All Forum Posts by: John Teachout

Quote from @Jay Hinrichs:

Quote from @John Teachout:

Why do you have HML and PML on the same deal? Are you not putting in any of your own funds?

I suspect this is what is called gap funding.  ( the second on HML) is commonly referred to as gap funding and the person making the loan is a gap funder.

To have this amount of leverage on a property, especially in light of a shaky economic future, seems like a bad recipe to me.

Why do you have HML and PML on the same deal? Are you not putting in any of your own funds?

Quote from @Dave Mays:

Thank you.  This is great.  I'm glad I asked.  I picked up 1 important thing:  No related adults must qualify on their own.  Very good point.   I also like Confirmation of utilities in tenants name prior to move it.  Very smart.  Lastly I like No cats under any circumstances.  I starting not allowing cats last year and I don't care if that shrinks my tenant pool.  Not worth it.    Thanks again, John!

Many/most of our criteria come from previous experiences. I'm allergic to cats and we do our own maintenance and repairs which is why we have a strict "no cat" policy. We let our potential tenants know that even an ESA cat will not be allowed. In almost every case, if someone applies and isn't offered a contract it's because they don't meet the tenant profile requirements.

Quote from @Dave Mays:

Quote from @John Teachout: John, could you send me a profile listing of your criteria?  Curious as to how it looks and what you have on it. Thanks.

Our first step upon contact is to send the interested potential tenant a profile listing all our criteria. Most self screen themselves out of the running.

The tenant profile for xxx Trice Rd. Lamar, GA 30xxx is as follows:

No smoking/vaping on property (inside or out) We do not rent to smokers (of anything)

Credit score 600+.

Minimum verifiable monthly household income of $2500.00 ($30,000 yearly)

Non related adult occupants must each qualify for the property. (ie, income can’t be combined)

Some animals allowed with $200 non-refundable fee and $20 per animal pet rent. breed restrictions apply. Dogs require specific approval. (any "ESA" dogs require documentation and are subject to breed restrictions) No cats allowed under any circumstances.

All occupants age 18 or more must complete an application and background check. There is no fee to complete an application but the background check cost is about $35 per person. The background check is comprehensive and includes credit, evictions, judgments, address history, sex offender, criminal background, etc. It is paid directly to the screening company. (price may vary)

References and rental history required and will be checked.

Employment will be verified. Income that can’t be verified will not be considered.

Rent is $840 per month, $850 security deposit. The first month's rent, last month’s rent and security deposit is required to be paid in cash. Subsequent rent will be directly deposited into our xxxx Bank account. Animal fees (if any) required before move in. One year lease.

Our method of rent payment is depositing funds into our xxxxxxx Bank account. This can be via cash, check, or transfer. You don't need to have an account at the bank to make payments.

Tenant arranges and pays all utilities. Confirmation of utilities required prior to move in.

If this profile fits you, please contact us to arrange a tour of the property.

Thanks for your interest in our properties

xxxxxxxxx Properties

email.....
phone number...

Since you used the term "partner" I'm assuming you're not married. Are you both invested in the rentals? Do you file tax as a single? All those things can affect tax strategy and exiting from rentals can certainly incur some big tax bills with capital gains and depreciation recapture. We're in a similar situation except that we don't have a W2 job. We live on our rental income but are looking to get more passive for some of the same reasons as you.

Consideration: since rental income is "passive" it doesn't count against your social security in case you take that before full retirement age. For spouses, there's a number of strategies regarding when to draw SSA. We decided to draw early and invest the proceeds. Based on information provided to us, if we can generate 8% or more gains on the SSA, then there will never be a time when it would have been advantageous to wait until a later age.

It may behoove you to consult with a tax strategist to help you make smart financial moves. You also need to know what your intentions are so a plan can be laid out. One thing we've considered and this will probably be implemented if I die before my wife, she would put the properties under management and even if they didn't cash flow well, it will still preserve them as a cash source and she can sell one off every couple years or so for supplemental income.

My concern with shopping centers is the large amount of vacancy I see in all but the newer ones.

We require our SFR tenants to maintain the lawn but don't provide a mower. As far as the shed, if it's on the property and they have permission to utilize it, it's incumbent on you to maintain it...

This property may not cash flow at half of the price. Just move on to something more realistic.

Just because they won't sign for the notice doesn't mean it wasn't sent. Document everything. Next time the rent is late, even a day, post the property with a notice of eviction. It sounds like it's going to go that route anyway.

The issue here isn't the age of the property, it's the condition and price stacked up against the current and future income potential of the property. This would be a horrible deal. Find something better to put your money into.