All Forum Posts by: Account Closed

I wish someone would have answered this question correctly bank in 2001 when I was purchasing multi-family properties for $67,000 per door and today they are worth $350,000+ per door. So, I ended up buying many 1-bedroom units.

2-bedroom units are always more in-demand, easier to rent and the difference in rental income is very significant. It takes a very insignificant amount of time and money to paint 1 more bedroom. Often, there is ano cost difference for a 2-bedroom unit because a high percent of sellers price their units by-the-door. Today, look in San Pedro California and you will see 20 and 23-unit building for sale where every unit is a studio price the same as multi-unit buildings that consist of only 1 and 2-bedroom units. 

A very high percent of renters of live alone rent 2-bedroom units because they want a 2nd bedroom for a large variety of reasons.

That is a lot of money you are out. I don't like the way most landlords treat their tenants, but I have a very special place I would like to send landlords who cheat their tenants out of their deposits.

You are 100% right about winning if you can prove your landlord did not give you a pre-inspection notice two weeks prior to your moving out. I believe your landlord has something like 21 days to give you an itemized list of deductions, but I also believe that sending it through email is probably as valid a method as regular mail. I've seen many judges throw cases out over those two items.

I've listened to many landlord disputes in court and it looks like you understand the laws and your position very well. It is my personal opinion that judges don't like landlords who rip tenants off, or try to nickel and dime tenants for a broken $1 toilet paper holder.

My concern is that you mentioned that you left trash, did not clean the apartment before vacating and I am wondering how thrashed you left the apartment. Even if you had a chance of winning due to the judge prorating the life of the carpet you will not do so well if the landlord shows pictures indicating you left the apartment looking like a pig sty.

You need to do an honest self-assessment and calculate the repair costs you may have incurred that are above normal wear and tear.

I own several rental homes and apartments. Before a tenant moves in we spend thousands of dollars to make every home and apartment look as pristine as possible. We spare no costs, spend many hours working hard and we are proud to show and rent our apartments.

California real estate laws state that when tenants vacate an apartment it should be essentially as clean as when they move in. But, this is almost never the case. Things that were beautiful when a tenant moved in are thrashed, covered with filth, grease, knicks, dents and everything you can imagine. Sometimes, stoves and refrigerators are so filthy we trash them and buy new appliances. We find that almost every tenant never even cleans the poop they splatter off the toilet seats. We find that most tenants never sweep or clean one floor in the home even when they live their 5, 10, or more years. We find that many tenants kick holes through doors for whatever reason and they bust doors in half when they lose their keys and get locked out. Tenants almost never take care of a landlords home the same as a homeowner would take care of the home they own.

So, most landlords have a price list for cleaning a tenants filth and the hourly rate should be no less than $30 per hour because nobody in this world works hard enough to clean filth for less than $20 per hour and then landlords have to pay payroll taxes, worker comp insurance and a lot more.

So, be honest with yourself and put a list together with the cost to clean and paint your rental that is above normal wear and tear.

Here is a very accurate estimate regarding what it costs me to clean and paint my properties in Las Vegas and there is no b.s. in what I am writing. The size of the rental homes I own range from $1800 to $2700 sq feet. The cost to remove the tenants crap they leave behind, paint every room, remove and install carpets, clean and paint the garage walls and floor, clean and rehab the damage done to the yards, etc. is never ever less than $8,000 and many times the cost for even an 1800 sq ft home exceeds $12,000. Our cost to clean a home is so insane I am currently selling every rental home I own.

One last time! Prepare an accurate list of items that were left dirtier than normal and be honest in court and use that list to counter your landlords costs. You have an excellent chance of winning if your your landlord did not give you your proper pre-inspection move-out notice, or your itemized list of deductions within the required time period.

I live in Los Angeles and purchased 10 single-family homes in Meridian and Boise Idaho in the past 15 years. I flew to Boise several time specifically to look at apartment buildings and never saw a property that made investment dollar sense. 

While the rental units were a little less expensive than in California, the problem with every Idaho property is the rents are too low to cover the costs for maintenance. Since there is so much vacant land and new construction the appreciation is low. The weather gets fairly cold in the winter and when the temperature drops to 5 degrees and a furnace goes on the blink expect to pay 200% more than the average cost for a repair, or pay for water damage caused by frozen water pipes. That is just about what the heating contractors tell me when I have a furnace problem.

I have several rental properties in 4 states and I am currently dumping every distant property. Investing in rentals out-of-state is great only if the properties appreciate, significantly. Otherwise, it is very difficult to turn a profit if you think you are going to make money purely by renting and cash flowing a few hundred dollars on each property every month. 

