All Forum Posts by: Jake Hart

@Trevor Murphy I know once you go over roughly 30% of the credit limit, your score tends to drop. Once you pay the card off your score should correct itself within a month or so. To solve this issue, my wife holds all our “bad debt” in her name. Like credit cards, so when I go for financing, that doesn’t reflect on my credit score. If you need to keep your credit high because you are or will be financing a property, I would just use cash or use the card and turn around and pay it off within a day or so.

@Bryan Potter I totally get it. We made the decision when my son was born that my wife would be a stay at home mom. Best decision we’ve ever made. As the father, I have had to suffer being away from my kids and wife, but what I’m doing will change not only my families future but also my grandkids and their kids. Your kids and wife seeing you work so hard for them will only make your moments together that much more memorable, and later down the road you can look back and see how you have change your families outcome. Hold on to those thoughts when your in the trenches working!!!

Bryan, I would have to agree with mostly everyone that getting rid of your W2 job wouldn't be the best decision moving forward. I would suggested working on getting a higher paying w2 for sure. Honestly just knowing the little bit of information you gave, if I was in your shoes I would (1) Get a super tight monthly household budget on paper so I was for sure saving more than spending (Saving all my rental income profit) (2) Set realistic and obtainable real estate investment & personal financial goals for the next 12 months with a game plan or road map on obtaining those, and (3) Put an awesome resume together and start searching for a higher paying W2 job. 

From your post, and please correct me if I'm wrong, you sound a little unsure or frustrated with your current financial situation. I totally understand where you are coming from. Back in the day when I had my first son on the way, I took a second job at Menards making $11 an hour out of fear of not having enough. For me, I try to find the good in every situation because its always there if you look hard enough. Working there for the short 6 weeks it was, taught me that no one will value your time more than you. If you have to trade time for money, make sure it counts big towards your future. Within 1 years from that point I had doubled my income and purchased my first rental property. You have a major leg up on me having around $200k in equity to play with. There is so much potential there, but the key is to set yourself up for success, not failure. Luckily you have, in my own opinion, the best platform here to find all the info for you to succeed. Really take time to think about where you want to go and how you are going to get there. Put it on paper. Study it and refine it daily. Making wise financial decisions is a by product on knowing what you want and how you are going to achieve that. Use the resources: Books, podcasts, blogs, etc. that BiggerPockets offers to help refine your overall goals and dreams and then Execute!

I totally see what you are saying, but I feel as if you are calculating that monthly cash return and not your actual return... This really depends what you want long term out of your rental property. What I am saying is that you were trying to compare a 4% return in real estate to stocks. However your 4% cash return I would assume might be much higher in reality. First, you need to consider that your mortgage paydown (if you have a mortgage) is actually your money that is in somewhat of a savings account. I wouldn't suggest to anyone on having a monthly negative net profit though. Next you need to consider the tax savings... As a passive investor, you can write-off all expenses including depreciation on any income received (I'm sure you already know this). So any profit you make, and if you strategies your tax savings well, will not be taxes. What kind of a tax savings would this equate to if you compared that to the stock market? There are just so many factors in your example that aren't present in order to make a fully educated decision..... I can tell you that If I was a passive investor I would still make a nice profit. I would suggest looking around college campus for college rentals. From what I have seen, they can gross nearly 2x the normal rent of the same size and type of house in areas where families live.

- Jake

@John Michael Rico 

Other investors might think your question is stupid but really in your market, a 20% down-payment might not be realistic to you getting into the investment game. ALWAYS THINK OUTSIDE THE BOX, but legally of course. If this is the issue, you really need to consider the costs of having one side as your own residence. Per the FHA guidelines, you would technically have to "live" in one side for the majority of the year. I didn't see anywhere where it stated the exact definition of "living", besides occupying the home for the majority of the year, but this isn't as clear as you might think. So if you travel for 300 days out of the year but have your stuff at your house and maintain all utilities and such would this be considered your primary residence per the FHA rules? Probably, but not if you have a lease signed with an apartment complex somewhere else for the same time frame.. I'm sure you see where I am going. Lets say you have a roommate on your side and they pay half of the costs while you travel 300+ days out of the year... These types of questions would need to be ran by someone who was extremely educated and knowledgeable on FHA rules and guidelines.... I would suggest contacting them for this info to be sure you aren't committing fraud unknowingly, once you figure out a situation that might work best for you. But lets just say that you buy a $500k duplex w/ 3.5% down ($17,500) and you can get a roommate to help with the costs. You might actually make a net profit or break even the first year and then convert this to a fully utilized rental the following year. This actually could be a trend that you use to get in cheap and then convert to a rental just after a years time. Just some things to think about.

