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All Forum Posts by: James Gates

James Gates has started 4 posts and replied 191 times.

Post: How To Evict Old Ladies?

James GatesPosted
  • Real Estate Agent
  • Redlands, CA
  • Posts 199
  • Votes 487
Originally posted by @Thadeous Larkin:

@Ronald Starusnak - Good for you for demonstrating basic human compassion and at least trying to puzzle through a particularly prickly situation.  Placing business above any sense of humanity is a failure of the soul.  And who wants to do business with someone who has an ugly soul?

On the flip side, @Karen Margrave brings up an excellent point with regards to discrimination:  New York State's (aspirationally-named) Human Rights Laws include a restriction on housing discrimination based on age.  Discrimination includes, under these laws, providing unequal services to tenants based on their protected class status (such as age).

Therefore, if you're willing to provide extra services (e.g. setting up a soon-to-be-former-tenant with social services) to one tenant, then you'd better be willing to provide that service to all tenants, lest you find yourself on the wrong side of a discrimination lawsuit.

How does that play out in a real world worst-case scenario?

You think you're doing a good thing by offering, before upping her rent, to help the elderly lady in Unit 6 apply for Section 8 or get her in contact with Social Services.  A year from now you have a 23 year old tenant in Unit 11 who you inform "rents are going up!"  You don't offer her any Section 8 application help or to connect her with Social Services.  And, what's more, she's friends with the elderly lady who lives in Unit 6.  They get to talking and 23-year-old learns about the special treatment the elderly woman in Unit 6 got from you.  She's savvy and doesn't want to leave her apartment.  So she talks to an attorney or the local legal services clinic run by Syracuse University Law School (I did Tenant rights for Greater Boston Legal Services while I was at Boston U. School of Law, so it's not an unreasonable scenario), and they tell her about housing discrimination and how she can't be treated differently just because she's 23 and Unit 6 is 89.  

Now you find yourself on the wrong side of a discrimination lawsuit, housing this angry tenant and paying her rent AND damages.  NOT GREAT, RON.  NOT GREAT.

The unintended consequence of non-discrimination laws is that they sometimes lead to scenarios like this - where you have identified an elderly person as weak or in need of additional help but are required by law to treat her as any other tenant.

In other words...it's a pickle.

--break--

That said, and not to be the fun police here because I am a fun guy... (I tried to upload the Kawhi Leonard laughing gif here but I'm not sure if it worked) 

but I've got to say that I'm a little disappointed by the levity with which many users (not you, Ron) are treating this situation.  While I can understand gallows humor to help process or mentally manage traumatic events, these are human beings that Ron is talking about.  Potentially losing your home around the holidays is pretty traumatic.  Laughing at their circumstances doesn't seem funny, it just seems cruel.  If this were happening to my Grandma and I presented these facts to a group of unknown business people and they made a bunch of Werther's Original jokes, I would (1) be forgiven for thinking that landlords are the awful stereotypes the media and lawmakers often make them out to be, (2) be justified in hating them forever, (3) also be justified in probably punching them in the face, and (4) probably get away with it because I'd demand a jury trial and as soon as the comments of the punched party got out, the jury wouldn't sympathize with that person either and would let me go.

Again, not trying to be the fun police.  It's just that some of those comments about a potentially vulnerable population seemed gross.  Maybe I'm just being sensitive, but then again people might be acting a little bit like jerks.  We report, you decide.

OK!  Non sequitur!

@Diane G. - ahhh...the typical mistake of the non-native NYer...assuming that the rest of the state is the city.  New York City has rent control.  New York State does not have universal rent control.  New York City is a city within New York State that contains about half of the state's population.  Conversely, about half of the state's population does not live in New York City (or even particularly like it).  NYC laws, despite what they try to do in the state legislature, do not apply to the rest of New York State.  Common mistake to make.  Also, go Bills.

This is the best post I have ever read of BP. 

Post: The Power of the BRRRR: The Sequel (Details + Numbers + Photos)

James GatesPosted
  • Real Estate Agent
  • Redlands, CA
  • Posts 199
  • Votes 487
Originally posted by @David Ross II:

Awesome! Well congrats on the property, I look forward to more posts from you in the future!

Thanks David! 

Post: The Power of the BRRRR: The Sequel (Details + Numbers + Photos)

James GatesPosted
  • Real Estate Agent
  • Redlands, CA
  • Posts 199
  • Votes 487
Originally posted by @David Ross II:

Did you pay your equity partner during the rehab process? If not, did he include himself throughout the deal (show up to house, ask lots of questions about the rehab, etc.)?

Hey David,

Noone is paid during the equity process, as there is no rent coming in yet, and my equity partner is not a debt partner (so no interest being paid). He was more of a silent partner due to how busy he is at his day job, but he has gotten much more interested in real estate after the refinance! 