Even though California has the highest costs for real estate California is still one of the best places to invest. You only need to be patient like as an alligator to get a great investment for a wholesale price.

Y

I went with two $500k K-mart shopping center syndicated deals at the same time, or $1 MM. The deal was highly recommended by my accountant  during the days  it was legal for accountants to give investment advice.

I would like to apologize for blowing up this thread with my negatives about investing in syndicated real estate.  I tend to write to tell naive people what to steer away from because most people don't have the knowledge or experience to find the good syndicators, or how to crunch numbers for their own properties, or how to manage the properties they buy. Most new investors make decisions based on only the advice and opinions of others and many of those 'others' are not qualified to give advice, or they are unscrupulous business people.

The first thing that every investor needs to do before getting excited about the profits a potential investment can produce is they need to calculate the risks. If there is even a slight chance that the average person (not a rich gambler) could invest as little as $50k in a syndicated real estate investment that promises a 20% return and there is the possibility that he could lose $15k, or about 30%, then I personally consider syndicated real estate investing to be a high-risk type investment. The average younger and naive investor cannot afford to tolerate a 30% loss and then continue investing in any type of real estate, afterward.

Why do I write the negatives about investing? Am I the only person in this world who feels the way I do when giving people advice? I am going to tell this story for the 100th time. In about 1999, I met a 25-year old woman who had $50k and she asked me where she could invest the money. I referred her to a New York Like insurance agent and the agent sold her an annuity. A few days later, the annuity dropped to $35k. Seven years later, the annuity was still worth only $35k. I felt so bad about this woman losing money based on my advice I paid her the $15k she lost. Ask me why I was seriously angry with the New York Life agent. It was because she kept telling this young woman that over a period of 100 years annuities produced an an average annual ROI of something like 10% and all this young investor had to do was wait more years to recover the $15k she had lost.

Sorry! I find that being a passive investor is has the highest risk and is the most dangerous type of real estate investing a person can do.  While this OP may have run into one or a few syndicators who did well for him you will find that a very high percent of syndicators are ruthless and unscrupulous sharks who don't have the mental capacity to perform as promised.

It comes down to this. Never ever allow someone to control your money and that is what you do when you become a passive investor. Syndicators have too much control of your money and you get to watch them do very bad things as your investment money whittles away to nothing.

I was a passive partner in two separate deals for two K-Mart shopping centers. I had an attorney review the 600+ page placement memorandum before I invested. I had a financial expert review the deal. Everything looked great until the day after I put exactly $1 million into the deal. It is funny how life is. Obviously, I was excited before I invested my $1 million. I was promised that in 7 years I was going to get a check in the mail for $2.3 million and my earnings was going to be tax-free. That part was absolutely true since you will see that I did not pay one penny for income tax.

K-Mart had four 25-year lease options with no rent increases. That meant the value of the property would remain stagnant for 100 years. Was someone sleeping with someone to get this deal? The general partner purchased each property for $18 million and sold it to the limited partners for $25 million. Simple math! He made $7 million. The general partner paid himself $1 million per year for 5 years to manage each property. He made another $10 million.

Then, the general manager drove the profits into the ground with maintenance issues, upgrades and so many other expenses the limited partners got nothing. We (the limited partners) filed a class action suit for $50 million since there was 50 of us. We won the $50 million, but the general partner was insured for only $50 million and the attorney took almost every penny. 

This following statement is not a joke nor an exaggeration. The payment I received from the lawsuit was $39.00. I literally threw the check in the trash.

I was a passive investor in two other syndicated real estate deals that went bust. I can write all day. So, I will ship the other two stories.

A few weeks ago, I wrote about a 25-unit apartment building that is next to the commercial building I live in. The syndicator has about 20 similar projects in the Los Angeles, Arizona area and Texas. I did a little work for this company as a neighbor and the company has failed to pay me $10,000 that was due last November. So, I know a lot of the the details.

Every passive investor doing business with this company is getting ripped off on every project, but I will explain only the one project next to my property. They purchased a 25-unit building worth about $4 million through a short sale for $1.7 million. Terrific start.

Now!!! Make believe you are a passive investor. This company has projects in Texas, Arizona, California, a really impressive-looking office and beautiful brochures. You sit through their sales pitch and you are positive these people have more business knowledge than you and they promise to triple your investment capital in 5 years. You give them your $500,000 cashier check that took you a lifetime to earn and as soon as it is laid on their office desk you get a lump in your throat because now you can't do one damn thing about how they spend spend your money. 

Before you gave them your cash they answered their phones on the first ring every time you had a question. Now, that they have your cash every time you call the person you want to talk to is in a company meeting. 

