All Forum Posts by: JJ P.

You have the most strength in negotiation BEFORE escrow closes. It's something that you can request as a condition of COE, and a good realtor working on your behalf would have known this.   Unfortunately, you missed this opportunity.  

You can do things like request updated tenant information, new signed leases that kick in at close of escrow, rekey or get key copies, estoppel agreements (outlining the deposits held by the selling owner),  etc.  

You have the luxury of being young, ambitious and making an investment without the concerns of keeping yourself housed and fed.  That is a very, very big luxury.  

Find the bargain in your greater neighborhood, where you can drive over, have a look.  I'd say no more than 2 hours away, with an hour or less being better.  You've got the benefit of a dad that might help and perhaps some  resources such as trusted tradesmen and fixit people.  You know these neighborhoods well, and you know what a bargain looks like.  Get your ducks in a row, meaning decide the type of house you want, the neighborhoods, the down payment and lending, etc.  Look every day.   There are motivated sellers in every.single.market.  You just need to know what a deal looks like and move quickly.  Hang tight until you find a good deal, then nab it.   

Out of state investing is fraught with issues large and small, so stay close to home and avoid the hassles OOS involve.  Here are some logistical examples:  

-Our OOS investments (Oregon Coast) are a 3 hour drive from the nearest Home Depot.  Yup, that factors in when you need something and it takes half a day to go get it.  

-We also find that deliveries... a non issue in So. California, where they show up when they say they will... are very, very hard to reliably schedule on the Oregon Coast.  They mostly show up late, but sometimes they show up early.   You can't leave your stuff sitting unattended on a porch until you come back. 

-We've been scheduled to fly into the local airport and, instead, weather related issues cause overnight snags and we've only got a few days budgeted for the trip.  Can't do a three day job in half the time. 

-We've replaced a dishwasher that was most likely running perfectly because someone didn't check the shut off valve.  If we'd been there, we would have caught it.    The list goes on and on...

You've got the resources to buy in a better area close to  home... do it!  

We have several investments and a second home in Coos County.  One of the huge appeals to us is the airport in North Bend.  Like Arcata and a few other Northern California areas, it is served by United Express from SFO.  When we were considering where to invest, and whether or not to self manage those investments, proximity by car or flights was a huge factor.  For any out of state investor, it's worth checking the airline schedule from your local airport to see if you can get there quickly and relatively inexpensively, door to door.  
 I can leave my house in San Diego in the morning, fly up,  swing by the rentals to check in,  and take a walk on Bandon Beach long before sunset.   If necessary, we can fly into Medford or Eugene, nonstop from So. Cal,  on several different airlines.  If we have to, or want to, we can drive.  At approximately 800 miles, it's a long drive, but doable compared to say, St. Louis, Cleveland, Florida or the Carolinas- all places that we were on our short list for investment properties. 

I'm not sure if I can post a link, but Dawn Richenbach, "The Note Queen," has helped me in the past. She does all types of loan purchasing and what not.

I would suggest staying closer to home for your first investment.   The time, effort and cost that you will incur when you factor in the travel or the outsourcing will eat directly into your profits and ability to really thrive as a "mom and pop" investor.   

I'm often the contrarian here, but I'm not a fan of leverage and expansion just for the sake of having more.   Your profile of goals is how we did it.  Maximize the return per door, instead of endless growth and leverage.   If 14 rentals can achieve your goal, it's time to stop growing and focus on how to achieve your desired returns.  Paying off the mortgages will help.  

If you trust yourself more than the stock market, and like the control over your own finances and wealth trajectory, then this is a great strategy. Also, the earlier that you have financial independence, the sooner you get to enjoy your wealth.   Thirty years is a long time to pay a debt down, but it's an even longer time to wait for enjoying financial freedom. 

 By maximizing your return per unit, that's an easy way to give yourself a raise.   I prefer to have no debt, because IMO, whatever the interest is costing you is money you're giving to the bank instead of keeping in your pocket.  It's like reverse compound interest-- the less principal you owe, the less interest you pay to the bank. So the sooner you pay it down, the quicker it will pay off.   There's no point in waiting to pay it down, as long as you won't leave yourself strapped for cash.  

