All Forum Posts by: John Stevenson

This is usually the way I do it too, but looking around just a little on the net, it seems some others do it ahead of this. I am wondering how and if this works? I usually don't want anyone to see it before it is ready because I am worried some people won't see past the cleaning that still needs to be done. 

One thing they mention is that by doing it ahead of time you might find better renters that are planning better. As in, not getting the people that have to move in right away for some reason (eviction, desperate, etc.)

I am just not sure how they are getting a signed lease before even showing it, or what they do. I figured this would be the place to ask :)

I have always listed a rental after someone moves and I can clean up etc. Many times word of mouth or a sign does the job. It seems like I always lose a full months rent though by the time it all works out. I am not sure if this is what most people experience or if better management can remove that?

Anyway, I am trying to maximize returns and run things better now that I am setup as a real business tracking everything to the penny, following proper LLC safeties, and added 4 more units, etc.

A recent 4 unit building I purchased is going to have it's first vacancy. They gave me their 30 day notice. I listed it today on Zillow and already got an inquiry. I might have been a little hasty because I am not sure how to handle a showing in this case? 

So, what do most people do? I read one article that suggests 4-6 weeks or as soon as you get notice to list it. However, they do not talk about showing it or when to put the sign out front. Is it even possible to have a new renter ready to move in day 1?  

Who wants a place they cannot see first? The tenants are still in there, so I really don't want to bother them. 

In this case from what I have seen, they keep the place in nice shape, so I do not expect to have to do much before it is ready to go. I do not have much to use in the way of pictures because I have not owned it very long and it has not been empty to take any. I have an outside pic and an occupied living room pic and the other pics are of other units also occupied. I usually have a place empty and then just show it. I have not needed to use any online listings before really. Worst case scenario, one-two week run in the local paper usually did the trick. 

Suggestions or advice?

Thanks!

I am a multipod. REI is one of my many multipod activities. The only one that really makes money I suppose. The rest of my hobbies are stinking expensive and that is why I still have to work! Some of my other things could make money, but they require me to actually be putting in man hours to get dollars out of them. I am tapped out on time. I don't even sleep enough at all. I do have a grueling day job and commute to go along with my rental activities. I self manage and do most of the work myself.

I don't even particularly get a thrill out of rentals, but I have not found an easier way to make money and keep money. I happen to know how to build houses and work on them from being a multipod in the first place. I have also rehabbed and flipped a couple houses that came my way as good deals over the years. All the other stuff is just a matter of doing and learning the legalities and paper work. Once you get through a couple, then it's just a matter of finding the right deal and getting through it. 

What other investment automatically beats inflation, comes with lower taxes on the income, allows you to leverage a banks money to make more money, gives a monthly dividend that also increases with inflation, and then also lets you make even more for retirement when it is all paid off? Well, I don't know any. A rental is one time purchase, but a potential life long money supply that only gets better with time if properly kept up and managed. 

Yes it is work and does come with some stress, but the amount of hours I spend actually working vs. the pay beats my W2 job. I make much more at the day job, but it requires about 240 hours a month of my time. 10 rental units maybe requires 25-30 hours a month at most self managing and working on. 

The problem is being able to find the right things to buy, having the money, or having the banks blessing. It takes a lot of money and a lot of properties to even come close to the day job earnings when your leveraging.

I have recently (last couple years) downsized my life and started increasing this activity because it is the only one I see that shows potential to ever let me be semi-retired before I am dead. Of course there are other activities in REI that also make money, but they are much less passive and still take a good amount of money and time to participate in.

Unfortunately, this is a slow build process to financial freedom, but if your doing this along with your day job, then you will end up ahead of the majority at some point. 

However, as to the day job, making good money without specializing is a trick you can sell from a blog when you figure out a proven method. If your only income is REI only, then in fact you have specialized...kind of :) You can diversify what your doing within REI though and maybe it would give you that fulfilled feeling. For me, doing many other things (non REI) and using this somewhat passive money to fund it is what I want. I do not do the other REI activities because they feel like jobs to me and I make the money easier where I am (I think). However that could change if the right opportunity comes along.

I know the cons of using a renter for work, but I have one that is reliable and has been mowing grass for me for 10-15 years (lost track). 