Now, I am going to tell you about what control you do not have and what control your syndicator has. The rental income for this 25-unit property was about $48,000 per month and the condition of the property was a little less than fair. So, this bigshot syndicator evicts every tenant at the same time. This was two years ago and the property is still vacant today. The project looks like it is going to run into a little over 3 years. That is a $1.8 million loss of rental income from a building that did not need remodeling, in the first place, or it could have been entirely remodeled a few units at a time during the same 3-year period. Is this how you wanted your $500,000 investment managed...so this company could absorb a $1.8 million loss.

The syndicator brings in illegal and unlicensed immigrants and guts the inside of every apartment. There are no foremen, no building permits and the illegals do everything wrong that can be done wrong.

So, after wasting about $700,000 on bad work a building inspector catches them and shuts the project down for about 9 months and makes them pull out every new window in every unit and replace them with the correct windows. 

Meanwhile, the syndicator gets a $3.4 million loan against the property, but he uses all the money for his other projects that are going bust. So, he still does not have the money to finish the property you invested your money in. And...there is not one thing you can do about it. You can't even sue him for Failure To Perform because your contract stipulates that he has 3 more years to prove that he can perform.

After you wait 5 years and lose all your hair you finally get to pay an attorney $50,000 to sue the syndicator, but the project is an LLC corporation and you can sue only that corporation. In the case of my deals, we also sued the syndicators, but as stated, out of $1 million investede the return on my money was $39 after paying attorney fees.

I've made $millions and lost $millions. I don't feel nowhere near as bad about losing money when it is my fault, but it is a miserable and long-lasting feeling when you find that someone you trusted lied to you and stole or misappropriated your money and lived high-on-the-hog (whatever that means) with your money.

Very few people in this world ever perform as promised! Investing in real estate syndicates is similar to investing in the stock market since there are good and bad managers and market conditions for both stock and real estate is constantly changing.  Always have 100% control of your money and 100% control of decisions pertaining to controlling the actual investment. You need to have the ability to make changes on-the-fly,  the ability to cut your losses in an instant, and the power to make all critical decisions that will make the deal perform they way you want and not the way some unscrupulous syndicator wants.

The best internet advertising we use for renting units is zillow.com. I think it costs $6 per week for each rental unit and we get 6 to 10 leads for each unit every day.

No expert seems to know how long this virus is going to last and they have not confirmed that it will not mutate and become an annual problem until the end of time.

It is strange how businesses that are goldmines tend to come to an end and it becomes time to pull out your tent stakes and move to a new area. Some companies were still pushing the sales for buggy whips and wooden wagon wheels several years after gas engines were roaming the roads.

If you can't rent the property to a family then I would not waste one minute putting the property on the market if it is going to cause a financial hardship that causes you to dig yourself into a hole that is impossible to escape from.

Cut your losses early and move onto something profitable, or just keep your cash in a safe place until you find a sure-thing investment. Every investment decision needs to be bases on the risks and not so much about the rewards.

I dumped a lot of properties and took a lot of heavy losses during my past 55 years, but I am 100% positive that every time I dumped a dog it was the right decision and I made even more money on my next investment. 

It is simple to set the code and you do it from the keypad. We have been using the same code for every building for 20 years. Yes. Tenants either give their guests the code, or open the door.

For power outages, every door has a regular key lock and every tenant gets two keys.

The biggest problem we have is with electronic driveway gates. For power outages, we teach tenants how to remove the chain on the gate so they can get it open to get to work. Then, we have to put the gate back together. 

Lots of luck with your 20 units. That is a nice number to start with. We love the apartment building rental business and we love dealing with tenants both good and bad. It is a fun business if you treat it like a business and have set yourself up so you have a mindset that tells you that you will handle all problems with business logic and never allow a tenant to get you upset or emotional. We own several rental homes in the 2700+ sq ft range and sometimes the damage the tenants do takes a crew of 5 workers 10 days to clean, costs $8,000 to $12,000 and makes me hate tenants, but once I get started with the painting and cleaning I realize the damage is inevitable when renting, a part of doing business and I don't get emotional. If you need any help feel free to ask.

We put two of our phone numbers on the wall at the entry of every building for deliveries, emergency personnel, cable companies, utility companies and process servers. We have no problem with letting everyone know how to contact the building owner. Maybe, we get 6 to 10 phone calls every year by having our phone number at the entrance of the building, but that tiny inconvenience for having to answer a few phone calls makes us feel that we are doing what we are supposed be be doing to make sure the building is run properly. Everyone should have easy access to get good service and to resolve problems.

We had a lot of tenants who did not want their names on door entry systems and we have a lot of tenants who get angry when we put their names on mail boxes. Mailmen don't need the names on the outside of mailboxes because they write the tenants' names on the inside of the boxes.