All Forum Posts by: John Kunick

Originally posted by @Mark Whittlesey:

Originally posted by @Danny Grey:

I think the general public has a perception that rental property owners are largely a bunch of wealthy fat cats flush with cash who can weather any economic storm, and if landlords still demand rent at times like these it's only because they're greedy. 

They average person probably doesn't understand just how much rental property is leveraged, much of it highly so, and if rent isn't paid, debt on those properties isn't paid, and we simply a see a line of debt dominoes falling into the abyss. This isn't news to any of you, but talk to some renters and you'll see this is a fairly common sentiment.

Whatever the "solution" for all this is, it needs to involve help for all parties from tenants, to property owners, to the owners of debt on those properties.

As for what this does for the overall market, it doesn't seem like much yet. I've seen a FLOOD of new homes hit the market this past week, but not at reduced prices. It just looks like folks trying to sell before the inevitable dip. The dip will come though, eventually.

 I agree with this.. but it's also more complicated than that. You can be under-leveraged but still be at risk. Equity is NOT spendable. And the monthly payment is based on the original loan regardless of how much you have paid or how much the property has appreciated. I am talking about being equity rich and cash poor.

@Mark Whittlesey Yes, that is exactly what I was referencing in my post above about re-evaluating your cash position.  As you say, you can be equity rich and cash poor.  That is why I plan to start increasing my cash reserves and making sure my business line of credit is in good standing.

Wow, just spent several hours reading through all 22 pages of this thread because, hey, what else do I have to do these days of quarantine?

As an owner and manager of a fairly large portfolio of SFH in Tulsa area, let me say that I am closely monitoring the situation with my tenants.  While I have yet to send out a blanket email to all, I have been in communication with those that I consider to be at risk.  Also, I have had one tenant let me know they will be one day late paying in April (her part-time job as a waitress was eliminated).  I thanked her for proactively communicating and asked her to stay in touch as the situation develops.  I also had one tenant, who had just renewed her lease, let me know she now needs to break the lease due to COVID.  I let her know that I would immediately start looking for a replacement tenant and will only hold her responsible for the lease for the lesser of 30-days or until a replacement tenant can be found.

All the other tenants that I've communicated with are so far not impacted enough to suggest rent payments will be effected.  But, the message to them is "stay in touch, let's communicate and work together and we will all get through this together".  As a Christian, I want to deal with tenants with compassion while also letting them know that how I earn a living is by them paying rent.  Without them paying rent, I can not keep the properties going - which means we will all be out of business.  Will some take advantage of this?  Maybe, but hopefully not - as I've done my best to screen the tenants up front.  I've been doing this for 10+ years and have learned the hard way that some will take advantage and you must weed them out as quickly as possible.  But, the vast majority will respond positively to a landlord that treats them with respect and compassion.

The other lesson that many have mentioned is "take this as an opportunity to learn from mistakes and get your "house" in order".  Are you over-leveraged thinking money is cheap and therefore the risks are small?  Well, guess again.  For myself, I have very low debt to equity ratio so I can weather the storm longer than many.  But, this situation has made me think about having greater cash reserves (I do have a business line of credit which is about as good as cash reserves).

God Bless you all and thanks for all of your input on this thread!

@Moritz Bode, I'm not sure that is more efficient as most tenants don't want to live in a house while renovations are taking place.  And, assuming the house was in top shape when they moved in, the only exception I could see is if they have been in the house for a long time and the condition of the house has changed over that period of time.  It has happened a few times over the many years that I've been buying/holding, but it's the exception.

After reading through this very worthwhile thread, it seems that most of the responses are regarding fix/flip.  Since I am only a buy/hold and therefore looking to increase the value of my properties via both increasing rents and keeping the houses rented (especially via decreasing turnover), I wanted to add my two cents.  To me, the single best upgrade I've been doing over past two years is changing flooring and getting away from as much carpet as possible.  Like many of you, I prefer the WATERPROOF plank flooring.  Yes, it costs more up front.  But, in the long-run (what I'm focused on as a buy/hold), it actually saves me $ as I don't have to replace carpeting ever again.  It makes the houses look newer, cuts down on allergies and I can typically rent the houses both faster and for a higher rate.  Then, the question becomes when to do it..  For me, the best time is when there is turnover as the house is empty and doing the install is much easier.  But, I've also done this as an incentive or reward for long-term renters.  With this, especially if the tenant is awesome and I don't want to lose them, I say "if you sign an extension with a modest rent increase, I will proactively go in and replace carpet, in certain areas of your home, with plank flooring".  I even let them help pick out the color/type as it makes them take pride and "ownership" in the property.  Finally, if I have to specify areas of the house to replace flooring, it typically will be high traffic areas like family room and hallways.  Typically, I don't do this in bedrooms unless a tenant specifically requests it.  Hope my two cents is valuable!