However, I am buying a new apartment where the current owner has an agreement with a tenant to "manage" the units. Mowing grass, turnover preps, & minor stuff. This will be terminated with my purchase, but I am wondering how I would pay him if I wanted to use him going forward. They currently have a contract with him for a set price per month off his rent. However, this is the current owners employee also (subdivision developer). 

Anyway, it sounds like you all agree, pay and 1099, and try to avoid this. I would agree since I do not know this guy. This could create a problem with him paying his rent though. However, I may try him out on some little jobs and let him mow grass to see what happens...... but he will not like the 1099 I am sure :(

If a renter does some repairs or maintenance for you, can you deduct it from their rent on the books? Is this okay to do? Or, do you have to make them pay full rent and then pay them and 1099 them (assuming it is over the minimum)? 

This would make their rent look erratic on the books, but would require less transactions and probably make the tax burden less on the renter? I am just not sure if it is okay to simply deduct it from the rent. 

Good news yesterday afternoon. I got the first quote on insurance from my current provider on my other units. It came in a little over $1700 for a 100% replacement at 12% higher than I am paying and a $1k deductible. It is also their higher level one that has some other perks if something were to actually happen. This is well under the $3000 originally figured above!  

However, with the good news, also came some other news. I won't call it good or bad. The bank wants 25% down for a conventional locked in loan.  It should be somewhere south of 5.5%. I am not sure yet. This is a bit more down than I hoped, but I can come up with it and it will at least increase cash flow! So, I consider it a wash. The amount extra needed I should recoup quickly, but for the next 30 years (or until I can pay it off) I will enjoy the little extra cash flow and a little more safety net on monthly costs if something happens :)

I actually ran the numbers even up to 10% vacancy and increased the maintenance and it still makes money even if it gets that bad. I am not a seasoned pro at calculating this to death. I did request my realtor send me the numbers/spreadsheet they use. They ran the numbers and they looked good to them, but I want to double check what they use for the area against what I have tried. 

I don't expect the taxes and insurance to move much, but I am going to go double check the county records to see what the appraised rate is. It is is rare, but maybe I can argue them down based on the purchase price :) They generally under appraise and over tax to seemingly erase all good arguments! I don't expect them to be appraised far off.

Those numbers above are not actually mine, but ones someone else created. I rarely go over 1 month on a vacancy around here and typically have relatively low turnover rates at my other properties. It does not take more than a few showing typically. I try to keep my properties nice enough that I would live in them. I think all but two are way over the 1 year lease (some of them above a decade). I have at least 3 lifers I think. I have had more than one unit where they lived there until they died. Usually a sign out front is the extent of the advertising. My stuff is all in a peaceful rural environment near smaller towns, but within an hour of a large city. 

I am still messing with the numbers, but so far nothing is scaring me too much. Everything has some risk. This is the best deal I have found in my county since I have started looking. SFH are all priced out of doing anything and the fixer uppers available are really more suitable for demolition because they are hacked together improperly built junkers. I looked at two Saturday. Garbage. Decent houses can't command enough rent to justify the prices. You can pretty much forget finding anything that comes close to even the 1% rule in SFH's around here unless you want to get in the the big city in sketchy neighborhoods.

One thing I like so far is that all my rentals are within 15 mins of where I live and even closer to my land I plan to build on again some day. I don't know how anyone buys far away. I can never find anyone reliable or reasonably priced to work on anything around here. This is always my biggest challenge. I consider the renters and the rest pretty easy. It is the maintenance that is so painful to get done. 

I will take a pause after this one to see how it goes for awhile and rebuild funds. If there are any problems, I will still have this purchased at a very low price for it's construction (under $64 Sq/ft). This is a nice place in a low density, but still slow growing area. I know this area well since I have lived here all my life. I don't feel comfortable buying far away or something I can not go fix something on my own if I need to.  

As for insurance and snow, there is no way around these risks. I do snow removal when needed, so that is all you can do. I usually just pay a guy $50 bucks to clear the drive at my other rentals as needed. We really don't get many snows where it lands and lasts long. I did not do any plowing last year. However, I also have a side by side with an electric raise/lower Warn snow plow :) I can do my own if I need to. I did loosely figure for there to be some snow removal and the snow removal on the main subdivision road is part of the maintenance fee.  

