All Forum Posts by: Chris Da

They are in Pa..It isn't hard to find cash flow properties if you do all the work yourself..I never understood why people buy properties that make $100-$150 month. Tome it would be just as easy to work a few hours overtime a month and get the same result without the headache..
I was taught to buy VALUE...I strictly deal with Section 8 as this economy isn't very stable. The downfall to Section 8 is that you have to report all your income, but I guess that is worth it, considering lots of guys I know aren't geting paid by thier cash teanants.
I also will only move them in Apr-July, that way I have the 1 year lease that they can't break, and if they leave(which they haven't so far) I am able to get another person easier in the summer months..
I guess you picked up on it, but I install electric baseboard back up heat in all the places..These people can't afford oil, (but for some reason they can afford a Cadilac Escalade) but they like the electric since when they don't pay thier oil bill they can run up the electric all winter than put it into one ofthier kids name in the summer..
I tell ya, the **** these people come up with.
Water bills kill ya too with these people($250 a quarter). NO MORE WASHERS, No more hose bibs either..I installed 25 gallon hot water heaters and shut of the oil burner in the summer..They learn to take quick showers..
If to want me to turn you onto some deals, let me know. Lots of guys from NY are buying in reading area..I am not, because I don't feel like driving 45mins to fix minor problems. I will send you some cash flow mls numbers.

I will try to be as straight forward as possible..

Good friend of mine knows I tring to break into the rental business, and do it correctly..He owns approx 100+ properties.
He has been now investing in 25+ unit complexes, and selling his single homes, as he is tired of keeping track of all these places, ect..(been doing it for 25yrs.)

Here is the tricky part..I turned him onto a home run complex, which he was able to buy without a realtor for about 300k below value..The deal is done..In turn I bought 2 of his properties from him.

This is where it gets tricky.

Property #1 Appraised @ 91k Single 4br house sec 8 with detached 3 bay garage..Sec 8 pays $1186 month and garage rents for $200 cash a month..Total $1386
He owned the thing free and clear, so he sold it to me for 88k on paper(hud-1)
with closing cost ect line 120 "gross amount due from borrower is $95934.47
I got a regular conventional freedie/ fannie mortgage and payment is w/taxes ins, ect $801 month.

Hello all. Have a nother question about my new Section 8 tenant..I was there yesterday to cut the small lawn and check the heater(at least that is what my lease says) Anyway, I go into the basement and it is flooded with 2 inches of human waste..The floor drain backed up and I was lucky to find used tampon applicatiors and some other objects. Anyway, she would have never told me and how sowmeone lives with that smell is beyond me..Is there a way to convince her not to flush objects down the toilet?? Another thing, she leaves the water on..I HAVE TO PAY THE BILL.. How do you make sure the water is turned off when people are done with the sinks, ect...

Have another question fo rall you guys..

Tax time...Let me give you a run down..I purchased a place this year as I posted before. I am renting section 8 and filled out the w-9 form. i am postive cash flow, and want to off set that. I also have a regular job which I get a w-2 form..
Now my question is, am I able to write off all the expenses that I put inot the place in order to make it up to code and able to be rented?? Carpet, paint, plumbing, electrical as long as I can truely account for all the receipts?
I know I can write off the mortgage interest and the taxes I pay.
I put some money in this house to get it liveable, so it wasn't unnessasary repairs..
My next question is next year, suppose I don't make any repairs(Which we all know isn't going to happen) and I collect say 11k from section 8, but only have say 4k in interest payments and maybe 3k in taxes, how do you come up with more write offs to offset the remaining 4k?? I will sit down with a real estate accountant if need be, but I have a guy who does my taxes..I would just like to know any ways you guys have come up with to lower your tax burden.. thanks

Mike, I have some brains in my head. No I didn't sign a contract like that at all. What I did do is write a seperate agreement and worded it as though she wasn't able to come up with the security deposite, so I allowed her to move in and she agreed to pay me "what she could afford" which was $115 month until the balance was secured..I never gave her a receipt for her security and I ONLY HAVE A COPY OF THIS. I thought that was rather creative.