The math would look like this:  If you snowball your debt payments, every bit of interest that you would pay to the  bank instead is liberated, presumably to pay down even more debt.  If you want to hit 45K a month, your current and projected rents need to be 45K a month, then you need to work off the leverages (mortgage debt) one by one.  If  you're currently making 12K, is that gross or net?  If net, then how much extra are your mortgages?  Your take home (net) will go up exactly the amount of your paid off mortgages, as they pay off.  So if you have 10 mortgages at $1000 payment per month each (10K a month in payments), every time you pay off a mortgage, you liberate an extra $1000 per month.   
For the purpose of simplicity, I'm leaving off the basic landlord stuff like rent increase projections, turn over and repair costs, etc.  

I really like the snowball calculator at Financial Mentor.   It's easy to plug in the numbers and get the "what if I paid this..." results in a nanosecond.  

I'd definitely find an alternative to paying $1200 a year off the top.   We used to pay for monthly Maintenace, and found that, in general, very little was done.   They'd show up, trim the same hedge they trimmed last week, blow some leaves from one side of the yard to another, and leave. 

After a few years of that, we did it ourselves, in part because we wanted to lay eyes on the place once in a while.  So, yes, you'd have a bit of a drive, but it might be the perfect excuse for a good look at the house. Plus you'll get to know the tennat. You may find that your rapport with the tenant leads you to tackle the PM duties completely.  That will likely raise your profit another $300 or so a month.  

We have the tenants care for the landscaping.  Then a few times a year, mostly in the springtime after the rains, we might go in and add mulch or weed, trim the plants a bit, etc.   

 It sounds like yours is very low Maintenace. That requires less upkeep than a lawn, and your monthly costs should reflect that. If you don't  call them on an as needed basis, at least tell the PM to have them come out once a month instead of once a week.  

Leave them, your view is framed beautifully now.  You have shade and privacy.   Who doesn't love a little cabin in the woods?

That fills in some of the missing pieces, but not all of them.  

Please clarify if the tenant trashed your house in that short period between the time that you inspected it prior to closing and the time that they moved out.  Also clarify if you had a rental agreement with the tenant and a management agreement with the PM for those 5 short days.  

 In a nutshell, the money paid through a security deposit and any additional monies the the PM collected for damages should have been used for repairing the damages.  That is, after all, the very purpose of a security deposit.   If the PM returned any money to the tenant, they shouldn't have, as the obligation is to repair the home with that money.  

 Why and how the former owner would get any additional money from the PM for damages to your home is something that is still opaque.  You will have to provide additional details for us to figure it out.   

Basically forget about future monies from the tenant.  They are not likely to show up in your wallet, especially if you couldn't even get the deposit that was already held. 

I see the issue as what ever the amount of the deposit was that the PM had should have been used to repair the damages and wasn't, perhaps because you didn't actually have a contract with the PM.   The additional issue is that the seller/former landlord shouldn't have taken that money back.  Very tacky, especially for a flipping company that is in the business of selling rentals to investors.  

Is it still managed by the property manager?  If so, then they should be making the deductions based on walk through or move out inspection, provide the tenant and owner a written list of issues observed at move out, and deduct the amount that the cleaning/repairs will cost from the security deposit.   What's happened so far?  Who has the deposit, who paid for the damages, and who is asking the tenant for more money for damages?  Were repairs made?  Did you inspect the property with an awareness of the damages?    Since this all happened months ago, it should have progressed somehow.  

Since you're new at this, I'll clue you in that basically the deposit is all you'll get from a tenant without going to court.  If you go to court and win, you still need to collect the money, which can be tough.  

If the deposit transferred to you, it is called Estoppel or Tenant Estoppel.   Yes, the money belongs to the tenant, but it is held by the owner/management company against the damage free return of the property.  The money does NOT belong to the former owner.  Where I see a problem looming is if the money is still in the hands of the former owner, there are damages that need to paid for, and you're left holding the bag.   Also there might be issues if no one is sure when damage occurred.   It was most likely there 6 days ago when the other people owned it, but was it there before the tenants moved in? 

Just out of curiosity, did you know in advance that they were moving out?  The cleaner purchase transaction would have been to hold off closing escrow until the property was vacant.   Then you could have just skipped the hassle of an exiting tenant and done a walk through inspection of an empty house.   I just suspect that you were taken advantage of in this... the sellers/flippers were your agents also, and did not act in a fudiciary manner on your behalf.  I suspect you probably signed off on an inspection or "final walk through" that basically says you accept the property as seen.  You already gave up your biggest bargaining chip...closing escrow and buying the house.  You may or may not have signed off on the tenant deposit, but as stated above, it's not really yours, just held by you.