I do have my stuff in a proper LLC now and I do carry regular insurance. I may consider buying an umbrella after this just to add another layer of security. There is no such thing as risk free. So far so good though and I have been doing this for a pretty long time on my other 6 units.

"Do you get higher cap rates in college towns like Rolla, Columbia with 20% down?"

I doubt it, but I have not fully studied it. I do know people that live in both of those towns and the prices seem similar to my area. I consider these too far away for me though.

I would not consider this area a hot market at all for outside investors. It just happens to be where I live and invest (right or wrong). I think if your not living here, it is probably an even tougher market to get into. A lot of people that seem to be landlords in this area either built new, have owned them for decades upon decades, got them from their parents, or are slum lords. It is hard to start from scratch and do much in this county I think.  

I guess my goal at some point is to possibly become independent of my day job and self manage/maintain my properties myself and just make all the money :) I have all the trade skills necessary to never hire anything out if I had more time. Who knows what the future will hold though. All I know is that sitting around doing nothing gets you just that......

So far so good on this one. Some of the numbers above were a little off after I found more accurate actual costs (sewage fees, road maintenance fees, etc). It did not change much. The main thing that changed is I am getting it cheaper! However, any way I look at this it still makes enough money unless something went horribly wrong beyond anyone's anticipation.  My realtor thinks the rents could be raised if there is turnover. I am not sure about this though, I am not counting on that. Right now it is fully leased, so it is turn key for the moment. I will fix a couple minor things.

The good news is we have an accepted contract after a few back and forths. $309k + Seller pays $3k towards closing! Of course we still have to do inspections. There are a couple small things I see, but nothing out of the ordinary for anything you might buy that is pretty new. 

This property has large nice units. It has Two 3 bedroom 2 bath (1475 sq/ft each) & Two 2 bedroom 1 bath (943 sq/ft each). It has high ceilings with coffered in the living rooms. The one larger unit I was able to view had all hard flooring (tile and laminate). The smaller one had tile and carpet. The property is only about 10 years old. I believe this was going to be 1 of many units on this property (and likely the display), but when it was built the economy must have killed the project. The original builder eventually sold the property (with the apartments) to the current developer a couple years ago. They switched gears to building houses on the rest. They seem to have no interest in running rentals or they may want the cash to keep going with the development possibly? They have 2 houses built so far and just went on sale. So, I am catching this right at the point the developer would have the most outlay of cash (my opinion). 

I was skeptical on the property and the price at first, but the back story of how it came to be and why they are selling it all seems to work out. This building is at the entrance of the new subdivision with only 2 houses built so far. I was able to enter two of the units (both floor plans). Both sets of tenants seemed very happy there. They said it was quiet and the nicest apartments they could find in the area. These are somewhat rural, but close to several towns, and also very commutable to a large city with easy access to the interstate. I also inquired about their electric rates and they were very happy with those. The smaller unit was under $70 a month (total electric units).

This will put me at 10 units with 2 loans. Getting there! Balancing the day job and commuting will get a little tougher, but maybe some day I can become independent.

Is it safe to post pics yet since we are under contract? :) I am always worried I am giving away too much info, but it should be pretty safe now that we are under contract? Hopefully I am not giving out too much info. 

Thanks. Everything is looking pretty good to me. The taxes will go up over time, but they don't seem to move faster than rents go up around here. Everything kind of moves together so you always make about the same amount while building equity. 

This 4 unit is about in line with its actual value/sales price as far as taxes go, so they should not move unexpectedly. However, you never know what the county will try to do make you argue with them :) 

I will try to get it cheaper than 325k if I make an offer! :) I may fail, but I will try.  

By the way, I am a little leary of discussing this stuff on here because I know everyone on here is looking for investments. Is this a bad idea? How else can you get help looking at specific properties without giving away your lead? I don't know anyone in real life that even does this stuff. I have been on my own and figured everything out myself so far...

I am looking for some opinions on this property. Here is a numbers picture just to get the conversation rolling. I am sure I can negotiate a bit lower price, but I don't see this hanging around much longer. This is at the entrance of a road that they are currently building a 40 house subdivision on and they already have a couple houses up. This is a ready to roll property fully leased. 10 years old. It should be low maintenance. Single story brick front, vinyl on the other three. Decent location. Close to my home and my other rentals. Also it is just a minute out of my way on my day job commute (which I desperately want to leave some day). 

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