Post: The Power of the BRRRR: The Sequel (Details + Numbers + Photos)

James GatesPosted
  • Real Estate Agent
  • Redlands, CA
  • Posts 199
  • Votes 487
Originally posted by @Sean Lopez:

@James Gates

Congratulations on a solid BRRRR James, and thank you for sharing the details. Your post will help a number of investors, especially those who are well-studied and looking to jump into their first deal. If you still have it, would you mind sharing a calc screenshot of your initial analysis of the property (when you were assuming a $155k ARV and lower rehab costs and monthly rent income)? Interest to know what the initial numbers looked like that gave you the confidence to make the offer.

Hey Sean!

I can't find an image of the initial BRRRR calculator, but I found some notes I had written on my investment presentation.

"Game Plan: BRRRR (Buy-Rent-Rehab-Refinance-Repeat) Strategy.

  • Purchase the property for 85K Cash.
  • Rehab the property (~1.5 months) for $26K
  • Total Cost Purchase + Rehab + Closing/Holding Costs = $114,000
  • Place a renter into the property by month 3. Renter pays $1,300 a month.
  • After 6 months of "seasoning," refinance the property conventionally. Pull out 75% of ARV (.75 x $155k) = $116,250.
  • Post-refinance, monthly cash flow on the property is $126 (post all expenses and allowances).
  • Hold the stable property for ~7-10 years, sell property using a 1031 Tax-Deferred Exchange to recapture equity + appreciation."

-James

Post: The Power of the BRRRR: The Sequel (Details + Numbers + Photos)

James GatesPosted
  • Real Estate Agent
  • Redlands, CA
  • Posts 199
  • Votes 487
Originally posted by @Sergey Tkachev:

Awesome job and story, thank you for sharing!

Thanks Sergey!

Post: The Power of the BRRRR: The Sequel (Details + Numbers + Photos)

James GatesPosted
  • Real Estate Agent
  • Redlands, CA
  • Posts 199
  • Votes 487
Originally posted by @Bas Nijmeijer:

@James Gates that’s a great year, planing to start next year with our first one, how do you make sure that the bank will refi the loan ?

Hey Bas,

There are a couple of things you can do to make sure you are setting yourself up for success when it comes time to refinance. First, I highly recommend contacting multiple banks ahead of time (even before you purchase the property in cash) to make sure there won't be a problem refinancing due to a personal issue (credit, debt-to-income, etc). As long as you are credit worthy and the property is in good condition, the bank is likely to happily lend to you.
-James

Post: The Power of the BRRRR: The Sequel (Details + Numbers + Photos)

James GatesPosted
  • Real Estate Agent
  • Redlands, CA
  • Posts 199
  • Votes 487
Originally posted by @Richard Bowman:

@James Gates what a great write up! And thread to all who've replied. I can't thank you enough. My partner and I are looking for our first BRRRR now. I know others have mentioned this, so excuse me if you've already addressed it, but how were you able to ramp up properties so quickly? I ask bc I have full equity in my primary residence (3/2, 1500 sq ft, Bungalow), do you think the best use of said equity is a HELOC?

Hey Richard,

We have been able to ramp up quickly by the power of the BRRRR. We are on our 13th month investing, and the BRRRR method lets you turn around your money every 6 months. So our initial investment is already on its' 3rd property! We also would not be nearly as far today without strategic partnerships and creative financing. We believe this golden rule: 50% of a deal is better than 0% of no deal.

Post: The Power of the BRRRR: The Sequel (Details + Numbers + Photos)

James GatesPosted
  • Real Estate Agent
  • Redlands, CA
  • Posts 199
  • Votes 487
Originally posted by @Steven May:

@James Gates

Congrats! The numbers look great.

Can someone explain briefly what you mean “you created forced 25% equity (47k)”

Thanks and good luck!

Hey Steven,

What I mean is that the home appraised ("is worth") 175K, but we only spent 132K. So by buying under-market value and performing a strategic rehab, we have created close to 45K in equity, which happens to be around 25% of the homes value. One way to think about it is that since you are allowed to borrow up to 75% of the homes worth in a loan, if you can create 25% forced equity then you will basically be invested for $0 (minus closing costs) and your return will be infinite because you will be able to pull out all of your initial investment from the refinance. 

Post: The Power of the BRRRR: The Sequel (Details + Numbers + Photos)

James GatesPosted
  • Real Estate Agent
  • Redlands, CA
  • Posts 199
  • Votes 487
Originally posted by @Alma Bagaoisan:

@Dustin Mathenia

How many mm is LVP you use. Thanks

6 mm, we try to find LVP on sale that is at least 4mm+

-James

Post: The Power of the BRRRR: The Sequel (Details + Numbers + Photos)

James GatesPosted
  • Real Estate Agent
  • Redlands, CA
  • Posts 199
  • Votes 487
Originally posted by @Avinash Reddy Bandela:

@James Gates

This a awesome post with minute to minute details mentioned.

I have a question about the bank you are using for refinance. Doesn’t the bank has a 6 months title seasoning period because of Fannie Mae rules??

5.0% on 30 years fixed before 6 months after closing is an awesome deal.

Yes the bank does have a 6 month title seasoning period, we started the refinance paperwork at the beginning of month 5 so we could close the day after the 6 month period ended.

-James