- Jake

@Filipe Pereira

I'm pretty new to the investing world but very process drive. I thought I had an effective system down for screening, but was I wrong... Looking into my future, I think you just saved me countless hours wasted!!!!.... This is just another reason why I LOVE GOOGLE!!!!!!!!!!!

- Jake

Hi @Colin O'Neill

I have a house 1/2 mile from a college campus and can say that renting to students is great! The rents are 2x higher than if I rented to the normal family or individuals. This is a 5 bedroom house so when I market it I just use craigslist, Zillow, Hotpads, and post of the different local university facebook pages. I just stay on top of marketing to ensure it gets rented and I haven't had an issue with it. The one good thing, at least in my area, is that 75% of the student rentals are in poor shape and that make mine 100x better because I really keep up to maintain my property. There are a lot of people that say it's risky to rent to college students, but if you have a presence at the property and you have a quality rental, the majority of students will take care of it. With utilities, I include that in the rental price. I know what it cost on average for utilities and I increase that slightly then add it into the rent amount. Most students find it much easier to pay 1 amount to me than pay rent, electric, gas, water, ect.... I let them deal with TV and internet provider, but you could easily include that in the rent as well. I do however have a clause in my lease stating that I can charge them any excess utility charges if they exceed 10% usage of prior years amount. This ensure that they won't run the heat in the winter with the windows open or something crazy like that. I also make each of them sign 1 lease. This allows me to hold everyone responsible if 1 student doesn't pay or if 1 student does more damage in their room than what their security deposit covers. With rent collection, I use www.Cozy.co which allows the tenants to split the rent and pay each of their portions online. One last point, if you are actively involved with your own property management, then I would also put a clause in your lease stating that you have monthly inspections every 3 months to check smoke detectors and change the filters in the house. Then you make sure you put a smoke detector in every room. This allows you to have a reason to "inspect" the property every 3 months without them trying to keep you out of specific areas of the house. If you have other questions I would be happy to answer them. 

- Jake

@Alexander Thomas Chaney When investing in a house that will be rented to college students you definitely want consider the extra risk due to potential damages. But like @Ian Kurela said, the majority of the properties around college campuses are in bad shape. To me this i gold! Why, because that means if I offer a very nice house, doesn't have to be fancy, I stand out above all the other Landlords. This makes it 1,000 times easier to rent my place and I can up the rental amounts. Look at it this way, why would a college student take care of the property they are renting if the Landlord doesn't even do that. For me, my rental is very nice and I maintain the lawn and have a presence there at the property. This shows my tenants that I am interested in my property and their stay and want them to be comfortable. When I treat my tenants like I would want to be treated, 9 times out of 10 the tenants will respect my property. I also go into the property every 3 months to check the air filter and smoke detectors which doubles as a secret landlord inspection. 

By college rental I mean a house or any property that is rented to college students. This could be a SFH, duplex, or larger property. So for instance, I have a single family home that is a 5 bedroom 2 bathroom just 1/2 mile from the college campus. There are families that live around in the same area but there are a lot of college students that rent these homes. I know that the market for a SFR to a family would be only around $900/month for this house and college students tend to pay around $350 per bedroom. When I go to market the house, I market it as $1,750 utilities included which is $350/ bedroom. By pricing the home per bedroom and higher than other normal SFR in the area I tend to only get college students applying. Doing it this way also keeps you from discrimination. If a family wanted to rent the house for $1,750/ month I would rent to them but why would they do that when they can move a mile away and lower their rent by $850.

Thanks guys.... I don't mind paying a little more in interest if the deal still C/F. I'll look into these!