Interesting about buying the house and title in the LLC name. I wanted to do that to the last house, and they would not let me. Said I had to fund the LLC with cash and buy the house with the cash from the LLC. Example, take a HELOC against my house, deposite the cash in the account of the LLC then write a check for the house..
What I did to buy the 2nd house was simple mortgage, put 10% down and and did a 30yr loan, but am paying it off in 15 (hopefully).

Thank you for all your help, as I think this will pay off in the long run..
I forgot to mention this place I am tring to get later this month that comes with the tenant also has a over size 3 car block garage behind it.. Need a new roof and doors, but that isn't really a big deal..Hell, I think I could have the garage looking really top notch for about $3500..This garage looks like a hell hole right now. Can't even be used. I would think having a nice fixed up large 3 bay garage has got to be worth something for the resale..As for now, once I fix it, I could rent it as well. Just an idea.

Thnak you for the input Wally..

I have another question for you all..My father is interested in getting involved in this me. He is a VERY straight shooter, and isn't interested the least in fixing toilets and cutting grass and 2am phone calls. What he does have an interest in is helping me get started and making the right moves. I had suggested borrowing EQ loan against my house to get things rolling and he is TOTOALLY against that..He is old school. NO debt.

The mortgage broker ran his numbers for a approval not long ago and told me that with him backing me I can do most anything.. the debt to income ratio was .7 He owes nobody period. the only reason there was a single debt was the fact that they went to Europe for 3 weeks and charged things, but it is now payed off.

My problem with taking advantage of this situation is that even though we set up an LLC, there is no real cash in it. (10k..) My father doesn't keep alot of liquid cash around (maybe 50k max) the rest is tied up in retirement accounts. If for some reason one of these tenants sued us, he could lose everything if say a 4 million dollar judgement was made.
Is there a way to titl a house in an LLC anme, but be personally responsable for the note??

If we just got a blanket insurance policy would that be just as good? I know my father wants to help, but I have a real problem putting someone else at risk, especially someone who has done with out alot of things all his life to aquire a 2+ million dollar retirement.

I did read that in the HUD agreement about not charging more..The tenant suggested it, because after we sat down and did the brakedown, me not paying any utilities, I said I really wanted someone with a higher voucher amount, and SHE SUGGESTED THIS..She says alot of people do this, and I said I didn't think it was allowed.She said it isn't, but if it is cash, and there are no receipts who is gonna be able to prove anything.(She really wanted the place.) I wasn't tring to take advantage of a woman and her children. I am new at this.

I could get the 3rd place cheaper, but I thin kthe sale price is about 61-63. havent done all the numbers yet. He is going to give me a check for closing down ect..And I will end up with about a 70-74 mortgage..

This guy seems to know what he is doing. I mean, he has been doing it for 21 years..Has over 70 rentals, now going for the bigtime with a complex..I like him..Hard worker..

I thank you all for your input as it is very helpful..

I think I should do a little more explaining, as maybe you don't understand all of the situation..

As with my first house..This deal was done with the son of the fellow I sat down and talked with, we will call him Joe jr..
Joe Jr. worked for his father for 17yrs and knows alot..After I spoke with his father, his father suggested that I talk to his son and see if I could light a fire under him, as I am aggressive, and well, I hate to say it fairly lazy and VERY spoiled..
I did so, and he spent hours explaining the sheriff sale process to me, how to search titles, how to check for liens, comp houses in the area, ect..He was very good at it, but he really never had to use it, becasue he had everything given to him.(example:has 7 rentals all worth over 150k, all100% positive cash flow..Given to him) Sure he is a land lord, how hard is it for him. He colects rent, and has no nut to crack at the end of the month.Daddy payed for everything. Same with his 5500sq/ft house.Free and clear. Daddy.. That is neither her nor there, he is fortunate in that respect..
The deal was that if we bought a house, he would be the CASH man, as he has plenty, and I would do all the research, and repairs and paperwork ect..He was strictly the bank, as I said, he likes the easy street.
Anyway, I busted my *** for 8 months tring to find that great deal. The house went to the sale, and he bid it up about 40k too much, and we got it. It was intended to be a flip, which we almost did, but the market changed and his judgement was off..
Anyway he bought it with a HE loan against on of his houses..We tried to sell it, then he ended up in a rehab..My luck, he picks now to fall of the wagon.. I didn't want to, nor could I afford to pay a mortgage, as that wasn't part of the deal, So I suggested renting it out..Then I suggested section 8 because I knew the money would be there. While he was in rehab, I did this, and it breaks even..that is how this came about..As you all know, the market has crashed more since the last year as we did this.
So, is it better to have a break even property, and ride out the storm, or sell it??

