. The seller didn't want to spend the money to do the updates. It dawned on me after driving by one such manual car wash that I later saw being updated to automatic (which is taking them forever).

I guess part of me always wonders, if it's such a great deal, why are you selling it? lol. 

Let's say I buy a 50 unit apartment complex. My mortgage is fixed. Expenses such as taxes and insurance will likely rise slowly over time.

Now if I raise the rent $50 per year on all 50 units (perfect scenario to demonstrate the concept) I'm pulling in an extra 30K per year. Now let's say I do that each year for six years. Now I'm making 180K a year MORE than before.

In this scenario, expenses have been budgeted for from the normal rent base, however, I could dip into some of this cash flow if needed.

I'm curious, if this is really true, why are more people NOT doing this? Seems to me THIS is the way to go. Heck I could replace my six figure IT salary in a few years and retire living the same lifestyle I live NOW. And I just get richer over time as rents rise and the mortgage is paid down.

Alright, so I'm not the only one who thinks this way then. I just talked to my broker again and he said he can get me the 4% today and maybe lower if he get's regional involved. I think I will take the 4% and run.