All Forum Posts by: Michael Rossi

That's the difference between talking about a subject and actually being in business and KNOWING about a subject. I could see that kicking down a tenant's door could result in the landlord having a very bad day. Not only could they be legally shot by the tenant, but then to add insult to injury, the sheriff would arrest the landlord for Breaking and Entering! LOL!

Now THAT IS FUNNY!!! LOL!

You don't seem to be getting it. The 50% Rule doesn't say ANYTHING about what a given property will do in a given year. Is it possible for a given property in a given year to have expenses of 35% to 40% of gross rents? ABSOLUTELY! Is it possible for a given property in a given year to be 90% - YES! The 50% Rule says what rentals will run over a large number of units and/or a long period of time - in other words it tells you what you will average over time, which is the information you need to know to successfully stay in business. Failing to understand this issue is the NUMBER ONE reason that newbies fail.

I completely disagree that it is or has always been difficult to get financing with a new LLC. I've done it many, many times. The key is that the bank will make you also sign personally for the loan - in other words, you're guaranteeing personally that the LLC will repay the loan.

When you have a LLC, you get COMMERCIAL LOANS - not residential loans. You need to talk to a small, local bank that does commercial loans and preferrably one that keeps their loans in their portfolio. You don't want to get involved with Freddie, Fannie, FHA or any other residential crap. If you're going to be in business - then BE IN BUSINESS!

Also, if you're going to be flipping, then a line of credit is probably more appropriate than a mortgage. Buy a house, flip it, pay of the line of credit - repeat.

Good Luck,

Mike

Great job! You got the scumbag thrown out and you didn't resort to doing something illegal which would have made you the bad guy and caused this routine problem to turn into a nightmare which is exactly what would have happened if you removed her door or taken other crazy action).

There is no doubt that the law is this country is corrupt and immoral. However, if we want to remain in business and succeed, we must still follow that law (while working to have it changed).

You couldn't put a lockbox on the lower income rentals (especially apartments) here in Ohio. You would have druggies living in the property in less than a month and since you gave then the key - you would have to evict them. Ugh.

Chris,

For a new investor, you've got something that many investors never get - COMMON SENSE. In a general way, what you said is correct. Even though the specific individual expenses are quite different in various areas of the country, it's amazing how the total expenses add up to 45% to 50% of the gross rents all across the country. For example, here in Ohio in some of our lower income rentals, we might have a higher rate of evictions than in the land of socialism (Kaleefornyah). However, with all their tenant friendly laws, an eviction in the land of socialism might take much longer and costs MUCH more. Property taxes in one area might be much greater than another area, but the second area might have a much lower vacancy rate. The bottom line is every significant study (including the large apartment associations who have data from hundreds of thousands of rentals) shows that the expenses (incl. vacancies and cap expenses) consistently run 45% to 50% of the gross rents.

You might want to read the sticky threads on operating expenses (this one and the one in the landlording forum) very carefully. You missed some expenses and it's important to understand this issue before you buy any more rentals.

Good Luck,

Mike

I wasn't offended Jon, I have skin that is certified to be 1 inch thick.

Bill, to answer your question, no - I don't have a MBA. I own a rental business and I'm not sure that a MBA would impress my boss (but I'll ask when I see him in the mirror). I do have an engineering degree and I do have the facts on my side as it pertains to this issue. However, if you have any data or other information that demonstrates that the 50% Rule is inaccurate, I would definitely like to see it.

J Scott,

I don't want to hijack the OP's thread, but I will answer your question. If my answer doesn't give you what you want, maybe you could start another thread and then a bunch of people could participate.

In answer to your question, there is NO leeway regarding the rent. When a tenant doesn't pay by 5 pm on the 4th, I post an eviction notice (3 day notice) on their door on the morning of the 5th. I will normally allow them to pay during the 3 day notice (although it's not required in Ohio) but they must pay in full with the $50 late fee and it must be all in cash (which is what I normally collect anyway). On the 4th day after I post the 3 day notice, my lawyer files the eviction with the court and at that point, it's usually impossible for the tenant to pay the rent, late fee, court costs (filing fee) and lawyer fee.

If you have a significant business (more than a few units), the word will get around about how you operate your business. If you're a weak landlord and don't follow the lease, that information will get out and you'll attract every scumbag in town. On the other hand, if you're strict with the lease and the rent, you'll avoid a lot of the scumbags and you'll lessen the chance of being sued/prosecuted for discrimination. I am very strict and I treat everyone equally. Quickly evicting deadbeats is a huge benefit to your business in many ways.

I certainly don't give them anything for not trashing the place, but they normally don't do so anyway. I will, however, do exactly the opposite. If they tear up the property, I will do as much damage to them as possible. I'll tell the other large landlords in town about the scumbag. I'll call Section 8 and try to get their voucher pulled. If they are neglecting their kids, I'll call social services. If they do drugs, I'll call the drug task force. You get the idea. I'm make their lives miserable for the next 100 years and they know that! When someone damages my property, I consider it no different than them breaking into my home and robbing me. I have a very good memory and that mistake will follow them as long as they live in this city.