All Forum Posts by: Mark Aiken

Thanks for the advice Greg Scott. I’m going to take it slow and obtain other quotes. I will try to learn as much as I can without losing more money. 

I made all of the rookie mistakes and now I must learn and hopefully recover from them.  I purchased my first rental property in May 2021 sight unseen through an online auction.  There were 60 properties for sale and I was only able to walkthrough six of them.  However, the one I purchased I did not see nor drive by.  My decision to purchase was purely based on the numbers, online pictures, and my conversations with the seller.  

I should have known to stay away, because of the homes I did see, all but one were in terrible condition (smells, damaged walls/exterior, sinking flooring).  This should of been a red flag that the owner was more of a slum lord and neglected normal maintenance.  But I ignored the signs because I was excited to land my first home and begin my journey as a real estate investor.  I was the highest bidder on two homes and after appraisals, I found out the bank would not finance the deals (2nd major red flag).  I decided to cut the bank out and purchase a single family home with all cash because I was blindly eager to get started.

The "deal": purchase price was $37,000, rent is $795/mo, and insurance/property tax are $1,100 per year.  I was extremely happy because I would make my money back in 5 years and have a cash-flowing property thereafter.  Turns out the home has foundation issues because the gutters have been dumping water underneath the property for years, the roof is rippled, the floors are sinking, and the home hasn't had any repairs probably since it was built in 1901.  To make matters worse, the tenant is 3 months behind on rent (seeking assistance) and the HVAC went out and I replaced for $5,400.  

I figured I could get the place completely rehabbed for $30k and start fresh.  I brought a contractor out and he quickly shattered my optimism by informing me the minimum cost for what I wanted would be $70k due to the foundation issues.  Homes are only appraising for $80-$90k fully rehabbed, so the contractor suggested I demo the house and donate the land once the tenant moved out.

I don't want to give up, but I'm very tempted to cut my losses.  I might be able to sell the home for $15-$20k as is (fingers crossed).  Or my other option is to try to keep the tenant in as long as possible and hope rental assistance starts coming in, which will only last 15 months.  Then I hope she will start paying after that and stay at least 5 years to recoup my costs and pray the house doesn't fall down.

Has anyone else made the same mistake?  If so, should I cut my losses now or stick it out long-term?  I feel like I've already failed at real estate investing and just got started.  Does anyone have any advice that will help me look at this situation optimistically? 

@Account Closed thank you for your thoughtful response full of grammatical and spelling errors.  There are plenty of examples where business raising prices are considered unethical (e.g. pharmaceutical company increasing the price on life saving medicine).  Just because I'm empathetic towards individuals with financial struggles doesn't mean I have a mental disability.  I probably will be better off financially increasing the rent to market value immediately but that doesn't mean the human elements shouldn't be considered too when this is my business.   

The rent is $910 but the previous owner agreed to pay all utilities, which are $450/mo on average (old house). The market rent for a house it’s size in the area is $1,100-$1,200 with the tenant paying all rents. I want to bite the bullet and just jack up the rent but I battle with the ethics dilemma since it’s a family of 4. Maybe hire a property manager to do it and take the emotion out of it. 

All of my tenants have been paying in cash but I want to switch them to electronic/automatic payment methods. They don’t have bank accounts or checking accounts and aren’t tech savvy. They could send cashier checks via mail but that is slow and causes more work for the tenants which could delay payment too. If I push them to get savings accounts/debit cards, are there ways to process rent with a debit card? Or are there better ideas? 

Thank you for the feedback.  I plan on giving the family as much notice as possible.  I definitely won't increase it 70% in year one, I'm not a monster, lol.  The tenants have been in the home for 10+ years so they seem to be good to the home.  However, their rent hasn't increased the entire time they've lived their.  I just wanted to make sure I wouldn't run into any legal issues before increasing rent.

Is there a limit for how much you can increase a tenants rent in Indiana?  I purchased two properties with inherited tenants who have been paying rent well below the market rate.  I will honor their current rental agreements but plan on increasing rent as much as 70% (owner was paying utilities too) with the next agreement.  I believe I only have to give 1 months notice, but I haven't seen anything that limits how much you can increase rent.   

I’m considering renting my car through Turo and I live in a suburb around Indy. I’m curious how time consuming this is (car washes, cleaning, fueling, administration, etc)? Also, does anyone else do it around Indy? I’m assuming most rentals are at the Indy airport, which is 45 minutes from my house. I really want to do this but my wife thinks it’ll be too time consuming. All ideas and comments are welcome. 

Thank you @Jason Duhn, this site was very helpful.  I discovered that all the current tenants have previous evictions!  I will be sure to utilize this site going forward.

Hello, I'm curious what resources investors use to screen potential tenants (e.g. background checks or credit checks) during the application process, other than just Googling the person?  I'm just starting out as an investor and I've acquired 4 units.  The units are currently occupied, but I'd like to be prepared when the time comes.  The properties are in Indiana if that makes a difference.