My second property deal that I just got on March 28th is the one where I rented to the woman with 7 kids..This is a nice area (a twin). I mortgaged 72k and with taxes and insurance my payment is $797/month.
Section 8 pays me $1186, but I wanted $1300, so I made a side deal with this lady, as alot of people do, that if she wants the nice place, she is gonna pay me the extra $114 on the side. I drew up a seperate contract with her, stating she owes me $114 a month, for the security deposite that she was unable to come up with(which she did) and that is what I meant by 90% section 8 pays..If you do the math, the place has a positive cash flow of $389 month for sure, but $503 if she pays the extra $114 which most do.
Am I being picky as to notice the trash piled up? I have been in the house, and it isn't being destroyed, she is just a slob..I know how I live, and I was told to close my eyes to that. As long as there is no damage, then you can't really say much about how they live..I dunno..
I agree that a woman not married with 7 kids makes bad choices, and I hate to say this, but I figured, she may never get a job, as how could she afford day care. I was banking on her staying a long time, if that makes sense..I figured you give a nice home to a lady who is basically screwed up, but wants a nice place to cal home, why would she want to mess that up? Maybe I am wrong..

Now my next deal, which I just came from is a guy I know who is selling off 13 ofhis 74 properties in town, because he came across a complex for sale, and needs 900k fast..
he bought a place for 43k in a so so area..His crew rehabbed it and are almost done.(They did a nice job.) Anyway, I can be in that deal as soon as I can settle, and he is willing to work the numbers backwards so I can be in for a mortgage of 74k. NO MONEY OUT of pocket for me. The place appraised at 89k tonight..So, my next question is, what do you guys think of this deal?? And the kicker, there is a section 8 tenant approved to move in June 1st for $1204 month.. The numbers are about the same for this deal as the last for cashflow.

This is the only thing I am confussed on. He suggested I do a commercial loan with a balloon payment in 5 years, because he says it is fast and easier, and he really doesn't deal with residential loans, and he said it is just easier and faster ect.. I don't like the idea of the balloon payemnt in 5 years, because I think rates will go up and then my cash flow could be altered..Odds are rates are going up..

Please respond, as I love your input and I love to learn.

