All Forum Posts by: Kevin Sobilo

@Ariel K., monitor the water usage every day and inspect one of the suspected units each day.

If its intentional the water usage will drop on the day you inspect the offending unit, otherwise you will find the source of the issue.

If I identified the offender, I would probably bill them back for the wasted water and when they didn't pay evict them, or non-renew them if their lease was near the end because that is simpler. 

@Alec Jacobs, a few things:

1. I do open house showings.

It limits the communication I need to do with inquiries. 95% of the time I simply cut and paste when the next open house day/time is. I don't care who does or doesn't show up.

I do them twice per week. One midweek in the afternoon/evening and one on the weekend around midday. That covers most people's schedules.

I will also often plan to do a few oddball things around the house while I'm there to maximize the productivity of the trip to the property.

2. Zillow is ok for applications and credit checks but I found their background checks spotty at best. So, I always go to the state's court website to search people's background myself. Most applicants are from within the state so that works really well:

https://ujsportal.pacourts.us/casesearch

3. Many people won't read your ad. So, unqualified people will still show up, but who cares. Maybe one of them will tell a qualified friend about the place.

4. The typical tenant is conscious about fees. So, having to pay for an application before seeing the property will turn many qualified applicants off. Remember that good tenants have worked hard to have CHOICES in life. They can choose another rental.

5. I highlight the use of zillow when I speak to tenants because they can reuse their application for 30 days to submit to other landlords who use zillow saving them fees. Tenants appreciate a landlord who is cognizant of a tenant's perspective on things. 

@Adriana Medina, a typical landlord is not a skilled detective/investigator. We rely on these kinds of records to make decisions. If this was a case of identity theft then she will eventually get it sorted out and removed from her credit report.

If she went to buy a house and applied for a mortgage, I think the lender would say the same thing aka you don't qualify until you get this removed from the credit report.

That said, if you feel you want to go above and beyond, then could could try contacting some of these apartment complexes directly and confirm her story with them but if you can easily find another qualified applicant why would you take on this work and additional risk.

@NA NA, for me that is an easy answer. Don't! At least not quite yet. I would be planning to do some things before actually making an investment.

A few things to think about:

1. Its great that you have saved some money and have a desire but investing involves a risk of loss. So, I would work to increase your knowledge and experience and really identify a strategy that suits you before moving forward with anything.

2. I presume your intention is to be an active investor who owns physical real estate and not someone who invests passively.

A couple strategies that could make sense for a younger person without experience could be a live-in flip or a house hack. Both of these allow you to low down payment loans to buy a primary residence with fixed interest rates.

With a live-in flip you buy a dated but functional primary residence and live there while you rehab the property. If you live there 2 years or more before selling you will be exempt from tax on the 1st $250k in profit which is a nice bonus. 

With a house hack you buy a single family and rent out rooms to roommates to make money OR a small mult-family (2-4 units) and rent out the other apartment(s). You can eventually move out and buy another property and continue to hold the property as a rental.

3. If you want to be an active investor, get some knowledge about things you will be dealing with. With rehabs you want to know enough about how houses work to manage the tradespeople. You will want to understand taxes and applicable laws. If you rent out property you will especially want to be up to date on a variety of laws.

4. Opinions vary widely on this subject, but consider getting a real estate license. Its a cheap and easy way to get some education and experience that will serve you well. It also can be great for keeping you motivated and plugged in to the industry.

Even if you don't get a real estate license, consider taking the licensing classes because it will give you some foundational knowledge for how real estate law works.

5. In order to execute on any of the strategies from #2, you will want to a work/income history and decent credit scores. So, look at those things as well.

6. Find local real estate investor meetups and attend the meetings. Often there will be speakers to learn from and active investors to learn from as well. One might even invite you to visit one of their projects to talk about it in detail and give you a peek behind the scenes. 

@Kristi K., I wouldn't discount wholesalers entirely. Here are a few things to think about:

1. In many places wholesalers are largely unregulated unlike a real estate agent. So, the wholesaler can say things about a property with MUCH MUCH MUCH less scrutiny than an agent can. However, that is changing! For example in my state (PA) as of this year you need to have a real estate license to wholesale.

2. You should be skeptical of anyone who offers you a "jewel of a deal". The more they sell it for the more money THEY make. Why would they offer you a better deal than they themselves are getting.

3. You ALWAYS need to do your own due diligence and even MLS listed properties may look like a deal on the listing but when you analyze them deeply they are not.

4. The wholesaler has identified a distressed property for you! They did some leg work. Can you find a way to capitalize on their work even if you don't buy "their deal". Potentially YES!!!

When a wholesaler makes ridiculous claims they are unlikely to sell that property BUT that doesn't mean the property might not be a good deal at a different price. So, you could contact the owner and make a backup offer. So, when the wholesaler's contract ends you are 1st in like for a BETTER deal than the wholesaler was offering.

You may also find that the wholesaler is a novice and has not fully executed a contract with the owner. So, that the owner can back out with the wholesaler and sell directly to you! This is handy especially when the wholesaler is lying to the owner as well about their intentions. 