@Devin Fakner and @Rhett Tullis, great post by Rhett - and Devin I will try to answer your question about Tulsa as I own and manage a large portfolio in Tulsa.  The biggest answer is "it all depends"!  It all depends on location, condition and also what the landlord's niche is (which hopefully is driven by their goals). 

For me, my niche is 3/2's in South Tulsa (primarily Bixby and Broken Arrow) that I can rent for anywhere from $1050-1300 (depending on location and condition).  As Rhett mentioned, the higher the rent the more time you can expect the house to sit simply because the "pool of eligibles" is smaller.  If I have anything over $1200 available, I can expect it to take 1-2 weeks to find a suitable tenant.

On the other hand, if I have a rental that is $1050-1199, I can usually find a suitable tenant in 1-2 days. So, when I've had the opportunity to buy additional properties, guess where I tend to focus? I've turned down a lot of realtors that call me begging me to look at their house that I can buy at a nice discount, but would have to rent for $1400+ in order to make same ROI. Of course, they ask me to look at the "built-in equity" that I am getting because their seller is desperate. My point back to them is I'm not buying to turn around and sell and make a profit! I am buying for rentals and that is my business model.

Having said all of that, I do have a friend who solely focuses on higher end rentals ($1300-1500). These are typically 4/2's with 2000+ sqft. But, he bought most of these houses many years ago and especially when the housing crisis was going on. He was buying most of these houses for under $110k and not having to do much work to them. Therefore, he's making a very good ROI, but he can't find that same house now to buy at anywhere near those same purchase prices.

To close, it depends on your location and condition of house.  But, in Tulsa, I think we have similar rental market as OKC.  For me, the 3/2's have been a significantly profitable niche that I don't care to stray out of.

This was in Tulsa World today.  As I posted back in late December, most of my rentals are in Bixby/Broken Arrow and I've been able not only raise rents, but have had zero problems finding quality tenants.  This information backs that up.  So, the lesson learned in real estate is location, location, location.

https://www.tulsaworld.com/new...

@Deren Huang, what have you seen with your personal portfolio?  I will tell you what I've seen with mine, but keep in mind the vast majority of my rentals are not in Tulsa per se, but rather the South Tulsa sub-market and primarily Bixby and Broken Arrow.  In those markets, I've seen a continuing steady increase in rent and demand.  When I've had rentals come up for renewal, I've had zero problem increasing rents (although I keep rent increases fairly modest if it is the same tenant).  When I've got turnover (one tenant leaving and another one coming in, then I've increased the rent more aggressively and have had zero issue getting it.  But, I continually do market surveys to see what rents are going for and try to stay at or slightly below the market.

Having said all of that, I would guess my rents from 2017-2019 are up 8%.  I could do research and pull up actual leases and get exact information, but 8-10% is a pretty good guess.

Hi Cylas, first, congrats on your first property! Like @BrianGraham, I'm also a real estate investor in the Tulsa area and have been doing REI for many years. I've both bought and sold properties with tenants in them. Nathan gave a great explanation of the best "legal" way to handle this situation so I won't repeat it (spot on, Nathan!).

I would like to offer the best "relational" way to handle this situation - which only supplements and doesn't substitute for Nathan's approach.

First, have the persons you are buying property from notify tenants of change in ownership as soon as offer is accepted.  Second, before closing, meet with the tenants at the property and let them know that you have been provided all of the lease information.  This is your opportunity to confirm the lease with them and make sure what you have been provided is consistent with their understanding.  This also gives you the opportunity to be in the house with them and see how they are taking care of it and if there are unapproved pets.  Third, this will also serve as your opportunity to put them at ease that you will honor the lease and will be receiving the security deposit.  This also gives you the opportunity to let them get to know you and how you manage your properties.  Fourth, after closing, send them a letter or email letting them know that the closing has taken place so they know how to pay rent to you and to communicate with you any repairs needed, etc..

Key to this whole topic is both communication and building a relationship based on mutual trust and respect.  In my experience, whether that is inheriting a tenant or just getting a new one on an existing property, it is best to start immediately building a solid relationship with clear expectations.

Best of luck!

@Brandy Bruce, first congratulations on saving significant $ and not just spending it.  Second, what are your goals for getting into REI?  I've been fortunate to do very well in REI and then help mentor several others to do same.  And, I always ask them the same question up front:  "What are your goals".  There are so many ways to make money in REI that you have to answer that question to help inform your strategies and next steps.   I am an REI in Tulsa market and can help you in this market if you will answer the question..

Jacob, can you clarify your question?  Do you mean for rental properties or someone who is moving here and looking  to buy a house to live in?