Brief history of myself..I have been a mechanic for the last 16 years..I use to love to fix cars, but now it is time to move on, as I se the writing on the walls, and it is just getting worse in the dealerships..
About 2 years ago I sat down with one of my best friends fathers. He owns a real estate agency, and mainly deals with commercial and land subdivisions ect.. To give you an idea of how big this guy is, 2 years ago he built a retirement community of 154 house, and it was a cash deal, as the bank tried to alter the terms of a loan once the parcel was approved.
Anyway, this fellow has done wonders for himself, and took a liking to me. The first statement out of his mouth is "RENTALS IS WHERE IT IS AT." At one time he had a complex, but now like I said he is older and owns a few shopping centers and strip malls..(Still rental income, just on a larger scale..
Well, I took his advice and bought a place at a sherrif sale maybe 2 months later..This is a nice townhouse, which only breaks even, but the community is VERY nice..I didn't steal the house, but got it about 25k under value..I have been lucky, as I have a SECTION 8 lady in it since it was purchased and she keeps it in PERFECT condition. She never wants to move, because this is not your typical section 8 house, and she can now live with the "RICH" people..So that worked out well so far.
2 months ago I purchaced another house via a REO..I got a good deal on it..Payed 80k and the house across the street sold last week for 128.
Here is where it gets interresting..I helped a lady who is 36 w/7 kids move from not so nice an area, to this house, which is a fairly nice area. She really liked the house, and she brought her mother along on the interview ect..I thought I was doing a nice deed by renting to her.(Plus I wanted the $1300 a month income from Section 8) My mortage with taxes and insurance is $797...
Well, she has been there 10 days now, and there is trash all over the yard, bags and boxes on the deck outside. She lives like a total pig. And I am okay that some people chose to live like animals, but I am concerned about the neighbors..Like I said this is a nice little area..Down to earth blue collar working class area, and most of the people keep thier houses pretty clean, now here I come the block buster with the 36 year old white trash tenant and her kids.
What I am getting at is that I live Section 8, as I am pretty sure I am getting payed 90% of my money. I am in this for the money, like most people here I think. What I am now considering is dropping my standards a bit on the houses I buy..
I know that 8 blocks away, where the area isn't so hot, a friend of mine is unloading a bunch of places, because he needs to free up cash to purchase a 34 unit. He offered my a place that he just bought last month. He payed 40k for it, did some work and has a Section 8 tenant ready to move in June 1st. He told me he would sell it to me for 60-65, and be creative so I don't have to put cash out...It will work out to be more positive than my last place, but am I making the right move in leaning towards being a slum lord?? That really seem to be where the cash is..I mean he made a comment to me."Look you bought the place 8 blocks away for 80k and put 10% down and all that, I will help you get into this for little or no money, and it pays the same rent." He has a great point, but I also feel that the property he has will really never be worth much, as that section of town seems to be the worst. I am concered about long term..Should I be?? Either way as of now I can get the place below market value...But how much I am not sure.

I have been looking for properties in my area that are multi unit or 4br+ single family units(I deal only with section 8). To be honest with you, there aren't that many great deals out there..I like to get the houses at least 30% below market value, but who is to say what these places are really worth??

I spend time on lunch on the MLS (I pay my realtor friends yearly fee) and in turn he allows me to use the MLS whenever..When I find something I usually drive there during the day and look it over well. I do almost all of my own work to the property(I hate paying anyone to do something I can do, except painting, I hate painting.)

Once I look them over well, I will call the listing agent and ask to go through the place. I do a very tough inspection as my walk through takes an hour, but I want to know everything, and if they don't like it, TOUGH!

Once this is all done, and I do this at least 1 time a week, by the end of 3 months, I sometimes find a place that is worth offering what I think is a fair price..

I goto settlement last day of March on a place listed for 142k..I bought it for 78k..Was on the market 73 days at 142k. I will have the keys in my hands on April 1st, spend less than 8k and have it rented by the end of april for 1357month via Section 8.

I think this is a good deal, but it took me 4 months to find it..
Last place took 7 months at the sheriff sales, but they cash flow, need little work and I am in and out..

Point is...Take your time..It isn't how many properties you own, but what and where you own them..You also want them to cash flow.

I deal only with Section 8, because they direct deposite to my account..I am not in the business of chasing rent..I explain to them that I own the property, not them, and they WILL TREAT IT fairly..I prefer single mothers with children who are on disability..I never have to hear that they lost thier job, because they will never have one..I let them know I stop over once a month to check the heater(my excuse to check on them) and it works well..

Another angle I have come up with is that I buy NICE places and make the people on Section 8 feel proud as to where they live, and it seems to pay off..My one tenant drives me nut, because she is always calling me asking to hang new fixtures on her sink, or the 4 foot by 6 foot stained glass picture above her fireplace, or the fancy $400 lite she bought for the hallway...I don't know how these people have such nice things, but no job..I don't ask..All I know is they treat me well, and I would rather her call me to be her interior decorator than to hear that she is trashing the place..