@Kevin Moise, a few things to consider:

1. If being an active investor was as easy as identifying these items you listed and hiring decent providers (contractors, agents, lawyers, etc) wouldn't everyone with some money be making money investing?

2. A successful active investor usually has something to add to the process from their own knowledge/experience. They might be an accountant, contractor, or real estate agent themselves and have expertise and experience in some aspects of the process.

3. You mention investing at a distance being more difficult, but don't seem to appreciate how much more difficult it is. Even learning a real estate market distant from you is a big task on its own!

In some markets a 40 year old house is "old" in others a 40 year old house is "pretty modern". Markets differ in the type of housing stock, building methods and requirements, buyer perception and expectations, etc etc.

4. You mention hard money loans. Many hard money lenders don't want to lend to a newbie because they evaluate "the deal" and the experience of the borrower/investor is a big part of whether a deal is likely to be successful. So, you may wish to make sure a lender will lend to you before putting in a lot of work finding a deal.

5. Have you considered a "Live-In Flip"? Buy a dated but functional home and live in it and work on it for 2 years before selling.

The advantages are getting experience in a safer deal. You can use conventional financing with low down payments and fixed interest rates because this is a primary residence. When you sell after 2 years of living there you can sell and not pay profit on the 1st $250k in profits! A nice bonus!

6. Consider seeking out local investors and learning from them. Go to local investor meetups. Maybe a local investor will offer to have to visit a project they are working on and discuss it in detail. I have done that with newbie investors a number of times.

7. Consider that you want to have some level of expertise in ALL aspects of the process. Its hard to manage a plumber when you have no clue about plumbing. You will struggle if you just listen to what your hired experts say.

Even a good contractor/plumber isn't going to give you the best advice a lot of the time. They don't have a good handle on the big picture otherwise they would be the investor themselves. 

There are also TONS AND TONS of horror stories about dealing with tradesman and they are TRUE! Plus MANY MANY more problematic situations that come up daily. You need to be able to manage those. 

8. Study project management! Every rehab you do is a "project" and while it is hugely helpful to have some knowledge of all aspects most people can't be expert in all of them. Having project management knowledge/skills will help you understand how to cope with that and manage a project to success. 

@Brandon Bell, a few things to consider:

1. You aren't going to be able to transfer the mortgage to an LLC. Most mortgages aren't "assumable" (able to be transferred) and even if it is the new borrower would need to qualify the same as the original borrower. Since the original loan was apparently for a primary residence an LLC could never qualify because it isn't a person who would owner occupy the property.

2. Subject-To is for giving someone who would not normally have control over the loan control over it. That would not apply to you since you are the original borrower and also owner/member of the LLC.

3. Many people just transfer the deed and NOT notify the lender. In most cases the lender will take no action so long as the mortgage stays in good standing.

4. If the due on sale clause was triggered you simply need to be prepared to refinance into a new loan.

5. If the risk of having to refinance into a new loan is a big deal for you, then you might consider simply operating in your own name without an LLC.

An LLC offers some liability protection, BUT states vary with the cost to get and maintain an LLC. If your state is an expensive one it might be cost prohibitive to have an LLC for a small rental business.

Also, an LLC only offers you protection if you use it correctly! If you don't use it correctly, then you will be able to be sued personally and your personal assets will be at risk anyways.

So, many people choose to operate in their own personal name but buy an additional umbrella policy to protect themselves from liability.

That is the exact example a public insurance adjuster used when speaking to a local investor group a few years ago. That's why I used it.That is also part of my point, an adjuster will know better what you're entitled to. 

I'm sure some policies have all kinds of language in them, but if it guarantees me full replacement that is what I would expect otherwise my granite counters would be replaced with laminate and my tile and hardwood replaced with vinyl and the cheapest carpet. If they won't replace the walls with the same quality materials they probably wouldn't do it for counters or floors either.

@Helena Lee, I do not have experience with it, BUT I would expect to pay capital gains on the bitcoin. 

So, if she bought the bitcoin for $1 million and is now using it to close on a $10 million property, that is a $9 million gain that needs to be accounted for in her income tax.

The person I would seek advice from is a CPA about this. 

@Max Schilling, I would knock on the door and have a conversation. I would want them to know what's going on and to LISTEN to what their frame of mind is. If they understand they need to leave and discuss honestly what they can do to make that happen then you are both working to the same end.

I would hold the cash for keys idea in my back pocket until I heard what they have to say. I would also try to anticipate their situation and needs and how you could facilitate their exit.

For example, with cash for keys you don't give that to them until they are out, BUT they may need help getting out. So, perhaps hiring a couple day laborers to help them move or even paying the 1st months rent on a storage unit would be better. Paying those things benefits you because they facilitate STUFF exiting the house. 

I would also discuss strategies with your lawyer for evicting/ejecting them if need be. My lawyer suggests in a situation like this that I give them a notice that I am the new owner and that as of a certain date they owe market rent of $X,XXX. When they don't pay you evict them as a tenant rather than dealing with an ejectment which I guess can involved more nuanced arguments in court.